PAK ENERGY PLANNING DEFIES WORLD ENERGY OUTLOOK

SHAMSUL GHANI
(feedback@pgeconomist.com)
July 25 - 31, 20
11

World electricity generation is projected to increase by 87 percent during 2007 and 2035 -from 18.77 trillion kilowatt hours to 35.18 trillion kilowatt hours - according to a study released by EIA, US. Coal is going to be the largest contributor to power generation followed by renewable sources, natural gas and nuclear energy. The use of oil as power generation source is on a steady decline after the oil shock of 1970s and coal, despite its environment-unfriendly character, is seen as the major source of electricity. The price sensitiveness of oil and the most erratic price pattern witnessed during the last few decades has caused the world to reduce dependence on this highly volatile factor of production. The erratic price movement - from $1.80 a barrel between 1960-70 up to $11 a barrel , then skyrocketing to $150, then abruptly coming down to $35, and finally going up to the current $115 a barrel - had little to do with the economics of production and consumption. Overinvestment in oil market by sovereign and hedge funds, not for productive but speculative reasons, caused the major shake-up in prices and forced the world economies to make adjustment in their energy production and consumption mixes. Alan Greenspan, the ex-Fed chairman and a leading world economist, reports this development in the following words:

"The investors and the speculators who are the new participants in world's more than $2-trillion-a-year oil market are contributing to and hastening an adjustment process that has become urgent with the virtual elimination of an adequate world supply buffer. Demand from the investment community caused the oil prices to rise sooner than they would have otherwise, spurring investors to assist in the accumulation of record oil inventories, adding to the thin buffer between oil supply and demand."

WORLD OIL CONSUMPTION LAST TWO DECADES

YEAR OIL CONSUMPTION MILLION BARRELS PER DAY YEAR OIL CONSUMPTION MILLION BARRELS PER DAY YEAR OIL CONSUMPTION MILLION BARRELS PER DAY
1980 59.9 1996 72.1 2003 79.9
1990 64.3 1997 73.9 2004 82.7
1991 67.3 1998 74.3 2005 84.3
1992 67.6 1999 76.1 2006 85.4
1993 67.9 2000 77.0 2007 86.2
1994 69.3 2001 77.7 2008 85.6
1995 70.4 2002 78.3 2009 84.2

The world oil consumption has fallen into stagnant mode since 2005 and during the period from 2005 to 2009, hardly any material deviation in the pattern has been recorded. This five-year stagnancy is in stark contrast to the preceding one-and-a-half decade that witnessed a 31 percent increase in oil consumption. Use of oil as a source of power generation is also on a decline. During 2007, five percent of power generation came from oil which is projected to drop to 2.4 percent by 2030 and remain constant during the next five years. Pakistan consumes 373,000 barrels of oil per day and is placed at the 35th position in the list of more than 200 world oil-consuming countries. On production side, it occupies the 60th position as it produces around 60,000 barrels of oil per day. In the face of its depleting gas reserves, a major portion of which is committed to country's transport sector requirement, and also due to the failure to develop to an optimum level hydro and coal power systems, Pakistanís dependence on oil for power generation remains unchanged in sharp contrast to the changing world energy outlook. It still produces around 33 percent of its power requirement from oil-based systems. Its Energy Vision-2030 program envisages to reduce dependence on oil from 33 percent of its power requirement to 4.8 percent by 2030. This is a tall order, especially when any policy measures to optimally use our hydro and coal potential are not in evidence.

EIA'S INTERNATIONAL ENERGY OUTLOOK AND PLANNING COMMISSION'S ENERGY VISION-2030 (DATA COMPARISON)

POWER GENERATION SOURCE OIL GAS COAL HYDRO (A OTHER RENEWABLE (B) TOTAL RENEWABLE (A+B) NUCLEAR GRAND TOTAL (MW)
Existing Capacity mix 6,400 5,940 160 6,460 180 6,640 400 19,540
Existing mix % 32.75 30.40 0.82 33.06 0.92 33.98 2.05 100
Estimated Addition
2010 160 4,860 900 1,260 700 1,960 - 27,420
2015 300 7,550 3,000 7,570 800 8,370 900 47,540
2020 300 12,560 4,200 4,700 1,470 6,170 1,500 72,270
2025 300 22,490 5,400 5,600 2,700 8,300 2,000 110,760
2030 300 30,360 6,250 7,070 3,850 10,920 4,000 162,590
End-2030 Estimates of Pak - program 7,760 83,760 19,910 32,660 9,700 42,360 8,800 162,590
End-2030 % 4.8 51.5 12.3 20.1 5.9 26.0 5.4 100
*2030 World Estimates % 2.4 20.3 40.8 NA NA 23.2 13.3 100
*International Energy Outlook 2010, Reference case prepared by US Energy Information Administration (EIA)

The Vision-2030 program projects natural gas to produce more than 50 percent of our power requirement. This is irrational and in defiance of the world energy outlook which envisages the gas-based power generation to remain constant at around 20 percent during the next 20 to 25 years. Hydro power, in view of our managed and unmanaged water resources, should have been our forte. Unfortunately, the program foresees its contribution cut from the existing 33 percent to just 20 percent by the end of 2030. The EIA paper highlights the importance of hydro power in the following words: "Although renewable energy sources have positive environmental and energy security attributes, most renewable technologies other than hydroelectricity are not able to compete economically with fossil fuels during the projection period outside of a few regions. Solar power, for instance, is currently a "niche" source of renewable energy but can be economical where electricity prices are especially high, where peak load pricing occurs, or where government incentives are available."

Coal is another area to focus on for cheap power generation in Pakistan. The Energy Outlook paper foresees its contribution to stay at around 42 percent in line with the current world trend. The conservative approach of our energy planners assigns a passive role to coal by limiting its contribution to just 12.3 percent by 2030. This again defies the major assumption of Energy Outlook paper according to which coal is the mainstay of world energy prospects. The paper affirms: "Sustained high prices for oil and natural gas make coal-fired generation more attractive economically, particularly in nations that are rich in coal resources, including China and India." To sum up, the vision-2030 program has virtually no linkages with the world energy ideas and has no connection with country's energy resource base. Before leaving, I once again raise the same mind-boggling question: Why the mention of Pakistan alongside India and China has not been made in the EIA paper if we really sit on 185 billion tons of coal?