Developing the energy sector

The Planning Commission has laid out an ambitious perspective development plan for next 10 years

From SHAMIM AHMED RIZVI,
Islamabad
June 11 -17, 2001

Speaking at the inauguration ceremony of Zamzama Gas Field in district Dadu, Sindh, Chief Executive, General Pervez Musharraf said that development of energy sector especially through indigenous sources was, after agriculture, at the top in the economic revival programme of his Government. "We believe that this (energy) sector has the potential of reviving the economic fortunes of Pakistan".

He pointed out the four areas of prime importance namely information technology, small and medium industry, agriculture and energy sector. These are the four areas which will drive the economy forward and would be the main contributors towards the economic revival of Pakistan. The Ministry of Petroleum and Natural Resources has been in the forefront in this effort and commencement of gas production from Zamzama Gas Field in a record time frame is indeed most creditable. He congratulated all the workers of the project.

The Chief Executive said he would certainly like to encourage and welcome Broken Hill Properties (BHP) of Australia which has taken up the Zamzama Gas Field project to expand its activities in Pakistan. "In fact, one of the areas that I would certainly like to encourage you is the Thar Coal project", he said adding that "we have the biggest coal reserves in the world located in Thar and they need to be developed."

The Chief Executive said that the Ministry of Petroleum continues to create viable investment opportunities for investors and will shortly be announcing a more open and market oriented petroleum exploration and production policy. This new policy should convince our foreign partners and the local investors community that this government means what it says, he added. He was of the view that the immense advantages of using natural gas as the fuel of choice are very clear. First and foremost, it translates self-reliance for the nation as a vital source of energy. Secondly, natural gas as one of the most environment-friendly fuels in the world today mitigates the danger of climate change, which is playing havoc with the global environment. He said in recent years around five to seven trillion cubic feet (TCF) of gas has been discovered in Pakistan. This invaluable resource will replace the import of liquid fuels used for power generations and for commercial and private transport.

The Chief Executive said that the main problem in the economic revival of Pakistan is import substitution. He explained that the important substitution of furnace oil stands at the top. When we are converting the power units to gas, it is really the import substitution of roughly 900 million dollars of furnace oil that we import from abroad.

He said this will translate into significant foreign exchange savings in our oil import bill at a time when our scarce foreign exchange requires to be conserved to improve the balance of payments position. The total import bill of oil reaches about three billion dollars annually. This needs to be substituted and that is what we are doing in the form of gas and also coal, the Chief Executive said.

Even the worst critics of the present Government cannot deny the fact that it has rightly identified the four areas, which may bring about a turn-around in our economy. The Government of General Pervez Musharraf has not only identified the right course, it has taken major strides to develop these sectors of our economy making allocation of adequate financial resources. A record amount has been allocated to conserve and augment water resources by building small dams and water reservoirs and generous credit to small farmers. Billions have been provided for development of gas and other mineral resources, development of hydel power to replace expensive thermal power converting the thermal power projects on gas and development of coal reserves.

The Planning Commission, under the directive of the Chief Executive, has laid out an ambitious 1553 rupees perspective development plan for next 10 years with more than half going to power and water projects indicating government's priority for agriculture and energy sectors. The "Lion's share of the funds will be spent to build new hydel projects and water reservoirs, a source disclosed.

During the last week two very important projects of considerable economic significance the white oil pipeline and the Zamzama gas field were inaugurated. The pipeline project, whose ground-breaking ceremony was performed by the minister of petroleum and natural resources, Usman Aminuddin, will carry refined oil from Karachi to the north and, to a great extent, cover the inadequacy of the existing infrastructure against the backdrop of the growing demands of oil in the upcountry areas which were supplied oil largely by tankers a mode of transportation which is relatively costly, time-consuming and inefficient as compared to transmission by pipelines. The new underground pipeline costing $ 480 million will carry oil from the Pakistan Oil Refinery at Port Qasim to Mahmood Kot in district Muzaffargarh covering a distance of 817 km.

The second project, inaugurated by Chief Executive, is the Zamzama gas field in district Dadu. Within two years of its ground-breaking the field has started supplying 60 million cubic feet of gas a day to the Sui Southern Gas Company's system. This accounts for about 20 per cent of the current supplies of gas in the country. Both projects are joint ventures the pipeline in collaboration with China and the gas field with a Australian firm. The completion of these projects will certainly help in reviving the confidence of foreign investors.

The oil and gas sector, which enjoys top priority along with agriculture in the present government's scheme of economic revival, has already attracted the commitments of $910 million in foreign investment. More may be forthcoming once a more liberal oil and gas exploration policy now in the making is announced. The goal of the government is to have an optimal energy mix in which the preferred option is gas which is efficient, relatively cheap and environment friendly as a fuel. At the moment substitution of furnace oil, used for power generation, for gas is on top of the economic agenda as its import costs roughly $900 million annually. Conversion of power units to gas would significantly relieve pressure on foreign exchange.

Another major energy resource lies buried in Thar, where the biggest coal reserves in the world are located. It is ironic that while we have these reserves of energy we continue to spend a huge amount of scarce foreign exchange on the import of oil. The Chief Executive has now invited the BHPP the developer of the Zamzama gas field to take interest in the Thar coal reserve. Earlier also foreigners were invited and they showed interest in the development of coal reserves in Pakistan by the powerful oil lobby in Pakistan's bureaucracy and business circles did everything to discourage them. According to press reports, China still has an interest in setting up a coal-fired power plant but it does not seem to be making any progress. If the developments of coal deposits are genuinely intended, obstacles put up by interested sections in the way will have to be located and effectively removed.