Oct 05 - 11, 2009

Pakistan's close friend, China has come forward with short-term and long-term plans to help the south Asian country to overcome its acute energy shortage. Shanghai Electric Power Generation Group has proposed for upgradation and rehabilitation of existing thermal power plants to enhance the country's generation capacity. The two countries have signed a $1 billion accord to construct 12 dams in the country's all the four provinces for what Axiom Bank (import/export) of China has committed to furnish $700 million loans. Chinese are also involved in 969-megawatt Neelum-Jhelum hydroelectric project in Azad Jammu and Kashmir. Sinohydro Corporation, a Chinese company has already shown interest in the $2 billion Kohala hydro-electric power project in Azad Kashmir.

This month, a three-member delegation of Shanghai Electric Power Generation Group, headed by International Services Director, Guo Feng called on Federal Minister for Water and Power in Islamabad and briefed the minister on their proposal for upgradation and rehabilitation of existing thermal power plants. The visiting Chinese delegation initially showed interest in rehabilitating and expanding the capability of two units of Muzaffargarh power plant in Punjab province. After rehabilitation, the generation capacity will be raised from 220 to 350MW on both units. The minister welcomed the Chinese proposal and asked them to submit a detailed feasibility report to the ministry.

The work on the construction of the 12 dams at a cost of $1billion is expected to commence during the current fiscal year. Chinese import/export bank has agreed to provide $700 million loan, while the remaining $300 million would be furnished by Government of Pakistan. An MOU has been signed in this regard between WAPDA (Water and Power Development Authority) and Axiom Bank of China.

Sinohydro Corporation, which is already involved in the Gomal Zam Dam and Khan Khawar and Dubair hydropower projects in the country, is also interested in Kohala hydro-electric power project in Azad Kashmir. The project is claimed to be one of the largest hydro-electric power projects in the private sector in South Asia, as it would require a 16kms tunnel, a diversion from Seran village and a powerhouse in Barasala. The110 megawatts project would be linked to the national grid at Rawat near Rawalpindi through a115kms 500kV transmission line.

Pakistan has already awarded contract of Neelum-Jhelum hydroelectric project costing $1.5 billion in Azad Jammu and Kashmir to a consortium comprising China Gezhouba Group Company (CGGC) and China Machinery Export Corporation (CMEC). In view of the looming energy crisis, it is a high priority project for the country. The project has one of the most difficult designs, as it involves construction of a 47-km tunnel, passing underneath the bed of Jhelum River, to divert Neelum River. The project site near Muzaffarabad is blessed with abundant hydropower potential by virtue of its topography, meteorology and hydrology. The rivers Jhelum and Neelum along with their tributaries flow through Azad Jammu and Kashmir. They have immense hydropower potential in their laps. Islamabad considers it crucial to secure its priority rights over Neelum waters - a tributary of the river Jhelum - threatened by the recent Indian move to use its waters for power generation and diversion.

The Neelum-Jhelum hydropower project was scheduled to commence in July 2002 and to be completed in June 2010. The project could not come in a take-off position owing to the issue of foreign exchange funding. The project was delayed by more than six years due to lack of public-sector allocations for the project.

Pakistan is currently facing an electricity shortfall of more than 3,000 megawatts leading to frequent and long blackouts in the country. The country has taken a major initiative through the IP gas pipeline for using much of the gas thus acquired to produce electricity. Officials in Islamabad believe that the delay in the implementation of the IP project is causing the country a daily loss of $5 million, as import of 750 mmcfd of natural gas from Iran would support the production of 4,600 megawatts of electricity, for which 7.5 million tons of HSFO (high-sulphur fuel oil) is required. The border price of IP gas based on the current price of Brent would be $8.05/mmbtu, while the country will have to pay $11.95/mmbtu based on the current price of HSFO.

China is also expected to join Iran-Pakistan (IP) gas pipeline project after India's withdrawal. If China joins the project and replaces India, the pipeline would pass through Pakistan's Northern Areas, now called as Gilgit-Baltistan. The Chinese experts would visit Pakistan to finalize the route of the pipeline after Beijing takes a decision on joining the IP gas pipeline project.

China is poised to take full advantage of the geographical location of Pakistan, which is strategically located between the region with largest energy reserves of the world like central Asia and the countries with highest energy consumption like India and China. The country is in a position to ensure energy security in the region by developing an efficient energy market and the cross border trade of energy. China has been focusing on building the strategic transport links between the country's northern areas and its remote western regions including Xinjiang. China plans to use Pakistan as a pipeline corridor, bringing oil and gas from the Middle East and central Asia in order to meet her strategic energy requirements.

Last year, China showed interest in joining the $7.4 billion Iran-Pakistan-India (IPI) gas pipeline project. China had revealed its intention to import about 1 billion cubic feet a day from Pakistan if India opts out of the gas pipeline project. Under the Pakistan-Iran deal signed in May, the 2100-kilometer pipeline would enter Pakistan from its border near Gwadar in Balochistan province.

Pakistan's Inter State Gas Distribution Company (ISGDC) has already floated a proposal for laying IP gas pipeline. Under the plan, Iran would build the pipelines from its Pars Gas Field to Jiwani in Balochistan (near Pakistan's border), while Pakistan would lay the pipelines from its side up to Jiwani. This would greatly save the cost of the proposed Iran-Pakistan gas pipeline project by $1 billion. Jiwani is a coastal town along southwest coast of Pakistan near Gwadar.

The experts believe that IP gas pipeline could be expanded to China, as the gas pipeline from Pakistan's south to the Khunjerab Pass, linking the two countries, is viable. The pipeline would go in tandem with Karakoram highway.