The Way Forward (2013-2023) Energy Plan For Pakistan

The Way Forward (2013-2023) Energy Plan For Pakistan (JR09)

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Executive Summary

The 2009 energy recovery plan and 2013 power policy objectives have partly been achieved. Capacity has been added. Imported and local coal capacity has been added or will be added in the next two years, thereby addressing the power mix issues to an extent. Losses numbers have gone down to about 18% and recoveries have increased to about 96%. The gap between supply and demand of gas has also been bridged, by end of the year 2017, by the commissioning of two LNG terminals and LNG import agreements   The first terminal Elengy Terminal Pakistan Limited is a 100% owned subsidiary of ENGRO, the company, which has been created to establish and operate a terminal for the handling, re-gasification, storage, treatment and processing of Liquefied Natural Gas (LNG) constructed in Port Qasim Karachi. In line with the approval, LNG Services Agreement   has been signed between SSGC and Elengy Terminal Pakistan Limited (ETPL), with capacity to re-gasify 600 mmCFD . The second terminal which also has the capacity to re-gasify 600 mmCFD per day has been commissioned by the Associated Group.  Annex 1 provides an assessment of the energy sector including a gap analysis.

 Both power and gas shortages have been addresses and in the next five years there will be need to move forward in both areas.  Failures include: regression on regulatory issues; indifferent power system planning; recoveries issues has not been completely solved, better numbers have been achieved by imposition of surcharges which has brought down the magnitude of cross subsidy. Industrial cross subsidy to domestic (high industrial tariffs have impacted upon export competitiveness) and inter DISCO cross subsidy has not been tackled .Progress on hydropower has been less than desired no major hydropower dam is currently under construction Dasu is also stalled, little work was possible on major water storage and power dams , although Neelum Jhelum and Tarbela extension are nearing completion and a number of high head medium/small output plants have been commissioned) . Dependence upon foreign fuels still persists adding to the growing balance of trade and reserves problems. Privatization and restructuring issues have received much attention, curtsey IMF Program (since concluded), but has seen little progress. Privatization of the four performing DISCOs is deemed to be crucial since the proceeds will write off the circular debt parked in the Power Holding Company. In recent moves GoP is considering bifurcating three DISCOs so as to make these more attractive to investors. Market reform and regulation issues also received little attention, in some ways regulatory affairs have received a setback. Moving towards a multi buyer market structure is seen as a must for the sector to perform.

Local gas and oil output has increased but the progress on exploration has been poor, insufficient progress has been made on: shale gas; tight gas; off shore exploration. Some of this could be explained by security conditions but these are  getting better and Majors drill in places with even worst security conditions .Mining of local coal ( except Thar where considerable and significant progress has been made) has not received much attention . Energy efficiency and conservation has received very little attention. Non commercial energy issues have received very little attention. Biomass and solar utilization in agriculture pumping received limited attention. 

There has been impressive progress but there is still work to do, areas where the short term efforts are to be focused to achieve medium and long term objectives are: Self Reliance – the energy mix has been altered but the share of foreign energy in total energy is still not addressed, there is need to encourage – hydropower, solar, wind, biogas, biomass to correct this energy mix in the medium and long term. Mapping of oil and gas resources and accelerated exploration of oil and gas would help, do to would be exploration for shale gas and off shore gas .; Indigenization of energy investments Pakistan still relies very heavily upon imported technology in the energy sector, there is need to put in place policies and procedures to encourage increase in local content in energy investments ; Governance – The liberalization of the power system and the oil and gas system is stalled and there is little progress in moving towards a  free market system, Government interference in day to day affairs has in fact increased , there is need to fix the financial dysfunction and put in place a transparent and independent regulatory system , after which the remaining entities in the power sector and oil and gas sector are to be privatized . Poor and non professional decision making along with misplaced priorities have resulted in circular debt. Improved and professional decision making will help in resolution of the financial dysfunction of the sector.

Objectives of the Strategic Plan

The strategic directions for developing energy sector include:

1.                     Optimize the utilization of country’s indigenous resource base especially hydropower to reduce the dependence on imported fuel through an institutionalized strategy. Thar coal utilization is in hand, coal other than Thar needs attention. Conversion of Tube wells to biomass, biogas and solar needs to be pursued as means of avoiding imported fuels. Wind and Solar would also contribute in imported fuel substitution. Accelerated exploration for gas and oil including tapping shale gas and off shore hydrocarbon resources also need attention.

2.                     The assurance of supply of energy at optimum and competitive price to all sectors of economy. Efficiency and energy conversation needs special attention. Cross subsidies need to be removed; Industry needs to be provided energy including power at cost recovery based tariffs.

3.                     Indigenization of energy investments including provision of employment to local people by means of   enhanced exploration of indigenous resources within the country and putting in place incentives for local manufacture or assembly of energy equipment and systems . Encouragement to local contractors and consultants needs to be made a part of the national energy policy.

4.                     Creation of a conducive and healthy environment for the participation of private sector in energy sector development under the supervision of effective, independent and transparent regulatory authorities.