Coal a cost effective fuel is being ignored

July 09 - 15, 2007

Pakistan is one of the few developing countries in the world where per capita power consumption of electricity is on the lower side. While many reasons can be attributed to this, one of the main reasons has been the political instability in the country. Other developing countries identified power needs well in advance and were taking up the issues on daily basis rather than treating the issue of power generation on a five yearly plan basis.

Now the situation is appalling, with 2900 MW shortage of electricity, we as a growing economy are facing a tough competition from our neighboring economies where the governments realized in time to adopt proactive approach and act accordingly. The fact can be noted from average consumption in India is 520.3 Kwh per capita, where as Pakistan stands only at 452.8 Kwh.

We in Pakistan are dependent on hydropower, fossil fuel, natural gas & nuclear power for electricity generation. Our total installed capacity is 19,404 MW, out of which only 33.4 % is dependent on hydel power with the rest of the electricity generated is derived from fossil fuel & natural gas. Only 462 MW of electricity is generated by nuclear power plants in Karachi & Chashma; the Karachi nuclear plant has completed its utility life ( Built in 1972) but thanks to our dedicated Engineers & staff the plant is operational albeit with some snags due to technical reasons. One of the cheapest mode of electricity generation is hydro power but this has been neglected in our country due to geo political reasons.

The other readily available raw material is Lignite coal which is abundantly found in the Sindh / Tharparkar area. In 1992, the Geological Survey of Pakistan (GSP) discovered more than 185 billion tons of lignite reserves in Thar coalfield. The GSP completed coal-resources evaluation in the four specific blocks of the coalfield. On the basis of GSP studies, the required coal potential of a minimum of 500 million tons in each block has been established. Thar coalfield extends over 9,000 square kilometers, of which 356 square kilometers has been studied in detail by the GSP, indicating the presence of 9 billion tonnes of coal in four blocks. The main coal-bed thickness ranges from 12 to 21 meters at an average depth of 170 meters. The quality of the coal has been determined on the basis of the chemical analysis of more than 2,000 samples. The grade of the coal ranges from lignite-B to sub-bituminous-A.

One coal powered Power Plant at Lakhra having capacity of 150 MW is under utilized due to improper maintenance and barely produces 30% of the installed capacity.

Its pity that huge reserves of Lignite which has been explored by Geological Survey of Pakistan and further in depth study made by RWO of Germany, is being ignored by many of our decision makers in Islamabad. After huge reserves of Lignite were discovered in Thar area, lot of International Power Companies showed their interest in bidding for coal power generation based upon Mine Mouth plant .

One of the big names in Coal Power generation Shenhua from China started working in the Thar area for coal based power plant. If this project would have gone ahead then 1000 MW of electricity would so have been added to the national grid and also giving the country infrastructure for Lignite based power plants which is one of the cheapest form of electricity production all over the world. The Shenhua Group Corp of China has now quit the US$1.5 billion Thar coal project in Pakistan and has decided to roll back its plan for setting up coal-fired power plants at Thar (Sindh). The decision is considered a major setback for the South Asian country, which is facing a serious power shortage. The project was expected to add 1,000 megawatts to the national power grid in three years.

The main reason for the company's withdrawal is the power tariff rate offered by Pakistan, which the Chinese side deemed insufficient to continue power generation. Security and domestic workload have reportedly been cited as the other reasons that forced the company to drop its plan. Pakistan had previously turned down Shenhua's demand for a tariff of 5.7 US cents per unit for the Thar project.

The Chinese group later expressed its willingness to install the power plant at a generation price of up to 6.5 cents per unit, but the government had not yet made a final decision on the tariff, which was more than what the Chinese company had previously sought. The company had also sought the government's assurance to allow the use of water from underground aquifers and guarantees of a return on its investment for setting up a coal-based power plant in Sindh .

Some circles in Islamabad were inclined to accept the Chinese group's demand for 6.5 cents per unit, given the fact that the tariff from other competing fuels was quite a bit higher, with the exception of hydro-electricity. Since then it was made compulsory that the tariff, once agreed, would not change for 30 years.

Pakistan had also invited China to become an equity partner in the setting up of the $500 million Thar Coal Mining Co, which would develop the remaining five blocks of the huge coal deposits at Thar. Its management had been planned in the private sector, but the federal government also pledged to provide more than $100 million equity and sovereign guarantees to the partners.

Shenhua has vast experience in generating electricity with coal-fired power plants. With registered capital of 2.58 billion yuan ($336 million), Shenhua Group Corp ranks among the top state enterprises. It is separately listed in the state plan and is endowed with the privilege of international financing, trading, and the import and export of coal. The group is responsible for the overall planning, development and operation of the massive Shenfu Dongsheng coalfield, as well as the related railway, power station, coal terminal and shipping fleet. The Shenhua Coal Trading Co is a wholly owned subsidiary of Shenhua Group Corp, specialized in the domestic and overseas sales of Shenhua coal products.

The Shenhua Group had completed mechanized drilling work by the end of 2002. Of 54 square kilometers, the Chinese firm had drilled 125 holes over 9 square kilometers. About 200 million tonnes of coal reserves were estimated to be available within 54 square kilometers, which is enough for power generation for the next 30 years. In view of the rapidly mounting Pakistani energy deficit, there is an urgent need to exploit the country's huge indigenous coal resources, turning the coal-mining sector into a modern mechanized industry.

Several foreign and local companies prepared feasibility reports in the past and confirmed availability of coal deposits, but they were reluctant to start power generation because of an unfair pricing formula for coal-fired power generation. Pakistan needs to increase its share of coal in the energy mix to at least 19% by 2030 and 50% by 2050. Experts in Pakistan stress the need for developing a uniform pricing formula for electricity purchase to ensure that foreign investors will set up coal-fired power plants in the country.

The project abandoned by Shenhua has been awarded to a local firm to complete 1000 MW Lignite fired power plant within three years and enhance the capacity to further 1800 MW thereafter. Sindh Coal Authority is trying their level best to exploit the huge reserves of Lignite in the Province. Let us wait & see how fruitful their efforts are in bringing the change in our Power sector in coming years.

Muhammad Afzal Shahab is CEO of Pak Energia Karachi, Marine Chief Engineer with extensive experience in power sector of Pakistan. His organization Pak Energia is a service provider for Industry in Pakistan, their expertise is operation & maintenance of gas / diesel engines, plant maintenance & marine ship repairs.

Email : pakenergia@cyber.com.pk