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Demand Supply gap likely to continue despite optimistic capacity addition scenario
A balanced supply demand situation to prevail even if peak electricity demand remains by 3% only
Pipeline Gas
Stranded Gas Fields
LNG
RFO
Coal
Indigenous
Imported
Renewables
Existing Power Imports from Iran to Pakistan : 0.3% (269 GWh out of 94,653 GWh)
of total electricity supply in 2010 near Pak- Iran border
WAPDA and TAVANIR (Iranian power utility) signed a contract in 2007 for supply of
100 MW Power from TAVANIR Grid to Gawadar
Tariff : Base rate of US cents 6.1 / kWh with effect from commissioning of 220kV interconnection for
a 30 year period
Future Possibilities :
Central Asia South Asia (CASA 1000) Transmission Line from Tajikistan
650 km long transmission line from Tajikistan to Pakistan via Kabul/Jalalabad has been
proposed by ADB & WB. Approx 70% of the transmission line to be laid within
Afghanistan. Includes 50 km distance within Pakistan only
MOU signed in 2007 between Pakistan, Afghanistan and Tajikistan for supply of a total
1000 MW
Electricity availability for 4 months only as power generation source will be hydel
No progress in feasibility study, however, expected tariff will be in the range of US cents 89/kwh delivered in Pakistan
Little likelihood of 1000 MW each supply from Iran and Tajikistan in the near
foreseeable future
Gas
Pipeline Gas :
Non availability of gas to new power projects due to increasing supply deficit (2 Bcf)
6FA based plants gas supply agreements (GSA) lapsed in June 11 and limited supply was provided till Nov
11 and no supply at the moment
Government is not fulfilling its commitment under long term Gas Supply Agreements
Only those power plants are getting gas which are on low Btu dedicated fields
Government has signed the 750 MMSCFD gas supply agreement with Iran but is struggling to arrange US$
1.5 billion financing to construct the 780 km pipeline inside Pakistan
Chinese bank who agreed to finance the Iran Pakistan pipeline project has backed out due to US pressure
1735 km long TAPI gas pipeline to supply 1.2 BSCFD is also doubtful due to Afghanistan war
Limited power generation potential from the identified gas fields ( Zarghun South, Sara West) due to
insufficient quantity of low Btu gas
Gas companies can off-take gas quickly at competitive prices from sites producing medium heating value
gas
LNG
Global LNG trade ( 298 billion m3 ) in 2010 is 30.5% of total gas trade around the world, 9.4% of
total gas consumed in the world and 2.2% of worlds total energy demand
LNG C&F price will be around USD 19/ MMBtu @ USD 110/barrel FOB crude oil parity. Power
generation tariff US cents 16/kwh
LNG based power project is in the best interest of the country due to higher efficiency and clean fuel.
However, long term supply agreements are essential to pursue LNG based projects but so far, neither
government nor any private company has been able to secure such agreements
LNG is the best option to fill the energy gap. There are constrains in RFO supplies & also question
marks in long term availability
Japan is the largest importer of LNG and after their closure of nuclear plants, LNG demand has further
increased which absorbed the surplus LNG available in the market
Australian LNG trains will be completed in couple of years which will ease the situation
Six reputable LNG Suppliers has shown their interest by submitting LOI for supply of gas to KAPCO
Port Qasim Authority also allocated a provisional Site at Khiprianwala Island for KAPCOs LNG
terminal
Estimated project cost of studies, construction management, dredging & terminal construction is
around US$ 350-400 million
There is no fixed pricing formula for the spot market trade, its market value is determined
by supply availability, demand and prices of competing fossil fuels
The LNG price is generally linked with Henry Hub & Liquid fuels in Atlantic basin, with
Japan Customs Cleared (JCC) in Pacific basin, with NBP, TTF & Brent Crude (BC) in
Europe and with Brent Crude (BC) in Asia
The generic pricing formula for long term LNG supply contracts is as follows:
Cons:
Gas import either from cross border pipeline or LNG would be required to
bridge the demand supply gap of energy and power
MERIT ORDER
@ Brent Crude Price of USD 120/Barrel and LNG with 0.152*BC+0.5USD
3.84
15.21
16.35
17.93
18.45
18.55
19.15
20.25
20.35
22.17
24.49
26.33
Furnace Oil
Long term availability of furnace oil is reducing as production is decreasing due up gradation of
refineries in Middle East
Global demand for RFO is also expected to decline gradually due to environmental concerns
and rising price trend of RFO
Demand for RFO in Pakistan has increased in last couple of years due to capacity expansion in
the power sector. 1200 MW RFO reciprocating engine based plants have been commissioned
Another factor for increase in furnace oil consumption is the non availability of gas to power
sector and industry.
Major cause of circular debt is the costly generation on furnace oil and main reason
behind forced load shedding is the non availability of oil due to financial crunch &
infrastructure constrains.
No further projects should be considered on Oil
Coal Scenario
GLOBAL
Worlds proven coal reserves over 861 billion tons
About 18% of total coal produced is traded internationally
Coal has 30% share in the global energy and 41% in the global power production
Most of the coal traded is used for power generation & steel manufacturing
27,644 MW of coal based power plants are under development & construction in the USA
Chinas total installed generation capacity is over 900 GW and 75% is based on Coal
PAKISTAN
There are 17 coal fields in Pakistan having a total of 188 billion tons of coal reserves. Thar coal
Lakhra is the only operational coal based power plant with capacity of 150 MW (Currently
operating at 40 MW). It was constructed by WAPDA in 1996 and acquired by Associate Group in
2007
Thar is the 7th largest coal reserve having 175 Bt of Sub-bituminous coal which is equivalent to 51Bt of oil
(more than Iran & Saudi Arabias combined Oil reserves
It is spread over an area of 9000 km2
It is located 410 KM from Karachi, 65 KM from the Mithi City & 25 KM from Islamkot
The highest elevation of sand dune is 125m
Semi-arid desert with scarce water resources
The Coal seams are of variable thickness ranging from 0.2 to 22.8 meters with upto 20 Seams at one location
The shallowest coal seam in the field lies at a depth of 123 meters & the deepest coal seam (depth of 1st coal
bed) is at 245 meters
Six blocks have been allocated to different companies to develop coal mines.
3 Main Aquifers are :
1st - Above the Coal Zone (Depth : 53 93 M from Surface) Recharge from rain
2nd - Within the Coal Zone (Depth : 120 M from Surface) No recharge
3rd - Below the Coal Zone (Depth : 200 M from Surface) Recharge from India
3rd one is the source of water for most of the tube wells installed in Thar area
Infrastructure already developed by the Government of Sindh for Thar Coal Field :
Fiber Optics, Rescue Centre adjacent to Block II (Under Construction) & Thar Lodge 20 Suites (Under
Construction)
Project financing
Project size would be quite big and under prevailing circular debt issue, it would be very risky to
undertake this project
Aquifer Management. Mud formation by upper & intermediate aquifer during mining
Overburden dumping
6.5Mt/annum mine project cost will be around one billion dollar and additional 10 MT/annum
mine will cost only USD 600 million
Power tariff would be less than 10 US cents
There are many challenges to pursue this project but it is in the best interest of the country and as
the tariff would be half compared to oil based projects which will provide some relief to power
purchaser also
Tunnel Length
(km)
Estimated
Project Cost*
(MUS$)
Cost
MUS$/MW
Tariff
Usc/kWh
12
33.5
441
3.3
15.2
100
32
22
1046
4.2
17.7
355
90
37
19
1,327
3.7
14.9
Indus, NWFP
249
N/A
20
13
733
2.9
10.8
Karang
Indus, NWFP
474
300
60
21
850
1.8
9.9
Naran
Kunhar, NWFP
225
350
140
10.6
1037
4.6
20.9
Balakot
Kunhar, NWFP
204
150
140
4.5
671
3.3
12.8
Jhelum, AJK
590
350
80
3 x 0.7 km
1,325
2.2
8.1
Project
River/Location
Capacity
(MW)
Laspur
Chitral, NWFP
133
130
Korag Parait
Chitral, NWFP
247
Gahriat
Chitral, NWFP
Altit
Mahl
Most sites are situated in remote, inaccessible areas requiring infrastructure development
Population resettlement issues likely to be low because projects lie in narrow valleys where population density is very
low
China, United States, Germany & Spain are the major players
China has added 43.5 GW capacity in last five years and becomes the leader in
this field. United States has also added 31 GW in the same period
Turbine availability was a major issue in the past but after Chinas entry wind
turbine availability is not an issue
Wind turbines require a minimum wind speed of 10 mph (16 km/h) i.e 4.5 m/s
or greater. Ideal Speed is 12 m/s or above
Pakistan has a considerable potential of wind energy of over 50,000 MW mainly in coastal areas
Alternative Energy Development Board (AEDB) has been mandated by GOP to introduce,
promote and develop renewable energy in Pakistan
Power Purchase Agreement is under development for a project life of 20 years
AEDB has issued 96 LOIs of 50 MW each to date
50 MW project requires 1,000 1,200 acres of land
Total of 33, 976 acres of land has been allocated to 22 Investors :
23, 646 acres of land (19,807 acres in Gharo and 3,839 acres in Jhimpir) have so far been allocated to 15
investors
10, 330 acres of land are being provisionally allocated to 7 more wind investors
Land Allocation charges by AEDB: 1st 10 Years - @ US$ 10/year/acre. Next 10 Years: @ US$ 20/year/acre
AEDB takes lease charges for first 10 years in advance i.e US$ 100k
Only few investors are seriously pursuing the projects . Most investors are not even installing the
wind masts for wind data analysis (cost is around PKR 5 million/mast)
Coastal and Northern areas of Pakistan have adequate wind speed to make wind power
generation feasible
Reliable wind monitoring & analysis are required prior to finalizing accurate wind farm design
Key issues & challenges related to wind power include lack of technical know how, high cost of
wind turbines & reluctance on part of WAPDA due to extreme variability in power dispatch
Globally installed power generation capacity based on solar energy reached 8,500 MW in 2007
growing @ approx. 50% p. a in the last 5 years on the back of strong policy incentives such as
feed in tariffs, tax cuts and subsidies
Technologies for solar power generation :
Photovoltaics (PV) : Conversion of sunlight into electricity directly through solar cell. The type of PV
cells are :
Type
Efficiency (%)
Upto 20
90 - 95
2-3
2-3
11
1.8 - 2.5
<1
1.5
2-4
Thin film technology market share is on the rise due to cost effectiveness
The capital cost for a 5 MW PV power plant based on C -Si type is approx. US$ M 48 which
translates into a tariff of Usc 80/kwh for a target IRR of 15%
Solar Tower
Solar Dish
80 MW
10 MW
25 kw
Solar To Electric
Efficiency , %
14-15%
10%
17%
Capacity - 150 MW
Area 2 Square km
Project Cost - US$ 1200 M
Tariff - Approx USc. 35/kwh
Areas close to Pakistan-Iran border have high solar potential above 2,400 kWh/ m2/year
Mainland areas of Sindh and Punjab have moderate solar potential (1,800 - 2,000 kWh/ m2/year)
Conclusion :
Capital intensive technologies that are still being developed. May become competitive in future
depending upon technology improvement, global energy prices, environmental regulations and
supply/demand situation
Globally, development of Solar Power is linked to Govt. incentives and subsidies
In the absence of any government incentives or subsidies, solar power generation cannot be pursued
in Pakistan
3 tonnes baggasse on wet basis is produced for 10 tonnes of sugar cane crushed
Baggasse is primary source of fuel for sugar mills low efficiency boiler
Currently, approx. over 500 MW is being produced by sugar mills for captive use
Government has announced co-generation policy and asked sugar mills to construct high
efficiency plants to be operated on baggasse during crushing season and on coal during off
season
Baggasse best utilization is to consume at sugar mill premises and transportation would be
difficult if someone consider a bigger project
Electricity can also be produced from molasses, a by-product of sugar industry, through
biogas technology
Jatropha - Biodiesel
Centre of origion is Central America and commonly used in tropical growing areas
Oil is produced by crushing jatropha seeds and then converted to biodiesel through
transesterification process
Can grow anywhere, even on marginal soils and require less water compared to other crops
Jatropha can survive in marginal conditions but this also means marginal yield
Initial fruiting just after 7 months of plantation and maximum yield after 3 years
Seed cake (by-product) can be converted to fertilizer & animal feed or can be used as fuel in
boiler
Seed price is Rs. 2000 per kg and around 1000 seeds in one kg. Sapling price is Rs. 25 each
D1 Oil, a UK based biodiesel company has cultivated 81000 hectares of jatropha in India
The project can be considered if Government provides land without any charge
as practiced in India
Acquisition Opportunity
Al Ghuriar group (UAE) are Sponsor of this project and has so far invested over 5 million
dollars (purchased 71 acres land & made advance payment to Siemens for ST)
They failed to implement this project due to weakness of their business development team
Star project is on the same field (Mari deep) as that of Fauji Foundation Daharki project
Star team signed all the agreement by just following Fauji footsteps but failed to achieve
financial close
Due to long delay in project implementation, PPIB has asked to quadruple the LOS
guarantee
Iqbal Z. Ahmed signed a SPA in 2009 and paid one million dollars but not pursuing the
project. Al Ghurair want to terminate the SPA if some other strong Sponsor take this project
GSA Take or Pay triggered in June 10 which needs to be resolved with Mari
Mari gas is willing to discuss the GSAs Take or Pay condition if serious investor will
pursue this project
Areas of Concern
Dependence on Oil:
Heat Rate:
Struggling to meet the target (PPA) heat rate due to low efficiency on LSFO and more
operation on LSFO
Startup on Diesel:
Due to shortage of gas, dependence on oil has increased which is impacting the bottom line
Availability:
Availability has reduced due to shortage of gas, inability of PSO to deliver required amount
of LSFO due to infrastructure constrains and cash flow issues. It has potential to generate
LDs
Mitigation:
Betterment Projects
Although, there is huge gap between demand and supply and ECC has also mandated PPIB
for 5000 MW unsolicited projects on any fuel & technology however, new project can be
initiated after easing of circular debt issue
Continue to pursue PEPCO/WAPDA for cash payment guarantee
Keep engagement with gas supply companies and LNG suppliers to develop workable LNG
supply model
Huge gap between demand & supply of electricity. Under 2002 power policy, power
projects will be developed in private sector
Power sector provides secure return on investment other than non payment by power
purchaser
LNG terminal project should be developed which will provide reliable operation of existing
facility and at the same time will provide opportunity to expand
Acquisition of Star power may be evaluated
Small hydel projects of 100 MW may be pursued
Thar Coal mining and Power generation would be good opportunity if company decided to
launch a big project