Apr 9 - 15, 20

The circular debt today bloating over Rs400 billion has become the biggest hurdle in the way of investment in the energy sector. Despite having excellent opportunities for investment and proven feasibility reports, the banks and domestic and international investors are reluctant to put their money in energy projects in the backdrop of unresolved circular debt issue, the primary concern of the investors.

The law and order situation in the province of Balochistan, which is said to be an energy rich part of the country, had adversely affected development of energy resources, which seem to be a valid reason. However, it is quite surprising that why tangible results are not coming out from Thar, one of the richest energy region in the world. The apparent reason is the circular debt creating doubt in the mind of the investors for quick and safe return on their potential investments.

In this backdrop, it should be taken as a pleasant surprise that friendly country China has given a positive nod for the biggest investment of over $3 billion in a coal mining and power generating joint venture i.e. Sindh Engro Coal Mining Company (SECMC) a project between Engro Powergen and the government of Sindh. Chinese investors are about to begin a due diligence of the project, which is the final stage for financial close of this project.

Khalid Mansoor, President Engro Fertilizers, having a 60 percent equity in the project, has expressed his concern that the state of affairs in respect of unpredictable gas supplies to newly developed urea plant at an estimated cost of $1.1 billion does not give an encouraging signal for the investors in new projects. Hence, it is the need of the hour that uninterrupted gas supplies under fuel supply agreement should be honored to make it a good precedence for the investors in energy sector in Pakistan.

It is interesting to note that Thar coal reserves are generally rated as the fourth largest coal field in the world, yet it comes on top ranking when it is seen as the only coal field located at one place without any break in coal deposits while rest of the coal fields are scattered due to many places in one country. Technically speaking it is the lignite of the best quality having only 1.1 per cent of sulphur as against the international standards of over three percent of sulphur elsewhere in the world.

Thar coal has exciting potentials with over 175 billion tons of coal having a huge energy value which is more than combined energy resources of Saudi Arabia and Iranian oil reserves and 68 times higher than Pakistan's total gas reserves. It is the irony that a country having such massive energy resources is today called energy starved nation and looking towards other national for energy support.

However, despite facing these painful realities, the Engro people are hopeful that when the project designed to attain a level of 4000 mw power generation in progressive phases will help in creation of social assets for the people living in Thar desert such as education institutes, medical facilities, vocational training institutes to add value to human resource and facilitate knowledge transfer and capacity building.

When more projects as approved by the government besides the Engro project come into operation and after the conversion of coal into useable energy assets, economic activities will have a shot in the arm not only in Thar but also rest of the country. Besides energy resources, Engro plans to develop Thar a dairy hub with improved livestock management, agriculture improvement to contribute to sustainable livelihoods and prevent environmental degradation.

Engro estimates that the Thar block II allocated to SECMC will help saving of over $218 billion from this project alone. Thar coal is the cheaper and more effective option as an abundantly available indigenous resource; extraction of Thar coal for power generation will have a positive impact on local economy. He said having 60:40 equity, Engro-Sindh government joint venture, the project alone has the potential to generate 100,000mw of electricity for over 200 years Conductive environment as well as credibility of policies is needed to attract investors to develop Thar coal field which is the best interest of the national economy and the people in general..

Khalid said that Engro has reached to financial close and Chinese investors are all about to go into due diligence prior to financial close yet the prevailing snags in energy sector are potentially discouraging to the investors. He cited the example of Engro Urea plant developed at a cost of $1.1 billion, which had to suspend its operations due to curtailment of gas supplies, which was contrary to the guaranty of uninterrupted gas supplies given in the contract.

He pointed out that despite promises of the federal government various projects for Thar including transmission for evacuation power from Thar Bloc II via Thar Matiari Rahim Yar khan, serious efforts are required to start work on the transmission line. Today the country is heavily dependent on importing furnace and high-speed diesel to meet its energy needs and about 30 percent of energy is based on imported oil.

It is unfortunate that despite having world's finest lignite, which is one of the cheapest fuel for power generation, Pakistan has to depend on costly thermal power while world's developed economies like Germany, China India and have shifted their power generation on coal based technology to 80 percent, 73 per cent and 63 percent respectively while we stand nowhere as far as coal based power generation is concerned.

Today, the developed economies have shifted over 60 per cent of their power generation to coal-fired system and Pakistan too has no option but to go for coal fired power generation as well as convert the existing thermal power machines into coal based system to provide much sought after relief to the people and the economy.