ENERGY SECTOR
SIGNIFICANT DEVELOPMENTS IN THE OFFING

The natural gas is gradually assuming a leading role on the economic development of Pakistan

By AMANULLAH BASHAR
May 19 - 25, 2003

The energy sector is likely to take a new turn in Pakistan with the go ahead signal on the two gas pipeline projects from Iran and Turkmenistan to India via Pakistan.

The two cross border gas pipelines may be the most significant outcome of the normalcy of business relations between India and Pakistan.

Pakistan's Foreign Minister Khurshid Mehmood Kasuri, while accepting India's suggestion to resume business before resolving the issue of Kashmir, has put two gas pipeline projects high on the agenda of the talks between the two countries. The Minister has proposed that gas pipelines to India from Turkmenistan and Iran be laid though Pakistan and said Islamabad was ready to give international guarantees to ensure that gas flow would not suffer even in the event of war or hostilities.

The natural gas is gradually assuming a leading role on the economic development of Pakistan. In order to assign greater role to the natural gas in energy consumption, authorities are concentrating to develop a strong transmission and distribution network from the gas-fields to the users.

President Pervez Musharraf in a recent interview telecast by PTV has admitted that the high cost of electricity in Pakistan was the disturbing factor especially for the common man. He however said that the government was taking appropriate steps to bring down the prices of electricity by shifting the power generation from oil based to gas fired system. The power purchase agreements with the Independent Power Producers was another area responsible for high cost of electricity in Pakistan. Steps are however underway to overcome this problem.

In order to get enhance the use of natural gas, we need a strong infrastructure network for which the international donor agencies have also shown their keen interest to invest in the energy sector.

The World Bank in its report on the development of energy sector in Pakistan has emphasized enhancing the full-scale utilization of natural gas in the country. The bank has demanded unlocking the full utilization of the natural gas because Pakistan required more gas to overcome its energy needs and to minimize furnace oil import bill by converting the local industries from furnace oil to gas.

The Work Bank, according to reports, has asked for the withdrawal of subsidy on the provision of gas to the consumers. Subsidy given to domestic consumers was being withdrawn over a period of three years. However, a fixed 40 per cent subsidy to the low income group with monthly consumption below 100 cubic meters would continue. It may be mentioned that 40 per cent of the 3.5 million consumers would not be affected by the withdrawal of the subsidy on gas.

In this respect, the Asian Development Bank (ADB) has extended $200 million technical assistance for the Public Private Infrastructure Financing Facility in the Oil and Gas sector to the Ministry of Petroleum and Natural Resources.

The main object of this multimillion-dollar technical assistance is to help developing infrastructure through private sector involvement. This will promote economic growth as well as help reducing poverty in Pakistan. Traditionally, energy sector has been the domain for public sector investment, exhausting the scarce public resource against other competing demands. The absence of private sector greatly hampered infrastructure development that leading to slower economic growth.

This is one of the unique programs in the oil and gas history of Pakistan in which ADB would provide a facility of $200 million with a grant of $400,000.

The remaining amount of the $200 million package would be provided in the form of technical assistance and soft term loan.

The Ministry of Petroleum has directed all subordinate departments including OGDC, SSGC, SNGPL, Mineral Development Corporation and private companies to chalk out meaningful project proposals within the scope of this facility.

There are strong chances of getting contracts of this project by foreign-based companies in view of their strong financial and technical capacity to deliver the goods on such a large-scale project.

The OGDC has also worked out a multi-pronged strategy to achieve the projected oil and gas production of 24,000 barrels per day against its current capacity of 21,000 barrels and 9,000 million cubic feet against its current capacity 800mcf respectively.

OGDC is also working on war footing to complete its four major projects namely Bobi field, Qadirpur expansion project in Sindh, Dakhni expansion project in Punjab and Chanda field in NWFP.

GHAZI BROTHA

On the power generation side, Ghazi Brother Hydropower Project (GBHP), with an installed capacity of 1450Megawatt, will be a significant addition to the hydel capacity which will also help in containing the ever growing cost of thermal power in Pakistan. Ghazi Brotha project is set to go into power generation from next month. The project will be providing a strong back up to the power generating capacity of the country.