Pakistan's energy crisis

Energy is the lifeline of a nation. The economic engine and the wheels of industry, agriculture and business need energy to move forward. On the social aspect, energy consumption per capita is a key indicator of the quality of life of the citizens and community. Unfortunately in Pakistan, inspite of tall claims and rhetoric by all governments, real solutions to meet the energy requirements of the nation have never been formulated or achieved. As a consequence, Pakistan's economic, industrial and social growth has been greatly constrained. Due to an increasing gap in energy demand versus capacity, while successive governments put power generation and availability of gas as a priority on their agenda, unfortunately, all plans of providing adequate and affordable energy to the citizens have failed to materialize. The inability to implement energy projects has been attributed to fiscal constraints, but in reality it is due to paucity of a VISION, absence of robust planning and of a commitment to national development. Further there continues to be a basic lack of understanding of the dynamics of the energy sector and market forces. The disastrous results are for all to see, while those in the corridors of power and authority in various ministries, and heads of public sector utilities have moved on, without any remorse or sense of responsibility or accountability. On the current energy crisis, much has been claimed by the past and present governments, discussed and debated in recent months, and numerous articles have appeared in the press and various magazines. The majority of articles have been written by amateurs, or those who clearly do not have an adequate understanding of the energy sector, and the related issues. There is no clear concept of viable solutions or the finances required and time lines for project implementation. But, it is obvious, even to the common citizen that the strategy and plans for the Pakistan's energy sector are neither clear nor properly formulated by the government, nor is there an established roadmap which can provide some light at the end of the tunnel. The people of Pakistan are looking for positive change and relief from the burden of a grossly inefficient & mismanaged energy sector. They are held hostage to the progressive increase in power load shedding, shortages of gas, and even petroleum products. Unfortunately inspite of tall claims there is no sliver lining in the dark clouds. The claims by the government that load shedding will end by December 2009 are nothing but illusions of the Ministry of Water and Power, while the Ministry of Petroleum and Natural Resources has chosen not to make any claim on meeting the gas shortage. Meanwhile the much trumpeted projects for gas import by successive govts namely the IPI, as well as the TAP and Qatar transnational gas pipelines, as well as Mashal LNG, continue to be a victim of missed opportunities, delayed decision making, flawed strategy and incorrect planning and project development. In the current scenario, the nation is faced with electric power shortages of about 3,500 MW. If we consider the load of the industry of about 1,500 - 2,000 MW, which has been shut down, due to unavailability of power, as well as gas, then the actual shortfall is in the 5,000 MW range. Part of the shortage is attributable to non- payment of subsidies by the government, and non-payment by KESC and FATA for power supplied. This has resulted in a circular debt of over Rs. 300 billion in the energy sector. Consequently the oil companies have not been paid and have held up oil supplies to the IPPs and GENCOs. At the same time the gas supply shortage is in the range of 500 MMcfd - 800 MMcfd mostly in the SNGPL area. As such nearly 3,000 MW of capacity with the IPPs, and GENCOs has been made idle, while the government is busy signing up new rentals and IPPs with tariffs in the 10-15 cts/kwh range. There also has been no analytical study of the cost impact and its effect on the tariff. So the Ministry of Water and Power is playing a waiting game with frequent hints of further escalation of power tariffs The situation appears even more distressing when we consider that Pakistan is blessed with a hydel potential of 45,000 MW power generation capacity, an equal if not more capacity for alternative energy. On the primary fuel side, our coal reserves are estimated as the 2nd largest globally. However, with the essential planning not in place, and adequate project development and financing arrangements not carried out, the much talked about projects are mostly pipe dreams. Further, Pakistan's location as the obvious Energy Corridor for Asia, with potential of developing energy hubs at Karachi and Gawadar, raises the multi billion dollar question, as to what has gone wrong, why we are still in the dark and not on track, and what can be done about it. It is essential, as a first step to understand what are the sources of primary energy and their availability and quantum in Pakistan, as well as globally, and what form and from what sources, energy can be imported by Pakistan. Secondly, what are the mechanics, modalities and financial outlays required to convert the primary energy to useable forms of energy, and thirdly, what is, and what should be an optimal Energy mix for Pakistan and to what extent Pakistan can meet its own energy requirements in the short, medium and long term? The time is NOW to move ahead towards formulating a comprehensive energy plan that will provide energy sufficiency, sustainability & sovereignty and provide cost effective and reliable energy in a competitive environment to business, industry and the citizens of Pakistan. In this context it is also essential to understand what needs to be done, and how to provide for energy sufficiency, sustainability and sovereignty for Pakistan. Whereas energy sufficiency is most easily understood, it must be considered that the nation's industry, business and the people have been subjected to a demand suppression scenario. The energy consumption of Pakistan's per capita is only 15 MMBtu, as compared to 104 MMBtu for Malaysia, 106 MMBtu for Iran, a EU average of about 170 MMBtu, and world Average of 68 MMBtu. Thus it is essential for Pakistan to increase its per capita Energy availability and consumption to at least 50% of the world level to about 35 MMBtu in the medium term (2012- 2020). Only then could we claim to be energy sufficient and have a reasonable measure of the quality of life for the citizens. Energy sustainability can only be possible if the energy mix is such that it provides for an affordable price level for industry, business and various economic levels of the citizens. Further the energy supply has not only to be maintained, but increased to meet the continuing rise in demand. This again would require a total revision of the Energy Mix, having a larger component of cheaper and sustainable sources of primary energy such as Hydel and indigenous gas, coal and nuclear. A one sided approach to rely heavily on hydel generation is not prudent, as there is a drop of nearly 70% in power output between the summer high and winter low. Alternate energy (wind and solar) whereas considered politically correct and fashionable to talk about, is a much more expensive option, with current wind power projects being given a tariff of above 13 cts/kwh as compared to past IPP's of 6 cts/kwh, and new IPP projects (gas based) of 7-10 cts/kwh. Of crucial importance to Pakistan is Energy Sovereignty in the current geo-political scenario. As a Nation we cannot afford to be held hostage, either to obnoxiously high prices of oil or gas in the world markets, or the risk of suspension of Oil and Gas/LNG supplies during a regional conflict. This would clearly put the Nation's sovereignty at risk. Thus it is essential for Pakistan to consider multiple supply sources of oil and gas (Proposed Asian Energy Corridor), as well as multiple import modalities and forms of energy (Oil / Gas Pipelines, LNG, LPG, EHV Electricity). Such multiplicity of energy forms, sources and import modalities reduces the risk factor on any one being disrupted. It must also be considered that the current primary energy mix comprises of about 48% local gas, 25% imported oil, 5% local oil, 13% hydel, 7% coal and 2% nuclear, LPG and others. Our saving grace is the 48% local gas. This mix is however not sustainable, as local oil production is not forecasted to increase while local gas production will be on the decline after 2010, and as it is, it cannot meet the current surge in demand. The projections for gas in the Energy mix in the 2010 - 2030 scenario continue to have a level of about 48% based on import of 2.7 bcfd by 2015 and 5.8 bcfd in 2020 thru Transnational pipelines and LNG. With these projects stalled it is imperative that focus is shifted mainly to indigenous sources namely hydel, coal, and nuclear with an appropriate share for renewables. In this series of articles I will present, (1) a situation analysis of Pakistan's energy sector, (2) identify the causes of energy shortage and what should be the crisis management plan in view of the supply-demand scenario and projected energy gaps in the short, medium and long term, and in (3) a gap coverage strategy framework will be presented based on a revised energy mix. In summary a doable roadmap for a solution to the energy crisis in the 2010-2030 scenario will be presented. And above all, it will be considered as to how Pakistan can put itself in the driving seat for meeting its own Energy requirements, as well as supplementing supplies to Asian economies thru the Asian Energy Corridor proposed and presented in various forums three (3) years back by the author.

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