ENERGY DEMAND GROWING IN THE FACE OF STATIC RESERVES

Adequate energy at an affordable cost in a must to sustain the present level of 7 to 8 percent annual economic growth

From SHAMIM AHMED RIZVI, Islamabad
Apr 03 - 09, 2006

Pakistan's energy requirement is increasing at the rate of 10-12 percent per year for the past few years to sustain its level of economic growth against almost static oil, hydel power and gas reserves.

It is feared that the country may be facing or shortage about 1000 mw by end 2006 and 5000 mw by year 2010 which may go up to 10000 mw by the year 2025. To meet the feared short fall the current year, the already functioning Independent power producers (IPPs) have been asked to enhance their existing capacity by at least 1000 mw to meet the immediate needs.

Adequate energy at an affordable cost in a must to sustain the present level of 7 to 8 percent annual economic growth. Thermal power produced through furnace oil is an immediate remedy but its production cost has almost become unaffordable. Coal fed and the hydel source of energy seems to be only alternative but it is a much longer process. Nuclear energy is the ideal solution but this concept is still in its infancy in Pakistan.

Keeping all these factors in mind the government has drawn up a 25-year plan (2005-2030) for increasing energy production in the country. This major energy development plan is accompanied by initial cost estimates, which will be $ 37 billion to $ 40 billion that has to come tin the form of foreign aid or foreign investment. And that is a very large sum. But the annual average expenditure works out to $ 1.5 billion.

Initially the government is seeking foreign direct investment for seven energy projects which are to be completed in five to seven years and that has to be apart from the current efforts to interest foreign investors in oil and gas exploration and development, and the privatization outlay in the oil and gas sector and other energy enterprises.

Immediately, the government is inviting foreign investors to finance its $ 3 billion plan for import and build a supply chain of liquefied natural gas (LNG) enabling the country to meet the fast approaching shortfall. This will be needed to fill the gap in energy supply between 2007 and 2011 when the pipeline for gas from outside the country could start functioning.

The government is also mobilizing international investors to invest in the $ 7 billion Iran-Pakistan-India pipeline, $5 billion on the Turkmenistan-Pakistan-India gas pipeline and $8 billion on the Qatar-Pakistan-India gas pipelines. The three pipelines together will cost $20 billion, along with that $8 billion is being sought for generating 32,000 mw of hydroelectric power. In addition to two billion dollars investment is being mobilized for development of energy from coal and $5 billion more for the thermal plants to meet immediate power shortage.

Along with that increasing gas production at home will enjoy top priority, as that is the cheapest source of power after hydel power. The OGDC has been directed to drill 100 wells this year but with the financial year being 3/3th over how many wells have been drilled is not obvious.

Such vast outlays on the energy sector, including in some currently disturbed and violence prone areas needs political stability in the country. That is all more so when major foreign investor and foreign courtiers like Iran, Turkmenistan and Qatar are involved. The number of foreign countries interested in the $7 billion Iran-Pakistan-India pipeline may dwindle sharply if the current conflict between Iran and the US takes a worse turn. The US wants to penalize companies which help Iran develop its oil and gas industry which is currently handicapped by its low technology.

For attracting such large investment, the country needs not only political stability at the center and in the provinces like Balochistan, but also a national consensus on the plan. Hence, before adopting the 25 years energy plan, it is advisable to seek the support of major political parties. In fact, the country has no alternative but to actively pursue such a long-term energy augmentation plan.

Uncertain supplies and high prices of furnace oil have reduced its importance for energy production. Focus is being shifted to Nuclear Power. In such a context the US has offered its cooperation to India in the civilian nuclear field after eight nuclear reactors have been excluded from the civilian nuclear field after eight nuclear reactors have been excluded from the civilian sphere. The US has also agreed to offer nuclear fuel for power production to India, which is a radical step. The Soviet Union too has made similar commitments to India making it easy and more economic for India to increase its nuclear output.

But Pakistan will not be offered such a facility by the US in view of its proliferation record, said the US in view of its proliferation Condoleezza Rice while in Pakistan. The US Secretary for energy Samuel Boodman who led the delegation to Pakistan immediately after President Bush's visit, said: "India's needs are different, its problems are different and its programs are different." And he advised Pakistan to get gas not from Iran, but from Qatar at a cost of $ 8 billion for the pipeline.

Pakistan wants the US to forget the past, as it has done in the case of India and have a uniform policy for both India and Pakistan or a single package and not separate packages. The US has not so far agreed to change its discriminatory policy, while the deal with India is facing strong opposition in US Congress from members opposed to proliferation.

Pakistan is to cooperate with China in developing energy from various sources including nuclear reactors and particularly gasification of the tar coal, an area in which Chinese experience is outstanding. The 300-mw nuclear power plant set up with Chinese assistance has been operating for long and the construction of a second reactor at Chashama has begun. And China has been requested to set up two more nuclear reactors with a capacity of 900 mw or more in Pakistan.

A senior Chinese energy official is to visit Pakistan soon heading a delegation of experts for a full-fledged conference on the energy options available to Pakistan and all energy options available to Pakistan and all the possibilities will be explored. And if the US and Russia can supply nuclear fuel to India, China can help Pakistan.

Meanwhile, the country is forging ahead in the area of alternative energy. The government has issued 32 letters of intent to future investors for producing solar energy, wind power and other non-traditional energy. The Sindh government has promised 1000 acres of land for each project. The government has already allotted 1000 acres and an arrangement for delivering 20,000 acres more in process.

The Energy Development Plan also includes the construction of mega Dams including Kalabagh work and Bhasha. Financing of these dams during the next 15 to 20 years will not be not be problem as World Bank and Asian Development Bank have approved their feasibility and offered assistance for Diamir Bhasha and Kalabagh. The construction of these mega dams and other smaller dams will not only adequately meet our energy requirements, at a comparatively much cheaper cost for the nest 3 decades, it would provide much needed water for irrigation for increasing our agriculture products.

Focusing its attention on the hydel power the Private Power and Infrastructure Board has awarded contracts of seven projects for production of about 1800 mw. All the seven sites are located in NWFP and Azad Kashmir and one is likely to be completed in Bhue in four years.

The authorities should focus on plans to provide electricity at the affordable cost. It is not possible through thermal power. It should concentrate on hydel power, coal fired power station, increasing nuclear power and using alternative sources of energy. Recently at an international coal conference held in Islamabad it was highlighted both by Pakistani and international experts that Pakistan could produce huge electricity at a very cheap cost by using its coal deposits. Pakistan has large deposits of coal mainly in Thar, which could produce over 40,000 mw of electricity. This should farm a part of long term planning.