NEED OF SHIFT FROM FOSSIL OIL TO COAL, HYDROPOWER

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
Apr 11 - 17, 2011

Pakistan is heading towards serious energy crisis. The average spell of electricity load shedding has been between 8-12 hours. The country now generates up to 67 per cent of total electricity through thermal power plants. Hike in international prices of crude oil has rendered electricity tariffs unaffordable. Added to this is mandatory closure of fertilizer plants for 45 days and 20 per cent curtailment for plants getting gas from Sui twins and up to 12 per cent for those getting gas from Mari field. Added to these is reduction in supplies when any field goes for annual turnaround or any transmission line is blown up.

Pakistan is very deficient in crude oil production and meets up to 80 per cent of local demand by importing crude oil or POL products and electricity generation is highly inadequate but the nation does not believe in conserving energy. Not only that the utilization of energy products is highly inefficient, there is also blatant pilferage of electricity. Until recently, stealing gas was considered almost impossible but now nearly 300mmcfd gas is pilfered with the connivance of gas marketing companies.

However, the policy planners have been failing miserably in balancing demand and supply. Instead of increasing supplies and making energy products affordable economic managers are resorting to extensive load shedding of electricity and gas, raising tariffs in the name of recovery of full cost and above all showing complete apathy to the most pressing issue. It may not be wrong to say that at present long spells of electricity and gas load shedding has become the biggest stumbling block.

Power plants are run at lower capacity in an attempt to contain circular debt but there is hardly any realization that closure of manufacturing facilities is having adverse impact on GDP growth, rendering millions of people jobless and pushing more and more people below the poverty line. Lately, there have been violent energy-related demonstrations throughout the country. However, there seem no focused efforts to ensure uninterrupted supply of energy products at affordable costs. It is still not too late to develop a new energy policy to change the energy mix and still keep the price affordable.

The basic sources of energy in Pakistan have been fossil oil, natural gas, and hydropower. However, over the years demand has surpassed production. In fact, indigenous oil production has reduced. Excessive reliance on gas has led to demand surpassing supply. No new dam has been constructed after the completion of Tarbela in 1976 and exploiting coal reserves has remained a dream. As a quick-fix, fossil oil based thermal power plants have been established but persistent hike in crude oil price is making cost of electricity unaffordable and proliferating its pilferage.

To overcome the immediate crisis energy conservation and efficient utilization can also help in containing cost of doing business. Along with this reduction in electricity, controlling T&D losses and Unaccounted for Gas (UFG) can improve cash flow positions of gas companies. Work has to be started immediately for the construction of mega dams to add up to 10,000MW power generation capacity, commence coal mining and construction of LNG terminal. Running power plants on imported gas can help in containing furnace oil import bill and also ensure running of fertilizer plants on optimum capacity utilization. Closing CNG stations and suspending gas supply to fertilizer plants and industrial units are impairing economic growth and adding to oil import bill. The Government of Pakistan must come up with appropriate policies for attracting investment in energy sector.

It is highly disgusting that there has been no letup in load shedding of gas despite summer has started. The country in general and Punjab in particular continues to face load shedding of gas. It is estimated that shortfall touches 1000mmcfd and unless imported gas is injected in to the system meeting gas requirement of industrial units will not be possible.

The present gas load management being followed in Punjab does not allow industries particularly textiles and clothing units to work at optimum capacity utilization. According to Gohar Ijaz, Chairman APTMA presently all 225 member units remain closed for three days due to non availability of gas. Gohar also expressed concern that textile industry would not be able to achieve the target of exports of US$4 billion during the last quarter of the current financial year at the best textiles and clothing exports could touch $2 billion during this period.

To overcome the looming shortage of gas some of the experts are suggesting import of LNG. There is consensus that import of LNG is an expensive alternative but seems justified on the basis of opportunity cost. It is choice of the private sector to face closure of the production facilities for days or keep it running by paying a little extra for the gas.

The proposal to allow the private sector to establish the LNG terminal in phases seems workable. In the first phase, a floating terminal should be established and work for the construction of an on-shore terminal should start immediately. The offshore facility will inject the imported LNG into the exiting gas transmission and distribution network of gas marketing companies, which in turn will supply it to the end consumers.

Some of the quarters are showing skepticism about the viability of the proposed system and capacity of the private sector to undertake import and handling of LNG. This is just to remind them that the private sector is already handling import of LPG in bulk and the requisite facilities for its distribution. This is done efficiently. If the private sector can handle import of LPG in bulk why it can't handle LNG import?