Thar coal power project remains illusive so far

June 11 - 17, 2007

The coal-based power projects, primarily exploiting the large Thar coal reserves, assume greater significance in the projected energy scenario, as it will reduce country's dependence on imported furnace oil, resulting in lower import bill, besides providing cheaper electricity. Sadly, coal is being used only one percent for power generation in Pakistan compared to 90% in Poland, 77% in China, 58% in Germany, 54% in India, 50% in Australia and 38% in Russia.


It was in 1992 that the Geological Survey of Pakistan (GSP) discovered huge sub-surface deposits of coal--- the largest in the world --in Thar District, Sindh. As the news spread globally, a number of foreign investors showed interest in the exploitation of Thar coal resources for power generation. There was no concrete proposal however received. In response to the Energy Policy 1994, Consolidated Electric Power Asia Ltd of Hong Kong signed a Memorandum of Understanding (MOU) for developing a 1,425 MW capacity integrated power project based on Thar coal. It did not materialize.

Related activities on the part of the government however continued on priority. From 1993 to 2001, the GSP conducted comprehensive exploration, assessment, evaluation and appraisal studies of the Thar coal resources, establishing technical and commercial viability of confirmed reserves of 175.5 billion tons of coal. The Thar coal, classified as lignite A-B, contains low ash and sulfur contents and is suitable for power generation, which would not have relatively adverse environmental and ecological effects. Thar coalfields covering an area of 9,000 square kilometers has been divided into four blocks of coal demarcation for administrative and logistic purposes.


The pioneering efforts were made by President Pervez Musharraf who took personal interest in developing Thar coalfields on a fast track basis, and asked the Chinese, who have demonstrated strong commitment to participating in economic development of Pakistan since long, to come forward to invest in this mega project. As a result, in April 2002, a state-run Chinese company, the Shenhua Group Corporation was assigned by the Government of Pakistan to develop block-one of Thar coalfields, accepting its proposal to establish a 600-MW power generation plant at the mine-mouth with associated captive coalmines. Subsequently, Shenhua Group, in association with the GSP, carried out studies related to coal-geological and hydro-geological investigations, and a feasibility report for the project was completed. The cost of these studies is estimated to be seven million dollars.

Based on these studies, the agreements were signed by the sponsors with the government for the construction of power plant, as well as for land use right, coal-mining license and use of underground water resources etc. The proposed project to be undertaken on BOT (build, operate and transfer) basis was to be located at Tharparkar and was scheduled to generate electricity by the year 2009, extracting required quantity of six million tons of coal annually. Unfortunately, the project ran into snags, primarily on the issue of the electricity tariff.


Efforts at the highest level of the government were made until recently to salvage the project seeking renewed interest of Shenhua Group, but without yielding any positive results. Now it is certain that the Chinese company would not develop the project. Meanwhile, various investors from Australia, Germany and other Western sources expressed desire in developing other blocks of Thar coalfields for power generation in the range of 1,000 MW each. But none came forward seriously. Even other Chinese companies, which had earlier indicated willingness to undertake similar projects have withdrawn from the scene.

The Sindh government, meanwhile, achieved a landmark in the direction of exploiting Thar coal reserves, have had , in January 2005, a bankable feasibility report made for the mining project related to another block of Thar coalmines, at a cost of about three million Euro. The world-reputed German consultants Rheinbraun Engineering confirmed technical and financial viability of mining Thar block-two that would yield more than six million tons of coal annually. The integrated project was now available to be offered to local or foreign investors for development.


In response to the successful Dubai Road-show organized by the Private Power and Infrastructure Board in April 2005, AES-Oasis Ltd, a subsidiary of AES Corporation of the USA, showed interest in developing an integrated mining-cum-power project of 1,000 MW capacity, utilizing block-two Thar resources. For the purpose, an MOU was signed with the provincial government for preliminary assessment of coal availability and mine-ability. The due diligence was to be conducted within ten months for which the federal government issued a letter of comfort in June 2005. The sponsors could not present a report on the issue and asked for three months extension in deadline, which too passed sometime in January 2007 but without any report. There has been no further progress.


The American sponsors had shown strong reservations about the commercial viability of the scheme, in spite of availability of project-specific sound technological and economic studies carried out earlier by many agencies and the German consultants. The sponsors have taken the above stance in view of assumed non-availability of required cooling water in the area. There is no denying the fact that Thar region is semi-arid, with scarce water resources. Nonetheless, underground water--of brackish to saline quality--is available, according to the GSP and the Chinese study reports. The GSP drilling data has indicated three water-bearing zones (aquifers) at an average depth of 50, 120 and more than 200 meters. The sponsors however have opined that the underground water was not sufficient to meet the project requirements. While they consider other options for water availability, including use of canal water, the sponsors also looked into the feasibility of changing the project site, somewhere on Indus River, and transportation of coal from Thar through railway wagons. Of course, the revision of site will totally change the characteristics of the envisaged project.


On May 8, 2007, the government has approved the proposal of Hassan Associates (Pvt) Ltd, Karachi to establish a 1,000 MW capacity integrated mining-cum-power generation project based on Thar coalfields. Details of the project are not available at this stage, but it is understood that a comprehensive feasibility study would be required for the project that may take at least a couple of years. Only then would the fate of the project sponsored by a Pakistan investor be known. Unfortunately, conducting the studies, though essentially needed, appears to be a never-ending exercise, causing inordinate delays in taking off the project.

A report recently conducted by the Asian Development Bank (ADB) has tried to complicate the matters further. The report, having identified major risks and constraints in the mining of Thar coal, has highlighted that previous studies conducted on Thar coal have not resulted in a bankable feasibility study and therefore private sector may not engaged itself for full-scale commercial development of the huge Thar resources. The available studies, according to the report, also lack full technical information such as appropriate mining techniques to be adopted.


On its part, the government has already done a lot from facilitating the investors to developing necessary support infrastructure for the project. Having launched the Thar Coal Infrastructure Development Project with a total financial outlay of over five billion rupees, the Sindh government has so far invested to the extent of Rs 3.5 billion in the construction of roads network, town planning, water and power supply systems and other schemes. Likewise, Water and Power Development Authority (WAPDA) is in the process of laying a 500-kV transmission line, at a cost of Rs 5.5 billion, for the dispersal of electricity from the project. WAPDA, as part of its Water Vision 2025, would also construct 164-km long Rainee-Thar Canal to irrigate region of Thar and Nara that can also meet water requirements of the project.

Given the conditions, a power plant based on the Thar coal, which is termed of great national importance, has so far remained a distant reality and may not come up within the foreseeable future. It is high time for the government to take stock of the situation and to adopt pragmatic approach addressing issues and challenges faced in implementation of the Thar project.

(Engr Hussain Ahmad Siddiqui is former Chairman of Heavy Mechanical Complex, Taxila and State Engineering Corporation of the Ministry of Industries, Production and Special Initiatives)