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Thar Coal: potential for Indo-Pakistan Collaboration
Thar Coal: potential for Indo-Pakistan Collaboration
There has been a long held desire in
Lack of availability of suitable projects has also been one of the reasons inhibiting economic cooperation among the two countries. Efforts have been made, in the past and continue to be so, towards building a project portfolio for possible collaboration, if and when political environment improves. SAARC project fund has been commissioning such studies. Reportedly, there is a SAARC energy initiative as well, headquartered in
Thar Coal and its vast deposits , apart from meeting Pakistan’s energy requirements, may have a potential for building and expanding regional economic cooperation .There are a number of possibilities such as; a)export of Thar coal to coal deficit adjoining states of Rajhastan and Gujrat ;b) India assisting Pakistan in developing and exploiting Thar coal resource; c) India installing coal –fired power plants in its border towns ,and exporting electricity to Pakistan produced by Pakistan exported Thar coal. Let me explain and analyze these propositions a bit.
First on
Reluctance of western countries with coal is increasing. International financing agencies are under pressure from environmental lobbies not to fund and assist such projects. Chinese appear to be reluctant as well, as reportedly; numerous attempts to revive their interest in Thar have failed. They still appear to have bitter memories from their past involvement in it and the uncooperative conduct of WAPDA that was manifested by the later.
Secondly, exports of Thar coal to
The third proposition is rather unique, ambitious and extremely profitable, all at the same time. The detail is, that
Similar ideas have been put forward earlier as well. There were proposals for exporting electricity to
Easier said than done, but it can be feasible. As for the security concerns, of large volume of goods transport and human traffic, Thar is a far-off town. Indian nationals may be allowed to come to Thar only through land route or a future direct flight from to and fro Thar. It may remain as good as domestic travel for them. Special immigration rules and status can be created for Thar coal projects. There is no major security installation or threat nearby. So security issues can be managed.
So many people and nations in the world want
Thar Coal update
Thar Coal: some submissions
Our energy crisis is so huge and worsening that one finds it only appropriate to belabor the known facts and bring forward new thoughts and solutions that come to ones mind. By this time, it should have become obvious that there is no escape from fast tracking the Thar coal project. Hydro power is also an equally viable option which solves water storage problem also , but suffers from seasonal factors . The two resources together offer optimal opportunities to meet
The bureaucratic circles tend to show that there is progress on Thar coal. But the fact remains, that there is almost none. Allocation of blocks, MOUs and even feasibility studies do not mean much, as many such things have been done in the past. Under-ground coal gasification project has raised false hopes among the public. Without casting doubts on the scientific credentials of its eminent promoters and on the technological potential of the route adopted, the problem of scaling up would remain for which there is no capability in the country of a level that would be acceptable to the lending banks. While the existing gasification would yield useful data, we would be back to the square one, which is of requisite financing.
The bad news is that under criticism and pressure from international Green lobbies, World Bank has discontinued its technical assistance program on Thar coal, amidst news that government of Sindh has persuaded them to renew it. Even if they do renew, it sends us ample signals on difficulties that we are going to face towards financing Thar coal. With time, the opposition to coal would increase. Our problem is immediate and the renewables are still to be perfected and improved to be cost effective and competitive. In any case, renewables are projected to have a share of 20% even by the year 2050 .What are we to do in the meantime. The threat is that by the time we put our act together, although fossil based power age may not be over, the financing regime may become too difficult and hostile against coal.
The residual issue as it stands today is not the financing issue of the mining and power parts of the projects, however difficult it may itself be, it is the financing of infrastructure part which is proving to be a stumbling block. Various estimates put these requirements to between 1 to 2 billion US dollars. More money is required for infrastructure, than the first coal mine and power plant itself .Government of Sindh, obviously would not have such resources, nor would the federal government. And in these days of emphasis on provincial autonomy, where is the appetite for common projects. There are also issues as to the technical and management capability of the provincial bureaucracy, as the project continues to be run from the narrow confines of the Sindh secretariat. Apparently, there is no shaft of light at the end of this tunnel, although it is not the only one.
In all humbleness, this scribe makes the following proposals. There are two options. One is to tender for a large project of 5000 MW or so, which may be able to assume the infrastructural development costs. The cake becomes big enough to absorb all kinds of interests. This is not new .In
Certain issues related to the 18th Amendment need to be sorted out. After the amendment, Electricity sector becomes a federal only subject, as there is no concurrent list any more. Earlier Electricity was in concurrent list. Coal was and is a provincial subject. If I understand correctly, federal responsibility and role in Electrical power sector should be larger than it was prior to the amendment. Thar coal power development , therefore, ought to occupy higher priority in Federal budgeting system. It may not be a bad idea considering some kind of linkage between investments in Hydro and Thar coal power; one project in hydel, and one in Thar coal. There is a technical requirement to balance hydel power as well. Gas being no more and oil unaffordably expensive and imported, thermal energy in future should mean Thar coal energy. Politicians from Sindh can suitably make a convincing case, provided they are also prepared to readily agree to federal involvement.
Let me close with good news, if at all. Some politicians lately made a statement that Thar coal is larger than the oil resources of our rich brothers of the
The writer is a former
The natural gas controversy
The natural gas controversy
There is a general gas shortage in the country for the past few years. Known reserves and deposits are on the way to exhaustion, while the exploration activity has been at a low level. Most of the gas these days is being produced these days. Gone are the days when most gas used to come from Sui in Balochistan. Thanks to exploration activities in Sindh, many new deposits have been discovered in Sindh and production started from those wells. More exploration activity is expected to yield new gas resources in Sindh. Due to the political and law and order problems in Balochistan ,no new deposits are being discovered as no exploration activity could be sustained there for the past many years. This is a very unfortunate situation , in which no body is benefitting, people or
Shortages create many economic and political problems. A number of controversies have developed. Industries have protested and some of which closed down in protest or due to gas shortage. Earlier Sindh assembly passed a resolution demanding priority in gas allocation and a number of prominent politicians issued statements in this respect. They have complained that Sindh's gas is being taken elsewhere in the central system and that Sindh’s demands should be met first, and then the residual should go elsewhere. The issue of distribution priorities! They have argued that there is a constitutional provision in support of this stance. Now KESC has joined the debate. In a message to the public and consumers in
There is a general shortage of gas throughout the country. Power plants in Sindh are not getting enough gas and thus load shedding of electricity. Gas and electricity are distributed to user sectors and customers who pay for the service. It is not supplied to an abstract concept or entity as a province. Then gas is distributed and allocated as per priorities. For example, fertilizer sector is a priority and supposing all of the capacity is located in Sindh, allocating and distributing gas to Fertilizer sector does not mean that gas is allocated to Sindh.
If this logic of prior right of producing province is accepted, then many problems would have been created for Sindh itself. Gas exploration and abundance in Sindh is only a recent phenomenon. Previously all gas consumed by Sindh came from Balochistan and most hydro electricity came from Sarhad/KP. Very little was consumed or allocated in the producer provinces, as there was no demand or distribution investment was not justified for widely scattered insufficient demand. Similar demands and protestations were made by some circles in Balochistan, when natural gas was brought to
The issue is that Production, transmission and distribution facilities have to be invested in. Often the investment comes from private and foreign entities that have to be paid back. The revenue is generated through consumers and customers and not from provincial or federal government. Principles of economic efficiency, markets, sustainability and rate of return to investors are involved. If we do not learn to respect these principles, we are going to end up in more shortages due to lack of investment in supplies sector and higher production costs of utilities and services. The capacity of people to pay has already reached or even crossed their limits.
If there is a shortfall both equity and efficiency considerations are their in allocating priorities. Where there is no efficiency or criticality issue, equity principles of equal distress are to be applied and not a province based formula based on the ownership of resource.
As to the ownership issue of the resource , except for political ownership which does not mean much in practical sense ,bulk of the resource(88%) that has been extracted belongs to the producer who has spent money, effort ,resources and know-how in bringing out the resource from the earth and processing it and making it use-worthy. So the ownership of the extracted resource belongs to the producer, save the royalty portion of say 12%, and not to the province where the resource is located. What is in ground belongs to a people and provincial or federal government as per laws and constitution of the country, but when it comes out of ground it is a different issue.
Energy sector in
Constitutional provisions are often desires and ideals. These have to be creatively and constructively interpreted and understood. It is well-nigh impossible for the framers of the constitution to understand the implication of every sentence they write into the constitution. American constitution explicitly allows only currency, defence and foreign policy in federal domain. American courts have interpreted the constitution so broadly and in totality, that there are sixteen federal ministries dealing with 16 or more subjects. Constitution may have to be amended if too literal interpretation of the quoted constitutional clause is attempted.
As for KESC, its issue is a bit complicated due to the tariff issue, which may not be intelligible to the non-specialist. KESC runs on what is called a constant tariff, with periodic adjustments for the fuel price inflation and general inflation as well. Gas is more thermally efficient fuel than oil in the sense that in combined cycle plants, an efficiency of 50% or more is possible to day than the traditional efficiency of steam turbine plants run on oil. KESC is expected to earn through increase in thermal efficiency and reduce other losses and leakages. There are many other issues with KESC tariff formula as it exists today. Normally such formulae are agreed to for relatively short periods. It has no answers or solutions for the long run. It may cause much more serious problems in future, details of which cannot be explained in this space. A review of this formula is required, along with a number of reforms and pro-active actions. For the time being GOP has allowed Oil sales and supply in lieu of non-supplied gas, at the price of gas. Perhaps this solves KESC’s working capital problem. A longer run solution would require the following steps; KESC should be a part of the central pool and eligible to draw from the central pool as per an agreed formula ; KESC to be treated as an IPP, and allowed to make investments in generation outside
Transparency in Oil & gas sector
Transparency in Oil & gas sector
In this article, I wish to uniform my readers of something in Petroleum pricing which is almost scandalous. OGRA regulates and periodically announces Petroleum prices that includes Diesel, but that is Light Diesel Oil (LDO) which forms to be a negligible portion of the consumption. The real Diesel, HSD which is used in road transports, trucks and buses, is apparently and clearly out of OGRA’s purview. Ministry of Petroleum is fixing these prices without regulation through its own notification posted on PSO’s web-site. As mentioned earlier, LDO and its pricing are hardly of any consequence. It is such loopholes and gaps in regulatory regime that are the focus of this piece. Also the bipartisan committee which is holding session these days on economic reforms must look into this.
HSD’s latest price is Rs.78.33 per liter as compared to the regulated Rs.66.61 for LDO and Rs.72.96 for Gasoline (premium grade petrol).That means that the real Diesel (HSD) is 7.36% (higher than the ordinary petrol) and 17.59% higher than the regulated Diesel price. There are two problems here. Except in the
Ideally all prices should be determined through unhindered market forces and their competition. It requires a large number of buyers and sellers. In
Transparency in regulated sectors is measured by the following factors;
1)
1) Written and publicly available policies, rules and regulations.
2) Public participation in Tariff and pricing.
3) Un- restricted publishing of data
Measured on the above yardsticks, Oil and gas sector in
OGRA’s regulatory process seems to be only concerned with the determination of Tariff for the Transmission and Distribution of natural gas that is supplied by the two companies, SSGC and SNGPL. Measured on the above transparency criteria, the performance in this limited respect appears to be relatively much more acceptable. On the technical side (standards) also, there appears to be a reasonable OGRA activity and performance.
Oil and gas sector is worth more than twenty billion US dollar in terms of sales and output. Except for the aforementioned exception of Gas T&D and mere posting of petroleum retail prices and gas wellhead prices, there isn’t much to show by OGRA. The sector is almost totally regulated, except LPG where there is confusion as to the regulatory domain. Admittedly OGRA works within the framework of the role assigned to it by Ministry of Petroleum (MPNR) and the GOP. It cannot arrogate powers to itself, although it can build pressure towards higher domain and role for itself. The due process is lacking in the following areas: Surely there are and must be rules in the following areas which in itself is not enough. The actual application and adjudication of those rules is to be the subject of due public process, where price is not determined by the market forces. International transparency moves and initiatives these days even go beyond public tariff and pricing determinations. They are demanding Publish what you pay(PWYP)policies and regime, for it has been found that the actual payments vis-à-vis publically determine tariff may be deviating for legitimate and not so legitimate reasons. Following areas should come under some process of public input and scrutiny through the regulatory process of OGRA and the latter should not restrict to posting of results but invoke the whole regulatory input and process into these.
1) Well-head prices of oil and gas.
2) Ex-refinery prices of petroleum products such as gasoline and diesel, including crude oil imports
3) Oil pipeline tariff
4) PSO imports of petroleum products (50% of the total demand is met through imports valued at around 8 billion dollars)
5) Furnace oil pricing despite claims of being in the open sector; and most importantly
6) High Speed Diesel (HSD) pricing.
On the other hand, what little powers have been granted to OGRA, successive leadership of that organization have not chosen to make use of those. For example who stops OGRA in holding public hearing for discussions on the other constituents of petroleum prices, if the ex-refinery (wholesale or producer price) is made an untouchable tree for it?
MPNR has traditionally being reluctant to cede powers to OGRA. In all the above areas, the closed offices of oil bureaucracy have the sway. There has been much controversy regarding the self pricing role of OCAC (Oil Companies Advisory Committee) which has since been disbanded or depowered. It is ironic that OGRA is not considered adequate enough for the role of OCAC .Who does not like power and authority? Public process absolves responsibility and implication of public servants in scams and others in a highly skeptic Pakistani society today. They should support the expansion of public process. Transparency would also encourage and promoted much needed direct foreign investment in this vital sector. And finally, it is the responsibility of legislature and public representatives to intervene and write laws and require regulation in this respect.
The writer is a former
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