IS PAKISTAN AN ENERGY DEFICIENT COUNTRY
Aug 06 - 12, 2007
Energy Consumption in Pakistan is increasing with each passing day. However growth in consumption is diversified and can be dealt efficiently if prudent measures are taken by the concerned authorities. Being a gas rich country, there is great pressure on gas demand in Pakistan. It took many years to allocate 100mmcfd gas to a fertilizer plant even in the presence of high import numbers due to rising urea imports. Pakistan is 3rd largest CNG consumer in the world and will become 2nd soon. Pakistani roads are now swamped with 1.22m of CNG vehicles while Argentina and Brazil has 1.24 million and 1.31 million CNG converted vehicles respectively on roads. The rate at which new CNG cars are coming on road is much higher in Pakistan as compared to Argentina and Brazil. Power generation is not meeting the pace of growing demand in previous years. In many other developed countries coal is being used as the primary source for power generation. In Pakistan, coal currently makes up merely one per cent of the electric power generation. Hydro power has become a political issue and despite so many announcements by the president himself to construct five dams, no significant development has taken place in this area. As a result of all this the Government has to rely on expansive furnace oil based power generation through IPPs. Furnace oil has further increased pressure on the import bill. However, situation could be even worse if furnace oil prices would have showed same upward trend as shown by the international crude oil prices. It appears after every round of meeting that significant developments have taken place in the construction Transnational Gas pipeline but no concrete measures have been taken towards its construction.
This is an established fact that Pakistan is an energy deficient country. In last 60 years all the Governments have made people of the country trust the fact that Pakistan is a resource rich country and God has gifted us with precious metals and reserves. Last few years confirmed this fact when surveys and exploration activities proved that drilling to success ratio in Pakistan is 4 to 1 and it is one of the best in the world even when compared to the oil rich countries where it averages roughly 8 to 1.
It indicates the lethargic attitude of different Governments, who did not make any serious efforts to explore and utilize natural sources up to the potential of the country and kept on relying on imported oil. Five years back, when the economic size was small and it was not facing demand pressures like in the present circumstances, the situation was not as worrisome as it is now. Oil import bill of more than $7bn or 50% of foreign exchange reserves for a developing economy with no hopes of creating exportable surplus in the near future is undoubtedly very alarming.
Government officials have been claiming that Government is very serious in reducing oil import bill and thus well exploration targets of the oil and gas exploration companies have become very aggressive in last few years. Though, it is true but figures do not depict the aggressive stance of exploration companies. Demand growth has outperformed these activities and hence there is a consistent rise in the oil import bill. Huge cash reserves that state owned oil and gas exploration companies have also depict the fact that they could be even more aggressive in their operations and it could yield better results not only for the exchequer but also for their own financials. Presently, these cash reserves are contributing to the other income of these companies. The discoveries by so called aggressive exploration activities in recent past are of small magnitude and this is very surprising that a resource rich country has not been able to discover any comparable reserves after 1954 discovery at Sui.
Any new international giant exploration company has not marked its entry in Pakistan. These multinational companies with soul objective of making huge profits did not start their operations in Pakistan despite attractive hit ratio. Government tried to regulate the sector without adopting international practices and restricted gas well head prices. This was a disincentive for these international companies when one imagines a scenario where global energy demand had forced all the big companies to operate aggressively so that this demand could be satisfied. One measure to judge these operations is shortage of drilling rigs internationally. Government also kept on making volatile decisions by altering well head prices and hence as a result we did not witness the presence of these global giants in Pakistan.
Globally, offshore exploration is a very expansive and risky venture. Exploration companies have to allocate and spend gigantic amounts for it. The budgeted amount exponentially increases if weather conditions are bad. However, if it goes successful then results can also be more than expectations. In India, offshore exploration remained a failure for a long time and even then pace of investment did not stop and thus as a result huge reserves were found. Few years back, State owned companies in Pakistan also announced to jump into offshore exploration. However, it could not gather momentum in Pakistan after failure at Pasni.
The concept of Ethanol based gasoline is very successful in the agrarian economies especially in the countries where sugar cane is grown in abundance. Ethanol is a obtained through molasses which is a by product that is produced in the process of making sugar from sugarcane. The petrol not only becomes environmental friendly but also healthy for vehicles engines if 10% ethanol is mixed in it. Brazil is a vital example where it has now been developed as a profitable business and ethanol is being obtained by directly converting sugarcane into ethanol instead of relying on sugar mills. Few months back, it was also experimented in Pakistan and Government was expecting that it will reduce oil import burden by 10% which is roughly $500mn in absolute terms. However after initial positive statements, implementation has been at tortoise pace and hence due to lack of interest from government, no seriousness has been witnessed by the private sector in the country.
If we compare energy consumption of Pakistan with that of India then an interesting scenario is developed. Pakistan is a gas rich country and meets 51% of its total energy requirement through gas where as India meets 51% of its total energy requirement through coal. Furthermore, in the total energy consumption coal contributes just 9% for Pakistan and gas contributes 8% for India. Our neighbor is also faced with the huge import bill brought by oil imports.
If the break up of Pakistani and Indian consumption is further analyzed then Pakistan appears to be in a situation where it can get rid of this import bill. However, this is not the case with India. The reason for this the abundant proven coal reserves in Pakistan. Based on these proven reserves, India can not increase its share of gas in the total consumption and therefore it is not easy to get rid of heavy oil import bill .however, Pakistan can definitely reduce its dependence on oil imports by increasing the share of coal in total consumption.
All the concerned authorities are very well ware of the fact that Pakistan has huge coal reserves which can be a very good alternative to meet its energy needs but one reason that is always quoted about these reserves is there quality. Just in Sindh province, the total coal resources are 184 billion tones. The quality of coal is mostly lignite-B to sub-bituminous A-C and hence technology was not available to extract and purify them. However, technological advancements have made it possible to make use of these reserves. One classic example for this is china where most of the future power generation plants have been planned on coal. Coal accounts for about 70% of China's total energy consumption. America heavily criticized china and forced it to shelve its coal based power generation plans as it will be hazardous to environment. However, china has declined any such claims by proving that it has developed the technology to efficiently utilize its coal and hence it will pursue with its plan to rely on coal for its future power generation.
There is a need that local oil and gas exploration companies should become more aggressive and a platform should be developed in order to facilitate more foreign investment in this area. Instead of repeating their statements about quality of coal, Government officials should now learn lessons from china and invest in the technology even if it is expansive because it will definitely be a fruitful move keeping in view the huge oil import bill.