Natural Gas-Coal, leading players of the
Feb 25, Mar 10, 2002
Natural gas and Coal are poised to assume a
leading role in the energy sector of Pakistan under the policy
focused at cutting down the import bill i.e. $3 billion. The import
expenditures on account of oil are feared to increase simultaneously
with the increase in demand as well as price in future if
appropriate steps for import substitutes are not taken well in
The costly import bill for petroleum products
claims almost 30 per cent of the total export earnings of the
country on one hand while rendering the huge coal reserves and
plentiful of natural gas reserves available within the country.
The foreign investors have responded warmly to
the incentives offered by Pakistan especially for development of the
coal and gas sectors as they are coming up with large investment for
power projects in these two areas.
According to official sources, China a trusted
friend of Pakistan is coming up with huge investment in three
coal-based power projects. Shenhua Group corporation of China has
selected a Block in Thar Coal Field to set up a 3000 Mega Watt Power
Complex in phases. Investment involved in this huge power complex is
estimated at $3 billion.
Another 250 Mega Watt Power Project at
Sonda-Jherruck is being negotiated with Jiangsu Mining and
Engineering Corporation of China. The China National Machinery
Import and Export Corporation has also offered to set up a 100 Mega
Watt Power Plant at Sonda-Jherruck.
Besides Chinese investment in coal based
projects, Smith Associates Power and Mining Company of USA is
conducting a feasibility for a 450 Mega Watt Coal fired power plant
at Lakhra on right of first refusal basis in which the direct
foreign investment is estimated at $400 million.
Usman Aminuddin, federal minister for petroleum
and natural resources while talking to PAGE said that time
has arrived to assign greater role to the natural gas in our
The Minister said that Pakistan's total petroleum
imports represent 41 per cent of the country's primary energy
supply. The value of petroleum imports is estimated at $3 billion,
which is eating up 30 per cent of total export earnings every year.
In order to save the hard-earned export receipts
and to strengthen the economy, we would have to develop import
substitutes luckily available within the country i.e. natural gas
and coal reserves.
To meet the gas requirements, steps are being
taken for rehabilitation of existing network, additional pipelines
and compression facilities.
The additional gas supply of 900 mmcfd through
SSGC and SNGPL would cost about Rs20 billion. Financing for these
additional supplies would be arranged through own resources and
In order to enhance exploration programme,
certain steps are underway to accelerate exploration activity in
The minister said that resumption of oil and gas
exploration activities in areas under force majeure in Balochistan
is also under active consideration of the government.
It may be noted that about 80 per cent oil and
gas potential areas are under force majeure where oil and gas
exploring companies cannot operate against the will of the tribal
population. In order to sort out this problem, 50 per cent of the
royalty currently being given to the provincial government may go to
the tribal chief while remaining fifty per cent of the royalty to
the local government for the development of the remote parts of the
programme, if everything goes well, may help
accelerating the exploration activity in Balochistan.
Besides optimizing the indigenous resources,
options are also available to import gas from Iran, Qatar and
Turkmenistan through pipelines. One of the three-pipeline projects
is likely to materialize.
Primarily, the gas pipeline project was designed
to route through Pakistan and originally destined for neighbouring
India. Negotiations between India, Iran and Turkmenistan are still
on. Although the Afghanistan leaders are extending assurances for
security of the Turkmenistan pipeline to be passed through
Afghanistan yet this project may take some more time to materialize
till the settling down of the dust in that country. This project has
a length of 1400 kms with a diameter of 48 inches and a supplying
capacity of 2 billion cubic feet daily.
Iran-Pakistan gas pipeline has a length of 1650
kms, 48 inches diameter and a capacity of 3 billion cubic feet daily
supply. This project originating from Pars North field will
terminate at Sui in Balochistan and then onward to India if the deal
struck between the countries involved in this cross border pipeline
The third option is Qatar-Pakistan gas pipeline
of 1600 ms, 44 inches diameter and a capacity of 2 billion cubic
feet daily. This project is to be routed through Qatar to Gwadar
through Arabian Sea.
Gas storage reserves
The petroleum minister feels that imported gas
through one of these pipelines would require large underground
storage due to following reasons:
—Meet seasonal primarily fuel demand,
particularly in the northern region of Pakistan.
—Meet seasonal demand for power generation,
based on the availability of hydro power plants.
—Provide "Parking" capacity in
respect of gas import contract obligations.
—Add reliability to gas supply.
—Increase base load.
The minister identified the following spots for
possible gas storage reservoirs:
Sui: currently, having a balance of 2.6 trillion
cubic feet of natural gas against the original recoverable reserves
of 8.6 trillion cubic feet when the production was started from this
Mari: currently, having a balance of 4.1 trillion
cubic feet against the original recovery reserves of 6.3 cubic feet
at the time of inception.
Pirkoh: Currently having a balance of 1.2
trillion cubic feet against the original recovery reserves of 1.8
trillion cubic feet.
Meyal; balance 0.1 MMB while original recoverable
reserves were 49.3 MMB
Dhurnal: Balance 0.1 and original recovery
reserves 50.9 MMB
Dhullan: fully consumed. Original recoverable
reserves were 41.4.
He said that besides swift development of our
local gas resources time is ripe to go for cross border pipeline for
which three options are available.
Energy demand grew at an annual consumption
growth rate of 4.8 per cent in the last five years and is expected
to grow at a similar rate till the end of the current decade.
An analytical review of POL consumption shows
that demand for oil and petroleum products has grown at an annual
consumption growth rate of 5 per cent, while demand for natural gas
grew at an average of 6 per cent. The relative share of gas in
primary energy supply has increased from 37 per cent to about 41 per
cent in the last five years.
Looking at various advantages, the natural gas
has become an obvious choice for developing economies being
economically attractive and environment friendly fuel.
Globally speaking, the current natural gas
reserves to production ratio at estimated for next 66 years as
against oil reserves estimated for next 37 years.
Currently, Pakistan has 24 trillion cubic feet (TCF)
of natural gas reserves i.e. equivalent to 467 million-Ton Oil
Equivalent (TOE). The current rate of production of natural gas is
0.875 TCF per year, which saves about $3 billion a year for the
Total natural consumption during 2000-2001 was
estimated at 774 billion cubic feet. Sector-wise break up of the gas
consumption indicates 37.1 per cent goes to power generation,
transport (CNG) 0.6 per cent, Domestic consumption 18.2 per cent,
Commercial 2.7 per cent, Fertilizer (Feedstock) 17.1 per cent,
Fertilizer (Fuel) 5.5 per cent, Cement 0.9 per cent while general
industrial consumption is estimated at 17.9 per cent.
Gas demand projection
The current demand for natural gas (estimated at
2,061 mmcfd in 2000) is to increase up to 3,559 mmcfd in 2005, 4,785
mmcfd in 2010 and up to 5,755 in 2020.
The government has decided to do away with the
royalty, which was so far received by the provincial governments
from the oil exploring companies in the energy sector.
According to new formula, out of the 5 per cent
royalty, 50 per cent would now go to the tribal Chiefs or Sardars
and the remaining portion will be given to the local governments of
the respective provinces.
The decision has been taken to give a free hand
to the foreign companies engaged with oil and exploration in
It may be noted that the local population
demanding their share in the yield disallowed the oil exploration
companies to carry on their operations in the tribal areas. If this
formula goes on almost 80 per cent of the potential areas in
Balochistan would be open to grant concessions to the companies for
the research and surveys in the oil and gas sector.
Iranian Minister for Petroeluem Bijan Namdar
Zanganeh, during his recent visit to Pakistan has said that a
decision on the issue of taking a gas pipeline from Iran to India
either through Pakistan or deep-sea would be taken after completion
of studies on both the options.
A Memorandum of Understanding has also been
signed with his host counter part, Usman Aminuddin. The end of 2002
would complete the studies on both these alternatives of the super
project of gas pipeline.
The pre-feasibility study on taking as pipeline
through land route, an option which would result in substantial
earning for Pakistan would be carried out by an Australian company
Broken Hill, he said.
The other option of laying the pipeline in deep
sea, apparently capital intensive preposition, would be studies by
an Italian company.
Zanganeh termed the signing of MoU for
pre-feasibility study of on-shore line an important step in reaching
at a final decision of the project, being debated for the past
We would have no objection on a pipeline for
supply of hydrocarbons to India through Pakistan.
Aminuddin has assured Pakistan's political
support for the project.
The project has three aspects i.e. Political,
economic and tactical. The first phase of the project, which
involved political commitment, has been completed.
As regard to other proposals of bringing gas and
oil from other regional countries from Gulf or Central Asian
countries he said the thrust of the government was obviously on
developing indigenous resources. However he said they had always
supported projects of regional pipelines.
Earlier Usman expressed Pakistan's strong desire
to work closely with Iran on different projects in the field of oil
We are ready to move forward quickly and a
Pakistani delegation would shortly visit Iran for further discussion
on proposals of exporting motor gasoline to Iran, promoting
vehicular use of CNG in Iran and curbing smuggling of petrol from
Iran to Pakistan.
Zanganeh when asked about the financing of the
pipeline project said that total cost would be over four billion
dollars and a consortium of International banks and financial
institutions would have to be engaged for the provision of funds. He
said the talks with the ADB and other international banks should
start for lining up the funds.
Talking about smuggling Aminuddin said it was an
issue which was concerning for both Iran and Pakistan. He said Iran
had been heavily subsidizing its petroleum products and the
smuggling was equally hurting them besides causing harm to
Beside development of local gas infrastructure to
meet the growing need of industrial and power sector, the import of
gas gradually become imperative to respond to the economic needs of
In the power generating sector, WAPDA is already
facing acute shortage of about 250 to 300-mmcfd gas whereas its
total requirement is 703 mmcfd.
The gas supplied during 2000-01 on daily average
basis was 403 mmcd, which forced Wapda to consume 1.21 million
tonnes of furnace oil resulting in additional cost of Rs4.5 billion.
Gas supply situation for Wapda power stations
further aggravated during the current fiscal as supply to its
various stations from Sui Northern Gas Pipeline Limited (SNGPL) has
been reduced drastically since November last.
Wapda chairman complained that the SNGPL supply
on daily average basis was 55 mmcfd in November, 15 mmcfd in
December and 33 mmcfd in January against the requirement of 243
mmcfd of the whole system.
Similarly, Sui Southern Gas Private Limited (SSGCL)
was not supplying sufficient gas to Thermal power Stations Jamshoro
and GTPS Kotri. Resulting furnace oil consumption has increased and
during January it touched about 0.23 million tonnes costing Rs2.5
billion which according to the WAPDA's chief was highest-ever and
He also gave the references of a high level
meeting chaired by the President in November in which the President
had instructed that the highest priority be accorded to the power
sector in supply of gas.
The Wapda chairman has sought the personal
intervention of the Petroleum Minister to improve gas supply for the
thermal power stations.
Wapda and gas companies were at loggerheads over
the payment of outstanding dues, which were pending against the
utility since long.
These companies, on several occasions, had
threatened to suspend gas supply to thermal power stations due to
non-payment of their arrears. The Chief Executive Secretariat
however has always come to the rescue of the utility companies.
Coal—a viable energy option
Dewan Muhammad Yousuf Farooqui, Provincial
Minister for Industries, Labor and Transport says that the global
energy demand is expected to increase by 50 per cent by the year
2020 and a large portion of this demand will be met from Coal.
Worldwide, the primary use of coal is power
generation. Today the world gets 38 per cent of its electricity from
Coal. By comparison the share of Hydro, Gas and Nuclear sources is
17 per cent each. In the Asian region 45 per cent power is generated
from coal. This is expected to increase to 60 per cent by the year
Clean coal technologies are making coal more
attractive. The New Energy Policy given by the Bush administration
includes major funding for development of clean coal technology. The
latest technologies being used for making clean coal have made coal
no longer a dirty fuel. In view of large reserves the world over;
coal will always remain the single largest source of energy for
Despite having much larger coal deposits
approximately estimated at 185 billion metric tons in Pakistan, its
use for energy generation is almost negative that is only one per
cent as compared to 45 per cent used by other Asian countries for
power generation. Instead of using cheaper fuel a large portion of
energy is generated by using the costliest fuel that furnace oil.
Additional power demand in Pakistan by the year
2010 is estimated at 9000 MW. In view of the expected growth in
economic activity in Pakistan, the electricity demand may further
increase in the days to come. Over 99 per cent of Pakistan's coal
deposits are located in the province of Sindh. Three major
coalfields in Sindh are:
—Lakhra Coal Field in District Dadu with
estimated deposits of 1.64 Billion Tons is well developed and ready
to maintain the supplies.
—Sonda—Jherruck Coal Field in Thatta District
has estimated reserves of 7.3 billion tons.
—Thar Coal Field located in Tharparkar is
spread over an area of 9000 square kilometers. Reserves at Thar
coalfield are estimated to 175 billion tons. Four blocks in the Thar
coal field have been fully investigated. The blocks are spread over
an area of 353 sq. kilometers with 9.6 billion tons of coal.
The present government has started a programme
for fast track development of coal in the province of Sindh.
Recently a Task Force has been set up for Thar coal development
under direct supervision of the President of Pakistan. The purpose
of the task force is to ensure smooth implementation of coal mining
and coal fired power projects. A sizable portion of future power
demand will now be met from coal based power generators. The
government has also started a coal development programme aimed at
development infrastructure in the coalfields. Sindh Coal Authority
is actively promoting and helping private investors to set up
projects. The process of conversion from oil to coal has been
started in the cement industry as well.
The focus of the current energy policy of the
government is to assign greater role to the natural gas and coal in
power production obviously to cut down huge expenditures on import
of oil and to save the hard earned foreign exchange. Enhanced use of
locally available natural gas and coal would certainly help
producing cheaper electricity in Pakistan. The real impact of this
policy would however be fruitful when the benefit is also passed on
to the consumers. Currently, the power consumers have no option but
to reluctantly pay the price for power consumption that beyond their
means and also highest in this region.