Nov 02 - 08, 2009

When it is a common fate of gigantic projects in Pakistan that they crawl out of paperwork to daylight at a snail's pace, can we expect an exception from a joint venture hammered out by government of Sindh and Engro of coal mining and power generation at Thar?

"The situation has changed right now and whole country needs power without which there would stay energy deficiency, so any power project let alone this one is taken seriously in the midst of serious energy crisis," avers Khalid Mansoor, Chief Executive Officer Engro Powergen (Pvt.) Limited. He was also referring to a question regarding unresolved matter of tariffs between a Chinese company Shenhua and national electric power regulatory authority (Nepra). The Chinese company rolled back its coal Thar power project reportedly because of tariff row, and that was so after reportedly completion of the feasibility study. It was said to have required guarantee of tariff at 5.27 cent per kilowatt-hour.

The Engro will have output tariff rate of 10 cents per kwh. "But, it is a calculation much in advance. The price of a unit will gradually reduce with the economies of scale," explained Khalid Mansoor in an interview with Page.

Engro is yet to start the feasibility study of Thar coal mining and power project. He says by middle of November the company will kick off a bankable feasibility study of $10 million. It will take seven to 8 months to analyse the technical viability of the project with consultation of foreign experts. Studies for such a project need to consider technical implications as well as social and environmental impacts assessments before green signalling a takeoff. Therefore, the project will pass through different stages of cost negotiations, engineering, procurement, and construction studies, etc. Overall, it will take 30 months for financial close, he says.

Recently, government of Sindh and Engro made a joint venture to utilize Thar coal for generating electricity. It is worthwhile to recall that Sindh ministry of mines and minerals invited local and international bids for Thar coal power project in June last year. The local and international participations were equal in weight, representing by three local and three foreign companies.

The recent joint venture (JV) has resulted in establishment of Sindh-Engro coal mining company with a 10-member board. As per the investment percentage weightage (60 percent Engro and 40 percent Sindh government), the board is majorly represented by the company.

According to the agreement, the government has assigned the company 55 square kilometres tracts at Block-2 of Thar. The mining would be started in 18 square kilometres at initial stage. The JV stipulates power generation after mining, which will take four year to complete. It will take four years to have coals on the earth, says Khalid. The reason is simple, he maintains, we have to dig out 180 meters to hit upon minerals. The company can mine 6.5 million tons per annum and will generate 1,000 megawatts electricity. According to him, there is a latent potential to generate 4,000 megawatts only from coals at Block 2.

Total cost of mining and power generation is estimated at three billion dollars. Of that, mining will require an allocation of one billion dollar and power generation two billion dollar. This is a costly project. "Based on records of accomplishment of Engro's credibility, all stakeholders are satisfied with extending cooperation," says he adding, "Engro is already managing projects worth $1.6 billion". The project is based on debt-equity ratio of 25:75. These projects include a power generation project handled by the company in the province of Sindh.

Engro is running a combined cycle power plant at Qadirpur in the Ghotki district of Sindh. Gas-ignited, the plant generates 220 megawatts electricity by utilizing the permeate gas (by product of the gas purification process) from the nearby located Qadirpur gas field. In a case study by Engro, permeate gas was described as an environment friendly source of energy and better option than carbon-intensive residue fuel or coal for electricity generation. The critical analysis of environmental impacts of coal-running power plant is one of the main issues, says Khalid Mansoor. Another one is of course social impact analysis. "We need to study them both in a piecemeal approach," reiterates he.

What are the other main issues? Infrastructure development, water, and funds are the main issues, he says. 'Government has the responsibility to develop infrastructure.' There is a need of construction of road networks, installation of transmission lines, and water pipelines. Wapda is yet to install a transmission line connecting the proposed site with the national grid. Immense supply of water is vital for the project. There is a plan to lay down a conduit in between Chotiari dam and the site. There is also a plan to establish effluent treatment plant.

A graduate in chemical engineering, Khalid Mansoor is also a senior vice president Engro Chemical Pakistan Limited and in the board of directors of Engro Polymer & Chemicals Limited. He joined the board in 2006. He has undertaken several major assignments including expansion projects while working with Engro and Esso Chemical Canada.