Use of Indigenous Energy Resources
-Pakistan
Introduction
Utilization of indigenous energy resources is one of the key
objectives of energy and power system expansion planning. This is one objective
that Pakistan has failed to meet and in some areas has regressed. Use of
imported sources of energy , cause balance of payment issues If a country
spends its export earnings on import of fuel it cannot invest in capital plant
and will therefore either stagnate of have very low economic growth rates.
A.
Coal
Local
Fuel Resources
Pakistan took to coal by:
installing coal power plants, super critical, based on imported coal at
Sahiwal, Port Qasim and Hub Co. site; and on coal power plants based on Thar
coal, first two plants are sub critical. After commission of two coal power
plants and according permission to the Hub Co. plant the government has
announced to cease allowing power plants based on imported fuel (this
permission, however, is restricted to power plants meant for the grid, private
sector captive plants continue to be based on imported coal) . LNG plants that
are at various stages of completion are also based on imported fuel, the government
had announced to not allow any mire plants on LNG.
Thar
Development
Thar coal mining and power
plant construction is going well and is on schedule. The good news is: mining issues associated with Thar coal have
been found incorrect; the issue with slope stability, in open pit mining, also
proved unfounded as after the top soil which was sand , the soil below is clay
, this makes sense as Thar is the ancient
route of the vanished Hakra or Saraswati River ; it seems that Thar coal
after treatment could be transported , Jamshoror power plant has agreements
signed for use of (partial) Thar coal . The bad news is that the underground
water seams are three instead of two and the third, unlike the top two which
are fossil water, is fed from a lake in Indian Thar , and therefore there will
be need of continuous dewatering as long as coal mining goes on . The water
seams have been successfully tackled.
Keti
Bunder Development
The Thar development will face
issues with water availability, which is why Sindh Government came up with the
concept of moving plants to Keti Bunder and connecting Thar and Badin by means
of a 300 km+ railway way line, the Keti Bunder Power plants will utilize sea
water.
This development needs attention.
Resettlement
Issues
Thar coal will have issues with
the resettlement of te local population , this is a complicated issue firstly because the majority of the
population does not have documents to property and secondly Sindh Government is a share holder in the Thar development and
also is the environment and social watch dog , this presents a conflict of interest
issue . Outside third party over sight is needed.
Cost
of Power from local coal
Sindh Government participation
in Thar development and the manner in which mining rights have been issued
present an issue. NEPRA wishes to graduate to projects based on competitive
bidding and subsequently to a open market structure, the present arrangements
will present an obstacle. Already the high ROE allowance and mining structure
has resulted in coal power that will be made available to Pakistan higher than
similar developments elsewhere.
Domestic Coal share in energy
mix
Domestic coal is beset with
large problems. In -fact the whole mining sector is very poorly regulated.
Mining resulted in high human losses. The cement industry utilizes high quality
imported coal. Treatment plants will allow local coal to fulfill this
requirement. Increase in domestic coal in total energy has to be carefully
planned.
B.
Large Hydro power Projects
Background
One
of the biggest water challenges for Pakistan is the fact that none of its
freshwater sources originate inside its own boundaries. Pakistan relies on
three tributaries of the Indus River, which flows from Tibet and through India
before reaching Pakistan. The river already supports a huge mass of people, and
populations in the region are growing. Additional water stress arises from
increasing demand as these regional economies develop. Climate change poses
additional risks as temperatures rise, rainfall patterns become increasingly
variable, and floods and droughts become more severe. In 2010, Pakistan
experienced floods more severe than ever before, affecting around 20 million
people and causing an estimated US$5 billion in damages to the agriculture
sector alone. The year 2012 also saw major flooding, affecting another 4.8
million people and destroying over a million acres in crops. Meanwhile in other
regions of Pakistan, prolonged droughts continue to jeopardize smallholder
agriculture. The Global Climate Risk Index by German watch found that Pakistan
was the country most affected by extreme weather in 2012, both in terms of
human losses and financial losses. It is, therefore, of vital importance that
the country should harness the water for meeting both its future power need
and, even more importantly, build large storage dams. These multi-purpose
projects hold the key to Pakistan’s energy and water future.
Recent Experience of Hydropower
Projects Development
The share of hydropower in the
total power generation mix is on the decline. The
three high-head HPPs and Tarbela extension project that were recently completed
underwent excessive delays in reaching commissioning stage (see Table). In case
of the still incomplete[1]
969 MW Neelum Jhelum HPP (recently partly commissioned), the huge time delays
are accompanied by an order of magnitude increase in the total project cost. . The
delays in completion of projects is invariably accompanied by increases in
their cost and thus the country suffers in two ways – economic loss due to
power from the plant not becoming available and incurring of additional expense
above the original cost estimate.
Table
: Delays in recent public sector hydropower projects
|
S.No
|
Name of
Project
|
Capacity
(MW)
|
Commencement
Date*
|
Targeted
Completion Date*
|
Actual
Completion Date**
|
Commencement
to Completion (Months)
|
|
1
|
Khan
Khwar
|
72
|
July
2003
|
June
2010
|
July
2012
|
108
|
|
2
|
Allai
Khwar
|
121
|
June
2003
|
Dec.
2011
|
March
2013
|
117
|
|
3
|
Duber Khwar
|
130
|
July
2003
|
Dec.
2011
|
March
2014
|
123
|
|
4
|
Jinnah
|
96
|
July
2006
|
June
2011
|
May
2013
|
82
|
|
5
|
Neelum
Jhelum
|
969
|
Dec
2007
|
Nov.
2015
|
Under
constr.
|
95
|
* Source: FODP Report (2010)
** Source: WAPDA annual report
2015-16
Obstacles
in Development of Hydropower
An assessment of the energy sector in Pakistan reveals
that since 2009 the self reliance objective has not been achieved and at the
way plans are finalized by 2023 there would be little movement towards
achieving the objective of reliance related to indigenous energy. One aspect of
this is the failure to increase the share of hydropower in the energy mix.
1.
Share of hydropower in energy and power mix. Energy and power data suggest that hydropower share in total mix has stagnated and this trend is likely
to continue to 2023 , in fact in 2023 hydropower share will decrease
slightly compared to 2017 .There are
several reasons for this . the last many
hydropower plants added to the system
in the public sector have faced inordinate delays ( Golen Gol, Allai Khwar,
Khan Khwar, Nelumn Jhelum , Jinnah, Gomal Dam, Punjab and KP Low heads and
Tarbela extension ) have also registered significant cost escalation .Insufficient studies,
mismanaged resettlement and land
acquisition, , indifferent
contract management, and funding woes triggered these delays . The unresolved
issue of the (‘profits on hydroelectric power generation ‘) royalty also
creates indirect hurdles in development of hydropower. Friction between KP and
the centre on this issue has starved KPs hydroelectric power potential to be
severely underutilized, in evidence the better utilization of AJ&K
hydropower potential as compared to KPs potential (KP hydropower potential is
generally more economic to AJ&Ks mainly due to superior geology. Large hydro’s
take more than 5 years to complete therefore the government which has a mandate
for 5 years is not interested in projects that will complete after its tenure
completion. There is very little coordination between Provincial/local
governments and Federal governments related to execution of hydropower plants.
Land acquisition and resettlement issues are poorly tackled. Preconstruction
facilities and infrastructure for construction receives insufficient attention,
these all emanate from indifferent feasibility studies that are poorly
monitored and controlled. HEPO has been weakened, underfunded and its ability
to provide guidance in hydropower issues has been compromised. Capacity
building has not received much attention. KP has faced issues with transmission
lines, there have been instances where
power plants were ready but transmission lines were not. Rules on who
has responsibility to construct lines and methodology of resolving transmission
issues are not available. KP has now called for building two 500 kV lines for
evacuation of power from Chitral. They neither have the financial capability
nor the technical capability to perform this task. Small hydropower plants are
having issues with approvals, CPPA now wishes to offer: pay what you take basis
for contracting capacity; this is the result of faulty planning. Small plants
also have trouble getting approval of DISCOs to connect their plant to the
distribution system.
Rectification of Hydropower Share in Total mix
Share of hydropower in
energy mix has stagnated; this has impacts upon the self reliance target and
also on the share of clean energy in the total energy mix. . To rectify this
there is need to take the following steps:
1.
Provincial inputs in
policy and plan formulation. The 18 th. Amendment of the constitution has altered the role
of Federal and Provincial Governments with respect to energy in general and
hydropower in particular. This needs that the decision making process is
amended to cater to this changed constitutional provision. It is suggested that
a policy and planning committee on power be constituted with representation
from the Provinces. There is also need to periodically refer the policy and
plan formulations of this committee to the CCI. Hydropower potential in
AJ&K has been utilized in a much better and smoother fashion than that in
KP. The primary reason for that is that hydropower falls under the AJ&K
Council which has declared that hydropower potential above 50 MWs will be dealt
with by PPIB whereas the potential below 50 MWs will be dealt by the AJ&K
Hydroelectric Board. KP wishes to deal with all hydropower potential except
that on Main Rivers for multipurpose use. KP provincial PPC has also not
performed well seems there is a message to KP Government in this statement.
2.
Preparation and
monitoring of feasibility studies. Feasibility studies
need inputs from a set of varied technical disciplines, there is need to:
monitor and control the development of feasibility studies by an experts panels
that is fully empowered; assess risk mitigation and identify the residual risk
that needs to be controlled during the construction stage, like tunnel
geological risk in the feasibility study.
3.
Capacity Building. There is currently
little attention paid to capacity building in the hydropower sector. ;
organization engaged in development of hydropower ( HEPO/WAPDA, PEDO, AJ&K
Electricity Board; Provincial Energy departments and organizations , and GB
Energy departments) do not have in place a human resource enhancement program
related to hydropower . Presently the Centre for Excellence in Water Resources
(CoEWR) carries out a MSc. program in hydropower; there is also a hydropower
training center in Mangla Dam. It is proposed that: short courses related to
various aspects of hydropower (like hydrology, geology, seismicity; economics;
mechanical, electrical, mechanical, turbines, financial, resettlement,
environmental etc.) should regularly be arranged through the CoEWR and other
institutions; funding should be provided to send candidates to the MSc. Course
in the CoEWR.
4.
EPC Contracts. The
organizations involved in hydropower sector development are not familiar with
the working of the EPC contracts. There is need to provide capacity building
opportunities to professional engaged in contract management of EPC contracts.
EPC contracts in the IPP mode also present an issue. Sponsors engage EPC
contractors that are very closely related to the main sponsor , the EPPC
bidding is not transparent and is questionable, it is proposed that a third
part evaluation of cost must be carried out to verify the lowest EPC bid
veracity and authenticity ..
5.
ToRs of Feasibility
Studies. ToRs (terms of Reference) of feasibility studies need to be amended to
reflect the concerns with identification of preconstruction activities. Delays
in completion of hydropower plants partly result due to inadequate provision
for pre construction facilities.
6.
Resettlement and Environmental Issues.-Pakistani agencies have struggled with resettlement land acquisition
issues. Land acquisition costs have risen sharply in areas where large
infrastructure projects have been or are implemented.
7.
BASHA, KALABAGH-Construction of Bhasha dam.
Kalabagh dam could not be built due to internal political differences and
Bhasha dam could not be built because of external factors. We should go on our
own. This should be initiated without any further delay. Dasu has been stalled,
in any case Dasu would only provide electricity, and water scarcity has become
an equally important factor if not the most important factor in our development
priority. Construction of Kalabgah Dam could be initiated at the earliest
possible as it would be acceptable to both WB and ADB, we however need to
achieve consensus amongst ourselves.
8.
Transmission interconnection-WAPDA has complained that NTDC have
not been able to add evacuation lines in time and have sought control over
NTDC, this has correctly been disallowed by the government. The issue, however,
needs to be resolved. In recent times NTDC have failed to add transmission
lines associated with both public and private power plants in time. It is
proposed that the penalty that is imposed upon IPPs for completion after due
date should have also compensation for NTDC, provided, however, the
transmission lines have been completed. WAPDA under construction hydropower
plants also need their PPA’s altered to include to include penalty to be paid
by WAPDA in case of delayed completion of power plant and a provision in this
is to be made for compensation to NRDC for non-utilization of completed transmission
lines and penalty to be paid by NTDC to
WAPDA in case of delayed completion of transmission lines associated with the
project .
.
Future
Prospects
The
progress on development of large-scale hydropower projects is extremely slow.
No major headway is seen on large reservoir-based hydropower projects as, for
example the arrangements for the highest priority Diamer-Bhasha HPP are yet to
materialize. It’s important that clarity is reached at the earliest on the
time-line and planned financing arrangements for this mega-project as it is
vital for Pakistan. The long-term power sector planning needs to, more than
ever, take into consideration the risk posed due to impending greater shortages
of water in the country. The major water storage dams that are planned to be
built in the coming years are facing delays due mainly to a lack of financing
arrangements for them (Table). As a
consequence, dependence on imported fuels for power generation will continue
and, in parallel, the water shortages are expected to continue rising at an
accelerating rate of growth.
Table-8: WAPDA’s
List of Major Water Storage Dams in Coming Years
|
Project
|
River
|
Location
|
Capacity (MW)
|
Storage (MAF)
Gross/Live
|
|
Diamer-Bhasha
|
Indus
|
GB
|
4500
|
8.1/6.4
|
|
Munda
|
Swat
|
FATA/KP
|
740
|
1.3/0.7
|
|
Dasu
|
Indus
|
KP
|
4320
|
1.15/?
|
Source: FODP Report on Water Sector (2012)
There is a strong need for
developing a framework that will facilitate building institutional knowledge
and relationships between water and energy infrastructure. Knowledge gained
from shared systems understanding can be used to promote energy and water efficiency
innovations by strategically identifying technology development needs and
forming a basis for targeted investments in R&D. For this, logistical
barriers to institutional collaboration between entities in the water and
energy sectors should be addressed. Universities can play an important role in
conducting research and providing education regarding the water-energy nexus.
University researchers can perform research to build understanding of the
behavior of the coupled water-energy system.
C.
Renewable
Energy
Background
Modern renewable energy (wind, solar
and bagasse) projects have been inducted in the system during the last three
years. The pace of development is much slower than being seen in rest of the
world, and even in the region. At
present, hydropower generation from large hydropower projects and renewable
energy contribute about 25% and 4% of the total electricity generation,
respectively. In terms of consumption, RE is meeting less than 3% of the total
electricity consumption. In line with the Sustainable Development Goals (SDG)
and Pakistan’s commitment to reduce its carbon footprint, the new Electricity
Policy[2]
lays strong emphasis on promoting the use of RE and deployment of large-scale
hydropower projects. Accordingly, the share of RE is slated to increase to 10%
in 2023 and 20% in 2030. The share of large hydropower generation will also be
increased from 25 % to 35%. To achieve these objectives, following are the key
provisions that are being made in the new Policy:
i.
There will be no cap on the quantum of intermittent
electricity to be absorbed by the NTDC/DISCOs up to 2030.
ii.
New
RE Zones will be identified on or near major grid nodes and points of
interconnection and it will be mandatory
for government to provide connectivity within RE Zones and/or within a certain
radius of network.
iii.
Distributed Solar Power projects – both stand-alone
type and those based on Off-Grid applications – will be promoted.
iv.
Planning and construction of Large Hydro Power Plants
will get priority over the fossil fuel based thermal plants.
v.
Substitution of subsidized electricity in agriculture
and domestic sector with consumption below 300 KWh per month, supplied through
grid, with solar based electricity generation schemes on concessional terms.
vi.
Innovative financing schemes for upscaling use of RE
in industry (e.g. through wheeling) and agriculture (e.g. solar tube-wells)
etc. will be prepared.
vii.
Wind
resource assessment will be carried out for new prospective sites and
collection of data for bankable projects will be done through appropriate
agencies.
viii.
A
database will be set up for all the new possible avenues and of the operating
renewable energy projects freely accessible to general public, researchers,
academia, project developers and financiers to promote evolution of new RE
projects.
Steps
for conversion of tube-wells to solar power (in Baluchistan), conversion to
biomass (in Sindh and Punjab) and solar roof-top installations hold the key to
a clean energy sector and should, therefore, receive adequate focus in future
plans.
Inadequate exploration of oil and gas and off Shore
oil and gas potential of Pakistan
THE upstream oil and gas exploration sector in Pakistan is
significantly off the radar for oil majors. Oil majors are not playing any
significant role in the country despite its impressive geology and
prospectively. In fact, over the decades,
companies such as Exxon and BP selling off assets and pulling out of
Pakistan.
Considering the nature of hydrocarbon exploration, and the
mettle of oil and gas executives worldwide, the argument that companies are
leaving Pakistan because of the security situation does not make sense, given
that oil majors continue to operate in countries like Nigeria (Boko Haram),
Iraq (ISIS), Mexico (drug cartels) and central Asian states.
If it were so, one also would not see oil majors making a
beeline for frontier oil provinces such as Papua New Guinea and much smaller
West African states. Frontier provinces, volatile security and political
environments have not tended to deter oil and gas majors from pursuing
hydrocarbon reservoirs and riches. However, the bitter truth is that despite
amazing geology, Pakistan has pretty much failed to market its upstream sector
and is seriously short of both oil and gas while seeking imported oil, natural
gas and LNG to satisfy domestic demand.
Key reason for lack of adequate
exploration is the fact that half of the natural gas production in Pakistan is undertaken
by the two large public sector corporations, OGDCL (Oil & Gas Development
Corporation Limited) and PPL (Pakistan Petroleum
Limited). These two companies
also hold the majority of the exploration leases. Unfortunately, neither OGDCL nor PPL has the project
management and technology expertise
to rapidly exploit and develop its leases. In this regard, the government
should advertise the sale of 26 percent of PPL’s equity to an overseas company boasting
the management expertise
and technological know-how to explore
and rapidly develop Pakistan’s tight and shale gas and oil resources. A strategic investor with 26 percent
shareholding in, and management
control over, PPL would have the incentive to rapidly
increase PPL’s hydrocarbon production. PPL is a “compact” company originally owned by the multinational Burmah group of the United Kingdom, and for
this reason it is easier to take
over
in a privatization move. If the divestment experience
of PPL is successful, then the government should consider a similar strategic
divestment of the larger public sector company, OGDCL,
Exploration
Issues
Reasons for
decrease in production of oil and gas
1.
Absence if large
discoveries
2.
97BCF average discoveries between 1992 to 2014
3.
Only 12
discoveries of larger than 1 TCF
4.
Crude average 3,4
MMBBL
5.
5 reservoirs of 10
MMBBL or more
6.
Higher finding and
developing cost per barrel of oil , these have grown approximately 74% in
2010-14 against 2005-09 due to decline in average discovery size
7.
Concentration of
exploration in Potwar and Lower / Middle Sindh. KP and Baluchistan are ignored
due to security concerns
8.
inappropriate wellhead pricing structure of
indigenous gas
9.
Law and order
situation hampering the exploration activities
10. Shortage of drilling rigs Causing low exploration and development
possibilities and prospect
generation, whereas lack of economies of
scale make the international bidder non-competitive
11. Non-development of dormant gas reserves because of slow evaluation and appraisal
process, litigation , low BTU gas of marginal reserves
12. Lack of proper monitoring system to review the progress on blocks
already awarded for exploration
13. Highly volatile process if the international market
14. Inefficient and obsolete refining operation and sub standard oil
products
15.
Slow exploration
activates in off-shore areas due to high cost , present off shore density is one well per 1000 sq. km
compared to world, average of 9.5 wells per 1000 sq km
Sedimentary basins cover 827, 000km2 including both onshore and
offshore, which to date remain under-explored, especially the offshore basins.
According to Pakistan Basin Study of 2009, the country has six onshore and two
offshore basins; offshore basins being the Indus basin and the Makran
basin. Almost the entire land mass and
the offshore areas can possibly have high potential hydrocarbon plays,
especially the Abyssal Fan system of the Indus offshore basin.
Abyssal or submarine fan systems constitute underwater
structures having huge sedimentary deposition systems over geologic time and
are a result of sediment transportation and deposition from continental shelf
down on to continental slopes. They are also referred to as turbidity currents
and their effects can be amplified through tectonic activity. Abyssal fans are
the largest systems through which organic matter, rocks, minerals gets
transported from land to sea and possess huge potential for hydrocarbon and gold
exploration. Given this context, the Indus offshore basin, primarily a rift
basin, is the second largest submarine fan system in the world after the Bay of
Bengal and ought to contain various high probability hydrocarbon plays based on
analogues. Tthe oil producing Mississippi fan (Gulf of Mexico), Amazon fan
(offshore Brazil), Niger fan (offshore West Africa), Congo fan (offshore
Angola) among others are prolific producers and analogous to offshore Pakistan
being primarily Abyssal or Submarine fan systems, though much smaller in size.
The total recoverable reserves of natural gas as per brochure on
Ministry of Petroleum website are given at 53.354TCF (trillion cubic feet),
while remaining reserves are stated as 23.18TCF. The Economic Survey 2013-14
and Economic Survey 2014-15 state current gas reserves at 492bn cubic meters
translating in to gas reserves of 17.3TCF (excluding shale).
As a contrast, the potential of submarine fan systems can be
gauged from the fact that in place resource at the deepwater block in Bengal
fan that contains the Dhirubhai discoveries initially stood at 25 TCF,
essentially indicating that one find in the largest submarine fan in the world
(Bengal) has a resource base greater than all remaining conventional gas
reserves of Pakistan. This should get some bells ringing both at regulatory and
commercial levels. The potential for hydrocarbon exploration and discoveries in
the Indus offshore basin is huge, however, given the huge size of the basin
itself, this will require intensive evaluation and commitment of capital. The
12 or so odd wells that have been drilled so far in Indus basin do not do
justice to the hydrocarbon potential within this frontier basin. From a
technical perspective, we should also be open to encountering high pressure,
high temperature formations.
The Makran Offshore basin has a different geology than the Indus
with both separated by the Murray ridge. Makran offshore is an oceanic and
continental crust subduction zone with deepwater trenches and volcanic activity.
The basin comprises oceanic crust and periodic emergence of temporary mud
islands along the coast is strong evidence of huge hydrocarbon deposits. These
temporary islands may imply improper sealing mechanisms but do ask for
exploration laterally and of adjacent areas.
Makran basin is also a frontier basin with negligible
exploration activity, though, a few wells have been drilled which encountered
high pressure formations and a blowout in 1956. Analogs to Makran offshore
include Cook Inlet, Alaska with a billion barrel oil equivalent reserve
profile.
Hydrocarbon exploration has always been a high risk venture,
however, given the geology that underlies offshore Pakistan, there is reason to
believe in the prospectivity of the region. Based on analogous evidence, one
can assume that offshore Pakistan is probably sitting on huge hydrocarbon
deposits.
In view of the above discussion, and fiscal regime issues, it is
imperative that Pakistani NOCs aggressively, and with an entrepreneurial
spirit, start exploring for hydrocarbons in the Indus and Makran basins.
The National Oil Companies (NOCs) will have to take the lead and
a strategic stake in offshore Pakistan, before any global oil major shows
interest, given the particular business dynamics of the region and opening up
of Iranian upstream sector to international market.
LNG IMPORTS AND THE OIL and GAS POTENTAIL
OF PAKISTAN
|
PAKISTAN has emerged on the
international scene as a significant importer of liquefied natural gas (LNG).
As of 2017, Pakistan was the sixth largest LNG market in Asia with imports of
4.6 million tonnes accounting for 1.6 per cent of global imports. Moreover,
Pakistan added one out of five re-gasification terminals commissioned
internationally by adding a floating storage re-gasification unit (FSRU) to
its supply chain.
The nation has opted for imported LNG to plug energy gaps despite being host to the second largest submarine basin in the world with potentially huge but undiscovered oil and gas reservoirs. It makes sense to gain some perspective on the LNG industry to enable optimized decision-making locally. The details of the off shore potential are discussed above. Over the last couple of decades, three main markets for LNG have emerged: Asia Pacific, Europe and North America/Atlantic. Asia Pacific is the largest LNG market with Japan, China and South Korea among the largest importers. Proper commercial structuring, at both export and import stages, is extremely critical and underpins the success of any LNG project over the long term. To put things in perspective, approximate costs of Chevron`s Gorgon project and Inpex`s Ichthys project are $54 billion and $35bn, respectively. Over the years, three basic commercial structures have evolved in LNG trade with hybrids in between.These main structures are integrated, tolling and merchant structures and apply to both liquefaction and re-gasification facilities. As Pakistan has opted for LNG imports to meet energy shortages exacerbated due to a lack of timely action on our part, it would make sense to see what resource potential Pakistan has in a region that consti-tutes the largest LNG market in the world (73pc global share). Natural gas constitutes approximately 25pc of global primary energy demand and is growing as the world moves towards cleaner fuels. Moreover, Pakistan has the second largest submarine fan system in the world (Indus basin) with up to 10 kilometers of sediment accumulation. Such accumulations are recognized for huge offshore oil and gas reservoirs worldwide. Pakistan is also blessed with the Makran offshore basin, which is an oceanic and continental crust subduction zone with deep water trenches and volcanic activity. Therefore, we can assume with a high degree of probability that Pakistan potentially has huge offshore oil and gas deposits waiting to be discovered. We are also closer to main LNG markets than Qatar, which happens to be the largest LNG exporter in the world with 27pc market share. Perhaps the LNG imports could be stop gap measures and in the breathing sace provided by these imports we put our house in order and attempt o discover oil and gas indicated in the off shore potential indicated above. However, this is a long-term endeavor, potentially spread over the next 20 years or so, fraught with financial and commercial risks, requiring new thought paradigms and a changed risk perspective. But big oil and gas was never a business for the risk averse. A small first step towards realizing this vision could be revisiting the fiscal and regulatory regime for the upstream exploration and production sector in view of changing energy markets.
NEW OIL AND GAS
FINDS AROUND THE CORNER
ExxonMobil has indicated that it is close to hitting huge oil
reserves near the Pak-Iran border, which could be even bigger than the
Kuwaiti reserves. Addressing business leaders at the Federation of Pakistan
Chambers of Commerce and Industry (FPCCI), the minister said that ExxonMobil
— an American multinational oil and gas company — has so far drilled up to
5,000 meters close to the Iranian border and is optimistic about the oil
find.
|
Facilitiating renewable energy projects
The cost of wind based power
projects on upfront tariff basis, which was USD 14.7 cents in 2011, now stands
at USD 6.75 cents per kWh.) For solar projects the QAU plant that was commissioned
in 2015 was priced at USD 14.15 cents/kwh but for the more recent plants, e.g.
Harappa Solar, the tariff is USD 11.53 cents/kwh. In comparison, cost of fossil
fuels based power generation is high and volatile and hence unpredictable. In
addition, fuel supply and cooling infrastructure has to be built in support of
them at a huge capital cost whereas wind/solar do not need such auxiliary
equipment. In spite of their attractive prices, renewable energy projects did
not take-off largely due to system stability concerns and need for transmission
system connections. To address these concerns, a study was carried out by USAID
in 2015 which reached the following conclusions:
·
Up to 2,200 MW of wind and solar projects can be integrated
into the national system by FY 2017. The
actual projects commissioned by end of FY 2018 amount to less than 1,200 MW.
·
By adding new transmission infrastructure, a total of 4,060
MW of wind and solar projects can be integrated by end of FY 2020.
·
By FY 2022, up to 9,400 MW wind and solar projects can be
integrated into the national grid but it would require major reinforcement in
the grid involving the addition of new EHV (500, 220 and 132 kV) transmission
lines and up gradation of grid stations.
Based on this confirmation, the
WASP run carried out as part of the Electricity Plan (under preparation)
confirms the addition of corresponding amounts of new wind and solar based
power by 2030 on a “must take” basis.
Zoning of RE projects
As part of integrated planning process and due to the need
to build transmission infrastructure and other arrangements, the zoning of
renewable energy projects should be undertaken. For large scale projects to be
built in wind corridors viz. Gharo/Jhimpir and solar parks viz. Cholistan
desert, EHV transmission lines need to be developed on a priority basis. DISCOs
should define their own zones in which projects will be set up. The zoning
plans should make provisions for land and other facilities which will be the
shared responsibility of federal and provincial governments. The creation of
jobs in these zones will lead to economic activity and result in building of
roads and other civic facilities for the local population.
Distributed RE
To bring about a fast-pace growth in distributed renewable
energy generation and mini/micro grids, an enabling environment for private
sector’s entry into this business will need to be created. Vocational training
programs to improve the technical skills of workers should be launched under a
joint program of federal and provincial governments. The weaknesses in existing
regulation for wheeling of electricity should be removed to facilitate free
trade/exchange of electricity, which is also in harmony with the efforts being
made towards developing Wholesale electricity market.
Net
Metering
NEPRA approved the Distributed Generation and Net Metering Regulations
in 2015 to put into effect net-metering. Subsequently, amendments in the
regulations were made in December 2017. Recently, the term of agreement between
consumer and DISCO was increased from three years to seven years. The license
issuance period by NEPRA has been reduced to seven days and determined tariff
would remain valid for term of the Agreement/License. While these are needed
steps for promoting roof-top solar installation, there is still a huge room for improvement in the regulatory and
promotion regime for the development of RE. Especially, given that the rules for net-metering and distributed generation
are not resulting in the realization of their full potential (until June 2018,
less than 5 MW of Net-Metering connections were given and those too in two
DISCOs only), a fresh review of the bottlenecks in the growth of net-metering
is urgently required.
The major reason for slow off-take of Net-Metering program is the high
up-front cost that is involved which acts as a barrier for a vast majority of
customers. There is insufficient
knowledge among customers to enable them to make choices about the equipment
specifications nor is there an understanding about the investment potential of
solar systems. These barriers can be overcome through a wide-scale customer
education, especially by disseminating information about successful case
studies. To increase awareness regarding Net-Metering among the communities,
focused seminars/workshops may be held at the professional level. For general
public, the importance of renewable energy option should be an integral part of
academic curricula starting from secondary schools up to university level,
across genders covering all strata of the civil society.
Net-Metering
should be adopted as a national level goal as it would reduce the power
shortages, cut down on transmission/distribution losses and reduce dependence
on imported fuel based generation. To up-scale the installation of solar panels
as a business idea, companies who want to come up with corporate based models
to integrate several roof-tops and collectively provide net metered electricity
besides meeting customers’ own needs will have to be encouraged. There is a need to devise new, innovative
financing schemes with active participation of the banking sector and
international financiers to enable the companies and individual customers to
address the issue of high front-end costs. The channeling of international
clean energy funds as a source of financing of such projects could give a boost
to investors’ appetite to make a venture into this line of business.
