28-Energy Security.pdf

7/23/2019 28-Energy Security.pdf

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28. Energy Security

28.1. Introduction

Energy is the lifeline of economic development but unfortunately Pakistan lacks integrated

National Energy Security Plan for the 21stcentury. While preparing the MTDF 2005-10 forthe energy sector, a long term view has been taken in the context of energy securityrequirement for the next 25 years. World and regional energy comparison of some of thesalient energy indicators is given in Table 1 below.

Table 1

World and Regional Energy Comparison, 2004

World Pakistan India Bangladesh China Malaysia

Population (Million) 6393 159 1086 141 1300 25.6

Per Capita GDP US $1995 (PPP)

8200 2100 2200 1900 5000 9000

Per Capita PrimaryEnergy Supply (TOE)

1.55 0.30 0.32 0.11 0.91 2.17

Per Capita Electricity

Generation (kwh)

2657 581 561 145 1484 3500

Import Dependence n.a. 24% 18% 21% 1% -53%(exporter)

Source: 1. British Petroleum Statistical Review of the World Energy2. World Fact Book 2004

The major energy consuming sectors of the country are industrial (38.3 percent),transport (32.0 percent) residential and commercial (25.0 percent), agriculture (2.5 percent)

and others (2.2 percent). The country historically has been subjected to energy demandsuppression due to limited supplies and lack of adequate infrastructure development forprovision of energy to the industrial sector. The lack of sustained and affordable energy toindustry has restrained economic growth and created declining tendency for industrialinvestment in the country. The per capita energy consumption, which is one of the keydevelopment indicators as well as measure of quality of life of a country, is low with only 14million BTU, as compared to 92 million BTU for Malaysia and 34 million BTU for China. Acomparison of energy units utilized to produce 1 US $ of GDP for 2003-04 is given inFig-1.


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Fig 1: Energy Utilization Per Unit of $GDP, 2003-04

It is essential to provide adequate energy to industry to drive economic growth andcreate employment opportunities, and to the domestic sector for cooking and heating and toprevent the continuing environmental degradation and deforestation by massive use of

wood for domestic fuel. The commercial energy availability to various sectors of theeconomy will help in increasing job opportunities, enhancing agricultural productivity,improving standard of living and preserving environment through reducing deforestation.

Pakistan power sector has historically been dominated by public sector utilities,WAPDA and KESC who were enjoying monopoly in the Power Sector. Over the years, theseinstitutions emerged as large monolithic, vertically integrated utilities with overstaffing,declining skills, deteriorating maintenance of Infrastructure, financial and technicalinefficiencies, poor governance, excessive dependence on public sector developmentresources, neglect of customers and lack of competitive spirit.

In order to mobilize private sector investment for power sector an independentpower projects (IPP) policy was launched in 1994 and subsequently reviewed in 1998 and2002. A Private Power and Infrastructure Board (PPIB) was set up which has been providingone window support to private sector. The government also set up National Electric PowerRegulatory Authority (NEPRA) in 1997. In 1998 the Government embarked upon aprogramme of unbundling WAPDA through corporatization and commercialization.WAPDA has now been reorganized in nine distribution companies called DISCOs, oneNational Transmission and Dispatch Company (NTDC) and four thermal generationcompanies called GENCOs. The hydroelectric power development and operation functionsremain with WAPDA. In order to carry out this restructuring and re-organization, afacilitation company called Pakistan Electric Power Company (PEPCO) was also

incorporated in 1998.

106

47

27

35

27 26 24

6

31

13 13

05

1015202530354045

50

US

A

U

K

Ira

n

SaudiArabia

Chin

a

India

Indonesia

Malaysia

Japa

n

Pakista

n

Banglades

h

WORL

D

MBtu


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28.2. The Context

Worldwide, over the last few decades, there have been few new oil discoveries whilethe oil production has been going up. The increasing energy demand and limited crude oilavailability has resulted in a shift in both exploration and production activities towards gas.

The short to medium term strategy to meet energy demand and long term strategies ofenergy supplies worldwide are illustrated in the Fig 2&3.

Fig 2: Short to Medium Term Strategy

Oil production becoming more important than exploration

Inevitable shift to gasboth exploration and production

Figure 3: World Energy Supplies(Long Term Strategies)

Source: SPE International (Society of Petroleum Engineers)


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The countrys primary energy mix (2003-04) in comparison to regional and othercountries is given in Table 2 and Fig 4.

Table 2

Primary Energy Mix by Country 2003-04 (%)Pakistan India Malaysia UAE UK USA Canada China*

Oil 30.0 35.0 42.0 32.0 35.0 40.0 30.0 23.8

Natural Gas 50.0 7.0 51.0 68.0 35.0 23.0 27.0 2.6

Coal 6.5 55.0 4.0 - 16.0 23.0 24.0 67.0

Others(Hydel,

Nuclear, etc.)

13.5 3.0 3.0 - 14.0 14.0 19.0 6.6

* 2002 Data

Fig 4

0

10

20

30

40

50

60

70

%

Pakistan India Malaysia UAE UK USA Canada CHINA

Oil Gas Coal others

* Data: 2002

The world data regarding total electric power industry and fossil fuel reserves toproduction ratio is given below in Fig 5&6.


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Fig 5: Total Electric Power Industry Summery Statistics, 2004 (July-Sept)

Net Generation (Million Kwh)

Total Energy Sources 3,053,969

Renewable 66,455

2.2%

Wind/Solar 11,008

0.4%

Other

47,351

1.6%

Hydro Electric

207,634

6.8%

Nuclear598,489

19.6%

Nat. Gas

541,818

17.7%

Pet. Liq./Coke

93,841

3.1%

Coal

1,487,373

48.7%

Fig 6 Fossil fuel reserves-to-production (R/P) ratios at end 2003

Source: BP Statistical Review of World Energy 2004


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There are considerable oil, gas, and coal reserves and hydel potential. The crude oilreserves are estimated at 27 billion barrels including 300 million barrels proven reserves. Thelevel of production is presently 22.6 million barrels compared with the level of consumptionof 100 million barrels. The natural gas reserves are 8 trillion cubic meters including theproven reserves of 0.8 trillion cubic meters. The level of production is presently 93 million

cubic meters per day compared with the level of consumption of 82 million cubic meters perday. The coal reserves are 185 billion tonnes including the proven reserves of 3.3 billiontonnes. The level of production is 3.3 million tonnes and the level of consumption is 6.1million tonnes.

It has been estimated that the hydel potential in the country is 46,000 MW, while thepresent installed capacity of hydel power is only 6459 MW. Out of total power generation of83755 GWH, hydel generation is around 29853 GWH. The oil sector has all along beenheavily dependant on imports of about 85 percent of the national requirement. Annuallyabout 7.8 million tonnes of crude oil, 5.2 million tonnes of oil products and 2.8 milliontonnes of coal are being imported at a cost of around $ 3 billion.

The local production of oil and gas would start declining due to depletion ofresources from the year 2010. There would also be a deficit of gas unless considerablecontribution is made from new discoveries. In case the gap is not met through indigenoussupply, there will be need to import gas, and the requisite infrastructure would have to beplaced in a timely manner. Power deficit is already being felt in the power generation sector.Some of this deficit would be met by accelerated exploitation of indigenous hydel and coalreserves, while imported fuel would be required to meet the future demand of power plantsoperating on oil and gas.

The present world fuel ethanol production is about 30 billion litres whereas the

ethanol production during 2004-05 in the country was about 350 to 500 million litres. Apartfrom export of substantial quantities of molasses, production of alcohol from molassescomprises the only major value added product manufactured in the country. At presentthere are no fuel ethanol-producing units in the country and there is no blend of fuel ethanolwith petrol. It is planned to mix about five percent of fuel ethanol in petrol which will begradually increased in the subsequent years. Research would also be undertaken for mixingfuel ethanol in diesel.

Most of the coal reserves of the country, estimated at 185 billion tonnes are located inSindh, including 176 billion tonnes at Thar. The current total mineable reserves of coal areestimated at 2 billion tonnes (60 percent of measured reserves). At present there is no

mining/coal production from Thar but recent studies have indicated considerable potential

28.3. Objectives

The main objectives of the energy sector development are: (i) to enhance theexploitation of hydropower, and exploration and production activities of oil, gas and coalresources, and increase the share of coal and alternate energy in overall energy mix, (ii) tooptimize utilization of the countrys indigenous resource base to reduce dependence onimported fuel through an institutionalized strategy, (iii) to create an environment conduciveto the participation of the private sector, and (iv) to develop the energy scenario in thecontext of regional perspective.


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28.4. Strategy

The strategic directions for development of the energy sector and sustainable supplyof energy at competitive price to all sectors of the economy include: (i) supply to be basedon an optimum energy mix; (ii) maximum utilization of the indigenous resources to meet the

increasing energy demand with a major emphasis on increasing the coal share in the totalenergy mix by developing indigenous coal reserves, and setting up integrated coal mining,power generation, petro-chemical plants and coal gasification; development of hydro forpower generation; increasing local oil and gas production by enhancing drilling activitiesparticularly in off-shore areas; replacement of imported oil with imported gas; andpromotion of accelerated nuclear and renewable/alternate energy sources (wind, solar) inoverall energy mix; (iii) enhancing participation in the sector, including manufacturing ofplants and equipment by strengthening regulatory frameworks and related institutionsand development of infrastructure, and (iv) development of human resources with emphasison technical skills and expertise. The strategy also includes extension of LPG supply to thedomestic sector, encouragement of CNG utilization in the transport sector and import of

LNG to meet short-term gas requirements, if feasible. Incentives would also be provided formechanized development of coal gasification technology.

The countrys energy mix and demand projections by fuel for the short, mediumand long term are outlined in Table 3 and Fig 7:

Table 3: Energy Mix Plan ProjectionsTable 3: Energy Mix Plan Projections

4.2%15.113.2%8.242.7%4.811.9%2.230.9%0.690.8%0.42Nuclear

2.5%9.202.2%5.581.7%3.001.3%1.601.1%0.840.0%0.00Renewable

10.8%38.9312%30.5012.1%21.4413.6%16.4013.9%11.0312.7%6.43Hydro

19%68.6515%38.2814.0%24.7712%14.459%7.166.5%3.30Coal

45%162.5845%114.8444%77.8544%52.9849%38.9950%25.45Natural

Gas

18.5%66.8422.7%57.9325.7%45.4727%32.5126%20.6930%15.20Oil

361.31255.37177.35120.1879.3950.8TotalMTOE

203020252020201520102004

Long TermMedium TermShort TermCurrent


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Fig 7

OI L

GA S

COAL

HYDEL

RENEWABLE

NUCLEAR

0

50

100

150

200

250

300

350

400

2005 2010 2015 2020 2025 2030

The energy demand over the next five years is expected to grow at a rate of 7.4percent per annum. To meet future requirements with indigenous resources, domesticexploration, if feasible, would be intensified. Simultaneously, the energy supply optionswould be diversified, with import of gas and LNG. In power generation a total of 23 hydelprojects are planned to be initiated during the MTDF period, out of which 14 hydel projectswill be completed, so that hydel-thermal mix is shifted towards hydel generation.Worldwide, pumped storage is utilized to generate about 70,000 MW hydel power. Thisconcept, depicted in Fig 5 would be explored to utilize hydel potential.

Fig 8

Unit working as

Turbine

Peak Hours

Main

Reservoir Downstream

Reservoir

Flow DirectionDam

Off-Peak Hours

Main

Reservoir Downstream

Reservoir

Dam

Unit working as

Pump*

* Using electricity from nuclear or other sources

Flow Direction

Worldwide Installed Pumped Storage Hydro Capacity in 2000: >70,000 MW


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Similarly, 900 MW capacity would be increased through coal-based projects.Recognizing the importance of exploitation of renewable energy, projects totaling 800 MWare also envisaged for implementation during 2005-10. The energy gap coverage strategy forthe country is outline in the Table 4 and Fig 9.

Table 4Energy Gap Coverage2005 2010 2015 2020 2025 2030

Supply 54.04 76.19 98.66 127.11 168.16 220.37

Demand 54.05 79.40 120.17 177.34 255.37 361.31

Gap 0.0 (3.21) (21.51) (50.23) 87.21) (140.94)

Gas Import-1 - 5.0 15.6 15.6 15.6 15.6

Gas Import-2 - - 5.0 27.0 27.0 27.0

Gas Import-3 - - - 5.0 27.0 27.0

Gas Import-4 - - - - 15.0 27.0

Fig 9

28.5. Long Term Financing Needs (2005-2030)

In order to meet additional power generation requirement of 143,310 MW during2005-2030, an investment of $ 150 billion would be required. The average Governmentinvestment per year is planned at $ 2.0 billion, with balance requirement of $ 4 billion peryear met through private sector including BOT and private-public partnership modes. Theproposed long term financing needs for 2005-2030 will be required for meeting theadditional power generation requirement of 143,310 MW during this period.

Demand

Import-4

Import-3

Import-2

Import-1

Imported oil

0

50

100

150

200

250

300

350400

2005 2010 2015 2020 2025 2030

MTOE

Demand Import-4 Import-3 Import-2 Import-1 Imported oil Supply


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28.6. Power Sector

During the last four years (2001-05), several public sector projects including AllaiKhwar (121MW), Khan Khwar (72MW), Dubair Khwar(130MW), Golan Gol (106MW),Malakand-III (81MW), Keyal Khwar (130MW) and Jinnah low head (96MW) are at different

stages of implementation. In addition hydel projects namely Malakand-III (81MW) inNWFP, Battar (4.8MW) in AJK and Naltar (18MW) in Northern Areas under the provincialprogramme were also approved for implementation.

With the addition of a capacity of 1450 MW during 2001-05 through the Ghazi Brothahydropower project, the installed capacity of the system has increased from 17710 MW to20289 MW, resulting in change in the hydel/thermal mix from 28:72 in 2001 to 33:67 in 2005.Over the same period, the total electricity generation increased from 67500 Gwh in 2000-01to 87992 Gwh in 2004-05. ( an ACGR of 3.2 percent), and 1.7 million new consumers wereadded in the WAPDA and KESC systems. In financial terms, an amount of Rs.73.4 billionwas utilized for the power sector during 2001-05 (including budgetary corporations).

28.7. Issues

Major issues in the sector include the following:

Shortcomings in Implementation

The outlined plans by the utilities (WAPDA and KESC) remained far beyond theirfinancial or implementation capabilities.

Slow Development of Indigenous Resources

The slow development rate of indigenous resources, including hydel, coal, oil, gas andrenewable, has aggravated the overall supply position. The lingering deadlock over majorreservoir dam/power projects has virtually held hostage the development of huge hydroresources. The non-availability of feasibility studies of potential sites has further added to thedelays in utilization of hydel resources. Similarly, limited capability of Public Sector agenciessuch as PMDC and SCA, has contributed to slow development of vast coal reserves. Inaddition, relatively limited infrastructure has hindered the development of oil and gas in thecountry.

Privatization and Institutional Aspects

The unbundling of WAPDA into NTDC, GENCO, DISCO and creation of NEPRA istaking time to yield the desired benefits of privatization programme, which is moving at a slowpace. Government policies and plans are yet to be synchronized for the creation of an efficient,cost effective and reliable power sector. The power sector is also suffering from weakcoordination between the Government agencies and other power sector stakeholders. Therehas been an adhoc approach in the management of balancing work like load forecast, projectidentification, tariff regime and future investment requirement. The resulting poorcoordination and rivalry amongst different stake holders and institutions has also impactednegatively on the competitive development of power sector.


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Generation Mix

Over the years the generation mix, which was earlier in favour of cheap hydel powerhas tilted towards imported thermal, thereby increasing import bills and delaying developmentof indigenous resources. Though the declining hydro power trend has lately been checked but

it will take considerable time to correct the situation as the gestation period for hydro basedgeneration is relatively long.

Tariff Structure

A tariff structure, which subsidizes some consumers at the expense of others isimpacting negatively in the development of competitive power system. Commercial andindustrial consumers are subsidizing agriculture and domestic consumers to a large extent.While there is some justification for subsidy for small domestic users, the current tariff regimeinduces misuse of electricity besides serving as a smokescreen for theft and pilferage.

High Transmission and Distribution Losses

A huge revenue is lost annually due to high transmission, distribution, auxiliary lossesand pilferage. Over the years the distribution network is suffering from overloaded conductors,feeders and transformers. The lack of computerized information on actual loading position andshortage of funds to revamp the distribution network favours corruption as workers cannot beheld accountable in this environment. In addition, lack of transmission infrastructure and lowcapacity utilization of IPPs has resulted in higher overall energy cost.

Lack of Participation of Local Electrical Engineering Industries

Local electrical engineering industries are not being fully encouraged in the

development of power sector, though practically most items required for transmission anddistribution are locally manufactured and are available at international standard oncompetitive prices.

Inefficiencies and lack of conservation strategy

Considerable energy losses and wastages due to poor and old equipment design andmake (e.g electric steel-making in Pakistan consuming 700-800 kwh per ton versus 300-350 kwhin advanced countries) is resulting in at least 20 percent wastage of total energy consumption.There has also not been a focus on energy conservation.

28.8. Objectives

The objectives for the development of the power sector include:

i) conversion of existing integrated state owned utilities into professionallymanaged, competitive, financially viable, and efficient electric power system ofgeneration, transmission and distribution in the private sector;

ii) enhancing access to electricity and quality of services at affordable prices; and

iii) maximizing new generation capacity requirement from indigenous resources

(i.e. hydel, coal, local gas, nuclear and renewable) and tilting hydel-thermal mixtowards hydel and local coal.


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28.9. Policy

The policy for power sector envisages:

i) utilization of indigenous resources for power generation and tilting the hydro-

thermal generation mix towards hydel by implementing maximum possiblehydro based power projects;

ii) maximizing generation through indigenous coal to increase its share to at least18 percent (20,000 MW) by 2030;

iii) increasing emphasis on nuclear power resources to increase generation fromcurrent 400 MW to 8800 MW by 2030. PAEC would enhance indigenizationcapability to maximize local content to reduce capital cost. Capacity of unitswould be increased from 300 MW to 600 MW and thereafter to 1000 MW;

iv) facilitating captive power for old and new industries capacity available in sugarmills during off crushing season to be made available on national grid;

v) enhancing participation of private sector in power generation, transmission anddistribution;

vi) exploring the possibility for linking and developing the regional power grid forefficient and reliable use of power with emphasis on import of power fromTajikistan and Kyrgyzistan on 765 kv transmission line through silk route;

vii) strengthening regulatory bodies and making them truly autonomous, effective,transparent and credible;

viii) promoting local engineering industry for power sector; and

ix) encouraging the utilization of renewable energy (such as solar, wind, andbiomass) especially for remote areas.

28.10. Strategy

The main elements of the strategy include:

i) Additional capacity requirement in power generation would be made mainly

from indigenous resources. Accelerated programme would be undertaken toincrease hydel power generation capacity from 6460 MW to 32,660 MW by 2030through construction of a series of hydro power projects on all riversparticularly Indus.

ii) WAPDA would undertake a study for maximizing hydel power generationfrom all rivers, particularly Indus, to identify strategy and projects for increasingthe hydel power share. A combined study with PAEC would be undertaken tomaximize hydel power at peak hours using pumped storage.

iii) Provinces would undertake Public- Private Partnership or BOT projects for

power generation on canals and other mini/micro hydel, with indigenousmanufacturing of plant and equipment (about 700 MW on about 800 sites).


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iv) Extensive private sector participation is envisaged in building additional powergeneration capacity of 7100 MW by 2010 based on the existing comprehensivepower generation policy including a package of incentives.

v) The power prices would be rationalized keeping intact life-line tariff for low

consumption domestic consumers.

vi) WAPDA and KESC would undertake an energy loss reduction, loadmanagement and distribution rehabilitation programme to bring down thelosses from 26.5 percent in 2005 to 21.5percent by 2010.

vii) An energy conservation programme would be undertaken including enactmentof necessary laws by Ministry of Science and Technology/ENERCON, forenergy efficient building designs, use and manufacturing of energy efficientappliances. Co-generation technologies to conserve energy would be promoted.ENERCON would develop a mechanism to monitor strict compliance of energy

conservation laws.

viii) The strategic plan developed for privatization of power sector would beimplemented on fast track basis. Under the privatization strategy, government isunbundling and corporatizing various functions of WAPDA for ultimateprivatization. Privatization of at least one generation company (Jamshoro), andone distribution company (Faisalabad Electricity Supply Company) would becompleted during the MTDF period. Privatization programme would beimplemented with the mandate to ensure capacity building of power sectorentities.

ix) Regional linkages would be established and possibilities explored for importingpower from Central Asian Countries through EHV lines and expansion ofcurrent linkage with Iran for importing more power, especially for remote areasof Balochistan.

x) NEPRA would be strengthened to enhance its effectiveness in regulating thepower sector. The Government would provide a conducive environment for thepurpose, which in turn will ensure the efficient and competitive functioning ofthe power sector and protection of consumer/entrepreneur interests in future.

xi) The capacity of Pakistan Nuclear Regulatory Authority (PNRA) will bestrengthened so that it can effectively manage the safety aspects related todesign and operations of the many nuclear power plants, which are planned aspart of the strategy for energy security and diversity.

xii) A variety of measures would be considered to boost local production/utilizationof electrical engineering industry, including joint ventures with foreigncompanies, in order to develop power projects with a cumulative capacity of atleast 2000 MW by the year 2015.

xiii) The Alternative Energy Development Board, created to implement projectsbased on renewable resources, would be strengthened. Small size, isolatedsolar/wind units would be installed in remote areas of the country unlikely toget electricity through the national grid.


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xiv) Transmission lines would be installed on need basis. The secondarytransmission and grid system would be upgraded continuously, enabling fullcapacity utilization and ensuring uninterrupted energy needs to the end users.

xv) The distribution system would be expanded and augmented. As the distribution

system is expected to be privatized, investment in this sector would be made bythe private sector on commercial basis.

xvi) Efforts would be made to stagger load profiles and reduce consumption at peakhours and increase load factors.

28.11. Operational Programme

Generation

The power demand is projected to grow with an ACGR of 7.9% during the MTDF2005-10 and increase from 15500 MW in 2005 to 21500 MW in 2010. Sector-wise/total powerdemand is given below in table 5.

Table 5

Total Power Demand(MW)

Year Domestic Commercial Agriculture Industrial Others Total

2005-06 7,199 1,216 1,763 5,891 1,035 15,500

2006-07 7,585 1,251 1,820 6,481 1,086 16,600

2007-08 8,127 1,312 1,893 7,252 1,159 17,900

2008-09 8,783 1,354 1,979 8,181 1,243 19,600

2009-10 9,531 1,408 2,079 9,267 1,341 21,500

WAPDA and KESC will continue their expansion programme for primarytransmission, secondary transmission and grids and distribution programme to expand the

power network. Energy generation is planned to increase at an average annual compoundrate of 7.9 percent to reach 128670 Gwh by the terminal year of MTDF. The energy sale isexpected to increase at an ACGR of 9.4 percent from 66100 Gwh in 2005 to 103500 Gwh in2010. Details are at Annex 1.

In order to meet the future load requirement during 2005-10 and to improve thegeneration mix towards hydel, an additional 7,100 MW of power would be installed by thecommissioning of the core projects listed in table 6 below.


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Table 6

Core Projects to be commissioned during 2005-10

S.No Name of Project Type Capacity

(MW)

1.Public Sector:Allai Khawar Hydel 121

2. Khan Khawar Hydel 72

3. Dubair Khawar Hydel 130

4. Keyal Khawar Hydel 130

5. Jinnah Low Head Hydel 96

6. Golan Gol Hydel 106

7. Malakand Hydro Hydel 81

8. Pehur Hydel 19

1.Private Sector:New Bong Escape Hydel 79

2. Rajdhani Hydel 132

3. Gulpur Hydel 60

4 Small/Low head Hydel 50

5 Matiltan Hydel 84

6 Kotli Hydel 97

7 Lakhra Coal 450

8 Thar Coal Chines Coal 300

9 Dadabhoi Coal 150

10 Faisalabd C.C Gas 450

11 Balloki C.C Gas 400

12 Oil Based Power plant Oil 160

13 Gas Based Power plant Gas 3100

14 Renewable (Wind) 800

Total 7100


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Power generation plan for the MTDF period and beyond is given in Table 7 below.

Table 7: Power Generation PlanTable 7: Power Generation Plan

162590518303036030038506250707040002030

162590837607760970019910326608800Total:

CumulativeGasRenewableHydel

47540201207550300800300075709002015

2025

2020

2010

Addition

Existing(2005)

2000

1500

-

-

400

Nuclear

300

300

160

6400

Oil

22490

12560

4860

5940

38490

24730

7880

19540

TotalCoal

110760270054005600

72270147042004700

274207009001260

---

1801606460

M.W

Note: KANNUP to be retired in 2019

Several major projects including hydel, coal, nuclear and renewable would be initiatedduring the MTDF. Feasibility and detailed engineering work on major hydropower projects isalready underway and their construction would be initiated during the MTDF. The feasibilitystudies for additional hydro power potential would also be pursued in public/private sector.An ongoing project for rehabilitation of KESC system will also restore 140 MW capacity.Similarly additional energy from Mangla dam after its raising would also become available.

Primary Transmission

The National Transmission and Dispatch Company (NTDC) is responsible fortransmission lines and grid stations of 220 kv and above. The existing infrastructure oftransmission and grid stations is overloaded. Power transmission from South to North andfrom North to South and for interconnection of new generation project to national grid will beundertaken. Four primary transmission lines and six 500/220 kv grid stations projects alreadyapproved, would be implemented during the MTDF.

Secondary Transmission

Secondary Transmission and Grid Station programme would be continued to improvethe quality and stability of supply system and to increase the overall access to electricity.

Distribution

To address the problems of heavy overloaded grid stations, high distribution losses,transmission line constraints, poor quality of service and various other problems, thedistribution network of WAPDAs distribution companies (DISCOs) and KESC would beextended to increase the service area and to ensure reliable and sustainable electricity supply.The utilities would also augment their distribution networks to minimize their distributionlosses to the extent possible. About 3 million new consumers are expected to be added to the

distribution network during the MTDF period.


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Power Losses Reduction

The power losses would be decreased from 26.5 percent in 2004-05 to 21.5 percent in2009-10, through energy loss reduction, load management and distribution rehabilitationprogramme. The loss reduction programme would be implemented by distribution

companies, operating in a competitive environment and providing efficient and affordableservice to the consumers. Besides, the ongoing work on system improvement of KESCnetwork and reduction of transmission and distribution loss would be completed.Subsidy/free units to WPADA employees would be rationalized.

Efficiency Improvement

An efficiency improvement programme will be undertaken with the aim of sustainingand improving the current activities in various sectors of the economy, with a primary focus onidentification, demonstration, data gathering and systematic implementation of low andmedium cost measures to achieve conservation. Efforts would be made to reduce peak loads by

shifting usages from peak to off-peak times and thereby defer construction of new facilities.This would be achieved through use of time of day or seasonal tariffs. Low power rate toagriculture tube wells during off-peak hours through special meters would also be offered.

28.12. Captive power and capacity available in sugar mills

Captive power for existing and new industrial estates own use would be facilitated.Surplus capacity of about 2000 MW available in sugar mills during off-crushing seasonwould be made available on national grid by undertaking some modification of sugarindustrys boilers.

28.13. Renewable Energy

The Alternative Energy Development Board (AEDB) would facilitatealternative/renewable energy projects and would also develop and implement off-gridelectrification programme of rural areas. Intensive efforts would be made to ensure theinstallation of 100 MW wind power by December, 2005 at Kati Bander and Gharo Sindh and700 MW by 2010. At least 5 percent of total national power generation capacity would bemet through these resources by 2030 (i.e. 9700 MW). In addition, under the remote villageelectrification programme, 54000 homes would be lit by solar/wind/micro hydro powerduring the MTDF. AEDB would also undertake a comprehensive plan for the developmentof solar products like, solar lights, solar fans, solar cookers and solar geysers through theparticipation of private sector.

28.14. Environment

The power sector is one of the major contributors of emission of Green House Gasesaccounting for over 80 percent of total CO2emission. The main source of these emissions isdue to heavy use of fuel oil in the power generation. During the MTDF period, conversion ofexisting thermal power stations from fuel oil to natural gas would substantially reduce theCO2and particulate emission.


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28.15. National Integrated Coal Mining & Power Generating Authority.

A new national integrated coal mining and power generation authority, whichcould be a joint venture among the Federal Government, Government of Sindh andlocal/foreign private sector, would be created to harness the huge coal reserves for power

generation in the country.

28.16. Institutional Reforms in the Energy Sector

It is essential that the power sector utilities be reorganized and managed on commerciallines to tackle the issues of efficiency, customer satisfaction, affordability, overhead costs,losses, and pilferage/theft. The strategic plan for restructuring and corporatization ofWAPDA, including commercialization, professional management and improvement insystem to bring about reforms, is underway and would be implemented during the MTDF.All assets of WAPDA, except the national Grid Company, for which a decision will be madelater, will be privatized as soon as feasible. The corporatized/privatized units would be

managed like commercial utilities driven by corporate efficiency, profitability, andconsumer satisfaction. A policy committee has been set-up to monitor and implement theabove programme.

The strategic plan developed in 1992 for restructuring and privatization of power sectorwould be revisited in the light of current realities and for serving as a guide for the MTDFperiod. Models successfully implemented in other countries would be used to draw lessonssuited to local environment.

The success of the privatization programme in power sector requires a clear cut policyfor fixing power tariff with NEPRA fully empowered to fix tariff rates on the basis of cost ofservice in accordance with policy laid down by the Government.

The interests of the utility employees would be protected by developing andimplementing a comprehensive human resources transition plan and a portion of the benefitsaccruing from efficiency improvement and reduction in losses as a result of better managementwill be shared with the utility employees. After a transition period, the existing monopoly ofpower sector utilities will be replaced by a number of financially viable electricity companies,operating in a competitive environment and providing efficient and affordable service to theconsumers.

28.17. Provincial programme

The provinces will manage investments for power projects up to 50 MW. For projectsabove 50 MW, the provinces would be the main drivers and catalysts for marketing andcoordinating projects with the Private Power and Infrastructure Board (PPIB).

28.18. Village Electrification Programme

The village electrification programme would be funded by provincial and districtgovernments. In line with the devolution of power, future village electrification programmewould be duly verified by district governments and they would be actively engaged inchalking out and implementation of the programme. During the MTDF period, 12585villages/Abadies would be electrified.


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28.19. Resource Requirements

The total investment for the power sector during the MTDF is estimated at Rs. 1102billion, including Rs. 445 billion in the private sector. Overall investment level will be keptunder constant review and in case of shortfall in mobilizing financing from private sector, a

contingency strategy would be evolved, including provision of enhanced sovereignguarantees, to solicit increased private sector participation. Project-wise/Year-wiseallocation for power sector is given at Annex 2.

Power sector organizations would be strengthened by undertaking capacity buildingprogrammes. Increased linkages between different power sector institutions would beencouraged. While implementing HRD programme, an equitable and gender sensitiveapproach would be applied.

28.20. Risk Analysis

As per historical experience there is considerable uncertainty regarding new capacityschedule and some of the projects in private sector may not materialize, as the success ratioamongst the applicants/bidders in private sector is usually a fraction of the total number ofapplicants/bidders. While some new IPPs may find place in the list of candidate projects,their contribution to the power system can only be expected after the MTDF period of 5years. In the past, surplus capacity at high cost was created on the basis of liberal higheconomic growth assumptions. To minimize the risks, demand growth would be kept underannual review so that mid-course corrections could be made and large surpluses or deficitsavoided. The power balance shows that in the first two years of the MTDF, power shortageis imminent and additional new plants cannot be commissioned in this period except those,which are already included in the schedule. It is therefore imperative that both

WAPDA/KESC revitalize their derated capacities, improve efficiencies and reduce forcedoutages and down times.

28.21. Fuel Sector

During 2001-05, there have been increases in production of crude oil, gas, LPG and coal.These include (i) an increase of 16% in crude oil production from 63548 BPD to 73917 BPD, (ii)an increase of 59 percent in gas production from 2531 MMCFD to 4033 MMCFD, with thenumber of gas consumer increasing from 3.6 million to 4.2 million, (iii) an increase of 52 percentin LPG production from 954 tonnes per day to 1450 tonnes per day and (iv) an increase of 18percent in the production of coal from 3.3 million tonnes per annum to 3.9 million tonnes.

The Oil and Gas Regulatory Authority (OGRA) has been set up to regulate thepetroleum, oil and gas activities and look after the interests of the consumers. GovernmentHoldings (Pvt.) Limited has also became operational. The Governments participation inpetroleum exploration joint ventures has been handled through this Holding Company. Theprices of POL products were deregulated and are determined by Oil Companies AdvisoryCommittee (OCAC) on fortnightly basis. The offshore Petroleum Policy was revised andproduction-sharing formula introduced to attract private investment in high-risk offshorepetroleum exploration. A study for unbundling of transmission and distribution system of boththe gas utilities has also been completed.


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The Gas Infrastructure Development Project to augment the transmission system of gasutilities has been completed. About 1 billion cubic feet of gas per day was injected into thesystem for supply to both power sector and industry. Moreover work on the 817 km cross-country White Oil Pipeline was also completed.

For the development of Thar coal deposits on fast track basis, a Task Force has beenconstituted. A Chinese company undertook a feasibility study to develop a block in Thar coalfor power generation of 600 MW in phases. Simultaneously, a German Company has alsocompleted a bankable feasibility study on Thar coal mining for 1000 MW power generationproject.

Utilization of Compressed Natural Gas (CNG) was encouraged in transport sector toimprove urban air quality and reduce carbon emissions. About 650,000 vehicles would beconverted on CNG. The Government issued directives to promote CNG in the transport sectoras an alternate fuel. About 700 CNG stations would be established in different parts of thecountry. Gas from dormant fields will be utilized as CNG for supply to far flung areas.

28.22. Issues

The following are the main issues:

(i) Low pace of exploration and drilling activities in oil and gas sector.

(ii) Coal development has remained neglected due to lack of capability andproper institutional set up.

(iii) There is need to strengthen the oil and gas regulated activities and expeditethe privatization process especially in the gas sector.

(iv) Indigenous gas will be in short supply by 2010 if domestic potential is notfully exploited. Gas imports through pipeline and/or LNG would beinevitable, with need for incentives for the private sector in gas infrastructuredevelopment.

(v) There has been lack of indigenous design engineering, technology andmanufacturing inputs.

(vi) There is need to introduce regulation for promotion of the concept of commoncarrier, common operator or third party access regime.

(vii) Refining capacity is short of demand for HSD and some of the otherpetroleum products.

(viii) Several gas fields have remained dormant in the past.

28.23. Objectives

The main objectives of the Fuel Sector are: (i) to enhance the exploration andproduction activities of oil, gas and coal resources, (ii) to encourage the utilization of thecountrys indigenous resource base and reduce dependence on imported fuel, (iii) to create

an environment conducive to the participation of the private sector, and (iv) to develop thelocal energy scenario in the context of regional perspective.


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28.24. Policy

The following policy measures are envisaged:

i) The existing policy will be reviewed to encourage oil and gas exploration in

the country especially in offshore areas and impediments in the way ofprivate sector will be removed. Necessary policy incentives will also beevolved to enhance private investment in gas pipeline system.

ii) The production of ethanol from molasses will be increased for mixing withthe motor spirit.

iii) Reliance on import of oil will be reduced and the share of coal and alternateenergy increased. Incentives will be provided for expediting exploration andexploitation of huge coal reserves of the country, and alternate technologieslike coal gasification promoted for expanding the utilization of coal.

iv) Gas imports are envisaged by 2010 to fill in the supply/demand gapconsistent with the envisaged economic growth of the country. A decision onthe preferred option amongst the three options for the import of gas fromTurkmenistan, Qatar and Iran would be finalized as a matter of priority.

v) To make the refinery operations competitive and to provide a level playingfield for the public and private sector, government permission will not berequired for setting up new refineries or expanding the existing ones.

vi) The existing policy to encourage the use of CNG in vehicles will be continuedand the existing price differential between CNG and motor gasoline will be

maintained as an incentive for CNG use.

vii) Plans for Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG)imports would be developed.

viii) A Plan to increase the strategic oil reserves to 45 days would be developed.

ix) Public Sector companies /corporations such as Sui Northern Gas PipelinesLtd (SNGPL), Sui Southern Gas Company Ltd (SSGCL), and Oil and GasDevelopment Corporation (OGDC) and other energy sector entities will bedisinvested/privatized.

x) The capacity in fuel sector for policy analysis, research and human resourcedevelopment would be enhanced.

28.25. Strategy

The main features of the strategy for the development oil, gas and coal sector areas follows:

i) The process of privatization of pubic sector entities in the Fuel Sector will bestrengthened.


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ii) Drilling activities would be enhanced by removing impediments in the policy.The pace of exploration and development wells will be increased to drill 100wells per year during the MTDF period, with further increases to 150/200wells per year from 2010 to 2030. More concession areas would be awarded tocompanies for oil and gas exploration having good track record.

iii) Based on a fast track action plan, exploitation of dormant gas fields, Sui deepreserves, and Tal Block in Kohat will be undertaken.

iv) Transmission and distribution infrastructure for gas supply will be expandedthrough private sector investment.

v) For gas market development, gas pricing and taxation would be reviewedand gas conversion work accelerated through links between gasmanufacturers and gas distribution companies and defining and promotingrules and safety standards for gas conversion of electricity based equipment.

vi) Large-scale utilization of indigenous coal in various industries includingpower generation by the private sector will be encouraged. Research anddevelopment of coal utilization technologies will be undertaken such asgasification of coal, coal bed methane, coal liquefaction and coal briquetting.Coal gasification will be projects expedited and establishment of washeries byprivate sector encouraged for improving quality of local coal.

vii) Strategic storages will be increased from 20 days to 45 days to meet thecontingency demand of the country, with incentives given to private sectorkeeping in view the strategic and economic trade-offs.

viii) The existing policy to ensure availability of domestic and imported LPG atcompetitive and viable prices in far-flung areas, where supply of natural gasthrough pipelines is not economically feasible, would be continued.

ix) A field/part of a field in the north will be allocated specifically forpetrochemical industry especially for establishing naphtha cracker as a matterof priority.

x) The use of CNG as transport fuel would be encouraged and in metropolitancities public transport would also be converted to CNG to reduce dependenceon imported oil.

28.26. Rational Programme

Exploration and Development of Oil and Gas

A significant increase is envisaged in the number of oil and gas wells to be drilledfrom 228 wells during 2001-2005 to 500 wells during the MTDF period. Details of theprogramme for 2005-2030 are given in Table 8.


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Table 8No of wells to be drilled (Nos)

Description 2004-05 2005-10 2010-20 2020-30

Total Wells

(Public+Private)

Exploratory 22 300 1080 1800

Appraisal/Development 32 200 720 1200

Total 54 500 1800 3000

OGDCL

Exploratory 8 175 480 800


Sub Total 18 275 780 1300

Private

Exploratory 14 125 600 1000


Sub Total 36 225 1020 1700

During the MTDF, Oil and Gas Development Company Ltd (OGDCL) would drill275 exploratory and development wells. The OGDCL plans to undertake 8050 L. km 2DSeismic Survey and 1765 sq. km 3D Seismic Surveys. The number of rigs would be increasedfrom 25 to at least 50 and optimal utilization ensured.

Oil Transportation

To satisfy the needs for the white oil supplies to the Peshawar region and to reducethe potential environmental hazards due to the transportation of petroleum productsthrough tank wagons, a white oil pipeline would be undertaken in the private sector.

Storages

The existing storage capacity of POL products excluding crude oil provides a cover ofabout 20 days. This cover will be increased to 45 days.


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Refining Operations

During MTDF, the existing refining capacity of 12.73 million tonnes per annumwould be increased to 18.73 million tonnes per annum by installing an additional refiningcapacity of 6 million tonnes per annum as a coastal refinery in the private sector. The Attock

Refinery Limited (ARL) plans to install such a refinery on the coastal region of the countrybased on the latest process technologies.

Gas Operations

During the MTDF, it is planned to add about 0.2 million consumers per annum tothe current 4.2 million gas consumers in the country. In addition, due priority will be givento schemes for supply of gas to towns/villages/localities to improve environment and forpoverty reduction. Moreover, the needs of the industrial sector will be given priority. Thegas requirement of the new Fatima Fertilizer plant is envisaged to be 110 MMCFD besides 78MMCFD of gas for Balancing, Modernization and Revamping (BMR) of the existing fertilizer

plants during the MTDF period. To promote the petrochemical industry in the country andto reduce dependence on the import of petroleum products, Attock Refinery Limited (ARL)would undertake a petrochemical complex in the private sector. It is planned to dedicatecertain gas fields like Gurguri in North Western Frontier Province (NWFP) for petro-chemical industry specially establishment of naphtha cracker.

During the MTDF period, the pipeline transmission networks will be increased from8606 km to 9700 km and distribution network from 62623 km to 94000 km. It will be ensuredthat the transmission and distribution losses for the gas companies namely SNGPL andSSGCL, presently 6% and 6.5% respectively, do not increase during the MTDF.

Compressed Natural Gas (CNG)

The use of CNG would be expanded as about 100,000 cars and 10,000 buses would beadded every year to the existing stock of the country. A programme of dedicated CNG city-buses would be undertaken, initially in federal and provincial capitals. Subsequently, theprogramme will be extended to other urban centres based on transport pollutionconsiderations. The programme will also include infrastructure development andmanufacturing of dedicated CNG buses.

During the MTDF, the CNG use in transport sector is expected to increase from21000 million cubic feet per annum to 33900 million cubic feet per annum.

Liquefied Petroleum Gas (LPG)

The supply of LPG would be increased form 1600 tonnes/day to 1800 tonnes/dayduring the MTDF period.

Liquefied Natural Gas (LNG)

To meet the shortages of gas in Karachi and other parts of the country, theprivate sector would be encouraged to import LNG if it is economically a viable option;there will be no contribution/guarantee from the Government except forproviding/facilitating necessary infrastructure e.g. berth handling facilities at Port Qasim.


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Coal

The programme for utilization of indigenous coal includes:

i) Increase share of coal in overall energy mix to 9% by 2010 and 19% by 2030 by

developing Thar, Sonda-Jherrick coal deposits, and by increasing theproductivity of present operational mines.

ii) Consider major utilization option for coal in power generation, gasification,fuel and chemical extraction.

iii) Acquire latest efficient, cost effective and environmentally soundtechnologies for co-production of power, fuel and chemicals from coal.

iv) Adopt measures to develop human resource for large-scale mining operationsat Thar and Lakhra coalfields. Provincial governments will augment thepresently available facilities and establish new ones based on latesttechnologies.

v) Facilitate establishment of coal briquette plants on coal.

Cement manufacturing industry as well as boilers of textile and sugar industries arepotential candidates for shifting from furnace oil/gas to coal for the reasons of high prices ofoil in international market and availability of coal as a cheaper source of indigenous energy.During the MTDF period all the cement plants would be converted to coal, resulting inincrease of coal demand to 2.5 million tonnes. Installing indigenous coal based powerplants will also increase the coal share in power sector. Furthermore, a study fordetermining the viability of Thar and Bhakkar coal for gasification is underway. Based on

the findings, the work programme including mining operations and allied works of theprojects will be formulated.

The utilization of lignite (brown coal) in Sindh would be made in power generation,gasification, fuel and chemicals extraction, briquetting and through quality improvements inprocessing industry besides exploration for coal bed methane. The utilization of hard coal ofPunjab, Balochistan and NWFP will be enhanced in brick kiln, cement industries and intown gasification by enhancing coal production from mines through improvements inmining techniques. Efforts will be made to mechanize the operational coalmines.

To enhance the exploration and evaluation activities, during the MTDF period the

Geological Survey of Pakistan (GSP) will complete evaluation and appraisal of coal invarious coalfields in Balochistan, NWFP, and Azad Jammu and Kashmir .

Energy Conservation

It is estimated by National Energy Conservation Centre (ENERCON) that energyconversion and implementation of low cost and medium cost measures at the national scalecan bring about a saving of around 250,000 tonnes of oil equivalent i.e. an estimated savingof about Rs. 4 billion each year. The cost of retrofit measures would only be a fraction of thecost of these savings. The programme initiatives during the MTDF period will have primaryfocus on identification, demonstration, data gathering and construction of information

systems, creating awareness and education and system implementation of low-cost andmedium cost measures to achieve energy conservation.


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The Alternative Energy Development Board has introduced solar heaters (geysers),solar cookers and solar fans that would be marketed by the private sector on a massive largescale. The Pakistan Council of Renewable Energy Technologies (PCRET) has also designedfive types of efficient cooking stoves suitable for rural areas. These cooking stoves, whichprovide fuel saving against traditional stoves in the range of 25 to 45%, would also be

marketed .

Privatization

With high priority to privatization in the fuel sector, the Government has decided toprivatize fuel sector entities viz. SNGPL, SSGCL, OGDCL, Pakistan Petroleum Limited(PPL), National Refinery Limited (NRL) and Pakistan State Oil (PSO). These entities areexpected to be privatized during the MTDF period.

Research and Human Resource Development

Research and development activities will be carried out to enhance sectorcompetitiveness and efficiency. For mechanized coalmines, training of staff and workers onscientific basis means will be carried out.

Regional Cooperation and Energy Trade

It is planned to undertake the import of natural gas from the neighboring countriesto supplement the local supplies and replacement of imported oil with imported gas. Threeoptions namely (i) Iran-Pakistan-India Gas Pipeline, (ii) Turkmenistan-Pakistan GasPipeline, and (iii) Qatar-Pakistan Gas Pipeline, are being explored. A decision would bemade during 2005, based on economic evaluation and strategic considerations. A total of 4pipelines with a capacity of 96.6 MTOEs are projected for 2030. The first pipeline to importgas to cover deficit of 5.0 MTOE would be made operational by 2010.

Demand and Supply Projections

The demand and supply projections are given in Tables 9 and 10. Details are atAnnex 3. The mixing of 5% of ethanol from molasses will reduce the import requirementsaccordingly.

Table 9Demand Projections

S.No Description 2004-05 2009-10 2019-20 2029-30

1 POL Products Demand(million tonnes)

16.8 20.69 45.47 66.84

2 Gas (MMCFD) 3173 4565 9114 19035

3 Coal (million tones) 7.4 16 55.36 153


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Table 10

Supply Projection

S.No Description 2004-05 2009-10 2019-20 2029-30

1 Locally Refined POL Products

(million tonnes)

12 12 18 18

2 Local Gas Supply (MMCFD) 4033 4424 3001 2299

3 Coal (million tonnes) 3.9 13.0 55.36 153

Demand Supply Gap

The demand/supply gap is given in the Table 11, which shows that there will be agas and petroleum products deficit throughout the MTDF period and beyond which will bemet through imports. The current coal deficit of about 3 million tonnes per annum(including 1 million tonnes for Pakistan Steel Mills) will remain to be met through importsduring the MTDF period as local coal cannot be used due to its quality constraints.

Table 11

Demand Supply Gap

S.No Description 2004-05 2009-10 2019-20 2029-30

1 Imported POL Products

(million tonnes)

-4.8 -8.69 -27.47 -48.84

2 Deficit Gas (MMCFD) 860 -141 -6113 -16735

3 Imported Coal (milliontonnes)

-3.5 -3.0 - 0 - 0

Resource Requirements

A total investment of Rs. 393.8 billion is proposed for Fuel Sector during the MTDF

period, including a public sector investment of Rs. 219.3 billion. Details are in Annex 4 andAnnex 5.


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Risk Analysis

If there is any slippage in the drilling activities, the projections for local supply willhave to be revised. It would be imperative to undertake capacity building on timely basis.The demand and supply assumptions will be reviewed every year to ensure that the

investments remain cost effective.

Conclusion

With the finalization of the long-term energy security plan, decisions fordevelopment of the sector are now firmly in place. During MTDF, the main thrust will belaid to meet the demand fully, with an emphasis on exploitation of indigenous resourcesincluding hydel, coal, domestic gas and renewable and importing gas in a timely manner.Sector efficiencies will be improved, institutions strengthened and private sectorinvolvement enhanced.

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