Chapter 3

Pakistan's Energy Scenario, 1988 Onwards

This chapter succeeds the earlier chapter by still looking at the energy scenario of

Pakistan, albeit from a contemporary point of view, unlike the second chapter that is

historical in nature. It focuses on the development of the trends in patterns of

Pakistan's energy sector from 1988 onwards, to the current phase. With the help of

diagrams and tables, this chapter tries to explore the present energy scenario of

Pakistan in terms of its energy requirements and demands, its supplies and available

natural resources. It looks at varied sources of energy available in Pakistan. It, then,

delves into examining various issues like the energy requirements in the different

sectors of Pakistan's economy and polity, by which sources of energy they are

fulfilled, and whether the energy supply in Pakistan is able to meet the energy

demands of the country at all, thereby examining the energy potential of the country

as well. Based on empirical evidences, this chapter examines policy options available

to Pakistan for meeting its growing energy needs.

Post 1988 Scenario

Pakistan's economy experienced a change, even though gradual, post-1988. This was

a result of the Government's decision to pave the way for widespread privatization

into the economy1• As a result of this, the energy sector also experienced changes2

•

The situation in the energy scenario in the post-1988 environment upto the present

times is analysed below.

1 Bokhari, Syed Anwar-ul-Hasan (1998), "History and Evolution of Privatisation in Pakistan", Paper presented at the ''National Seminar on Privatisation" held on 18-19 September 1998. The seminar was jointly arranged by the International Labour Organisation and Pakistan National Federation of Trade Unions. [Online: Web], Accessed on 15 July 2007, URL: http://www.policy.hu/bokhari!Histort'lo20and%20Evolution%20of%20Privatization%20in%20Pak.pdf 2 Marshuk Ali Shah, (2002), "Private Sector Investment in the Energy Sector: Case of Pakistan", Presentation for the Asian Development Bank, 07 February 2002, Karachi, Pakistan.

96

Policy to Encourage Private Sector Investment

Recognising the importance of the power sector in the economic development of the

country, the Government in the 1980s increased the allocation of the public sector

outlay from 30% to 40%3• The electricity sector, too, experienced deregulation and

private sector investment as the growth and demand investment requirement far

exceeded the public sector contributions4• In 1985, the Government had introduced a

policy inviting private investment in the power sector that was subsequently revised in

1994. Essentially, it was to make way for a single-window clearance facility in the

form of the Private Power Infrastructure and Board (PPIB). The PPIB was set up as an

autonomous organisation to deal with private investors and to assist them in signing

agreements and receiving approvals from Government departments. Terms and

conditions were clearly defined for the potential private investors to diminish the time

spent in negotiations. The Independent Power Producers (IPPs) were allowed to

choose a technology fuel and sight location and also to make their own arrangement

for the import and transport of fuel and for the development of Port handling

facilities. Government guarantees were introduced for payment obligations for public

sector utilities such as W APDA and KESC and state-owned fuel suppliers. Financial

incentives for power generation companies including exemption from corporate

income tax, custom's duty, and import licence fees and other surcharges for the term

of the power purchase agreement were provided. Private power generation companies

were allowed to issue corporate bonds and shares at discounted prices to enable a

higher rate of return proportional to the risk. Foreign banks were allowed to

underwrite the issue of shares and bonds by private power projects. The earlier limit

of 5% on investment equity in associated under taking was abolished. Private

3 Bhattacharya Subhes C. (2006), "Power Sector Reforms In South Asia: Why Slow And Limited So Far?" Energy Policy: 35(1): 37-332. 4 Baxter, Craig and Charles H. Kennedy (ed.) (2000), Pakistan 2000, Karachi: OUP.

97

generating companies were allowed to register anywhere in the country to avoid high

stamp duty and allow registration of debt documents. 5

This approval of the Privatisation Commission was based on a mix of " strategic

sale" and ''management contracts"6• Implementation of the restructuring programme

was expected to bring about a gradual transition from the integrated state owned

utility to a decentralised system with separate generation, transmission and

distribution entities having substantial ownership and management thereby reflecting

and encouraging a commercial and competitive operating environmene.

These 1990 reforms had the special character of focussing on stimulating economic

growth through increased private-sector investment and productivity. The main thrust

of these reforms was to free up markets, thereby reducing the economic role of the

government8, to increase investment, improve service and strengthen the sector's

financial performance.9 In terms of implementation, the reforms centred on the

disinvestment of public enterprises, deregulation and denationalisation10• The 1990

reforms, introduced by the Nawaz Sharif Government focused on the following: a) to

quickly hand over public economic assets to the private sector b) to restructure public

enterprises before privatising them, c) to concentrate on making an enabling

environment11• This was done with the larger focus of the private sector being able to

5 Government of Pakistan (1994), "Policy Framework and Package of Incentives for Private Sector Power Generation Projects", March 1994, (Online: Web), Accessed on 17 October 2010, URL: www.ppib.gov.pk/PowerPolicy1994.pdf 6 "Pakistan's Karachi and Water Sewerage Board", [Online: Web] Accessed on 22 April 2007, URL: www.world­psi.org!femplateRedirect.cfm?template=/ContentManagement/ContentDisplay.cfin&ContentiD=7552 7 Peterson, George E. (2002), "Pakistan's Fiscal Decentralisation: Issues and Opportunities", [Online: Web], Accessed on 25 April 2007, URL: http:/1209 .85.17 5.1 04/search?q=cache:TI3wkT69 _lMJ :www.pakdevolution.com/publications/publicati ons/F1.pdf+decentralisation+pakistan+seperate+transition+generation&hl=en&ct=clnk&cd=1&gl=in& client=firefox -a 8 State Bank of Pakistan, "Financial Sector Reforms During 1990s", URL: http://www.sbp.org.pk/publications/fsa/index.htm 9 Vucetic, Vladislav and Achilles G. Adarnantiades (2009), Hathaway, Robert M. and Michael Kugleman (ed.) Powering Pakistan: Meeting Pakistan's Energy Needs in the 21st Century, Oxford University Press: Oxford 10 Rosett C. (1991) ''Pakistan's Free Marketeer", The Wall Street Journal, II July 1991. 11 WTO (1995), World Trade Organisation, Trade Policy Reviews: Second Press Release And Chairperson's Conclusions, "Pakistan: February 1995; Trade Policy Review Body: Review Of Pakistan Trade Evaluation", URL: http://www.wto.org/english/tratop _ e/tpr _ e/tp4_ e.htm

98

perform better than the government but at the same time making sure that the latter

must ensure an enabling environment that will advance the development of the private

sector12• This strategy of achieving private sector lead development, was, however, in

direct contrast to many other ''third world" countries and according to a viewpoint,

reflected the preferences of the US, Japan and West Germany, that were Pakistan's

major aid donors at that time and whose economic largesse was crucial to the aim of

bringing about rapid industrialisation 13•

However, these reforms had been preceded by two other sets as well. The one in the

1970s were introduced to deal with a series of balance of payments problems

stemming from the sharp increases in oil prices and decline in prices of Pakistan's key

imports14• In the 1980s, they were introduced again as there was a requirement for

structural adjustment to strengthen productive capacity15.

The Deficit of Energy Security In Pakistan

In a world where the amount of energy consumed is an indication of the economic

prosperity of a country, Pakistan holds the thirty second position as far as world

primary energy consumption is concerned.16 Per capita energy consumption IS

estimated at 14 million Btu17 only as compared to developed countries.

12 Burki, Shahid Javed (1992), "Privatisation, Deregulation, Regulation and Good Governance: A New Economic Development Paradigm for Pakistan" in Nasim, Anjum (ed.) Financing Pakistan's Development in the 1990s, Lahore University of Management Sciences, Karachi: Oxford University Press. 13 Weiss, Anita M. (1991), Culture, Class and Development in Pakistan, Bellevue: West View quoted in Talbot, Ian (2005), Pakistan: A Modern History, Delhi: Foundation Books. 14 Aghevli B. et. al. (1987), "Growth and Adjustment in South Asia", quoted in Looney, Robert E. (1997), The Pakistani Economy: Economic Growth and Structural Reform, London: Praeger 15 Looney, no. 14. 16 EIA (2010), Energy Information Administration " Pakistan Energy Profile", [Online: Web], Accessed on 25 October 2010, URL: http://www.eia.doe.gov/country/country _energy_ data.cfm?fips=PK 17 "Meeting Pakistan's Energy Needs", Speech by Mukhtar Ahmad, Advisor to the Prime Minister of Pakistan, June 2006, Woodrow Wilson Centre.

99

Table 3.1: Primary Energy Supply and Per Capita A vailabilitv

Energy Supply Per Capita Year Million TOE Change(%) Availability (fOE) Change(%)

1998-99 41.72 0.31

1999-00 43.19 3.51 0.32 1.28

2000-01 44.4 2.82 0.32 0.63

2001-02 45.07 1.5 0.32 -1.25

2002-03 47.06 4.41 0.32 2.86

2003-04 50.85 8.06 0.34 5.25

2004-05 55.58 9.26 0.36 6.45

2005-06 58.06 4.18 0.37 2.48

2006-07 60.62 4.33 0.38 2.61

2007-08 62.92 3.78 0.39 2.86

2008-09 62.55 -0.58 0.38 -2.27

Jul-Mar

2008-09 47.1 0.29

2009-10 46.8 -0.64 0.28 -3.09

Source: Government of Pakistan (2010), Economic Survey of Pakistan 2009-10

Per capita energy consumption is often seen as the level of development of a country,

and Pakistan's low per capita energy consumption points to the fact that it is a poor,

developing nation18• Moreover, It is often known as an "energy profligate" and an

"energy deficient" country lead by the consumption of fossil fuels 19• Since the

productions of these are not sufficient to meet the energy demands of the nation, it is,

therefore, also a net importer of energy, as seen in the Table 3.1 above.

Despite Pakistan's low standing on the world scene in terms of energy consumption,

however, demand for energy in Pakistan has grown manifold in recent years, in

18 Rai, G.D. (2006), Energy Sources, Delhi: Khanna Publishers, Parikh, Jyoti K. (1980), Energy Systems and Development: Constraints, Demand and Supply of Energy for Developing Regions, Delhi: Oxford University Press. 19 EEIU (2005), Eco-Ethics International Union, "State of Pakistan's Environment", URL: http://www.eeiu.org/chapters/multan/reports.html

100

keeping with this trend throughout the South Asian region20• A growing economy and

rising population, that requires more energy for their multipurpose uses, are the

primary two reasons for the growth of such a huge demand in energy. However, the

supply of energy to meet this demand is not enough. While energy requirements in

2007 were 58 Mtoe, it is being forecast to increase to 360 Mtoe by 2030, by the

Planning Commission of Pakistan21• In fact, even till as recently as 2008, Pakistan

was facing a gap of 4500 MW between the demand and supply of electricity,

registering a shortfall of 40r<P. There has been a slow but sure energy crisis emerging

in Pakistan since 2005. The cumulative effect of the energy crisis on the economy is

estimated at over 2% of GDP during 2009-10 alone.23 This very situation translates

into a condition of"energy insecurity" for the country. In today's world, the concept

of security has acquired a much more multi-faceted form than before. The dimension

of energy, forming on such facet of the term, is regarded as a "strategic commodity".

A "strategic commodity" has two components, as discussed in Chapter 1. Firstly, it is

essential for the economy of a country. Secondly, its supply is uncertain and may

present a risk to the socio-economic fabric of the nation?4• This is true for Pakistan.

Due to increasing demand but an indigenous supply that is not able to match up to the

demand, there is a deficiency in Pakistan's energy scenario that robs it of energy

security. All attempts at fulfilling this deficiency from imports have risks attached to

it, making the nation further vulnerable in the Realist perception, in terms of having

soft borders with outside powers25•

20 Khan, Shaukat Hameed (2009), "Technology Status and Costs of Emerging Alternative Sources", Hathaway and Kugleman, no. 9 , EIA (2006), Energy Information Administration, "South Asia Overview'', URL: http://209.85.175.104/search?q==cache:lguEdAoBVeUJ:www.apo­tokyo.org/biomassboiler/D 1_ downloads/presentations/Nepal_ Program _DEC2006/Country _Papers/Paki stan/Pakistan_ CP .doc+pakistan+current+energy+mix+of+different+types&hl=en&ct==clnk&cd==3 &gl=i n&client==firefox-a 21 "OGCON-2007 Inaugural Session: Minister's Speech", Address by Mr. Amanullah Khan Jadoon, Minister for Petroleum & Natural Resources, 3rd Pakistan Oil and Gas Conference, 18-19 February 2007, Deloitte, [Online: Web], Accessed on 16 May 2008, URL: http://www.pakoil­gas.com/ Agenda.htm 22 Asif M. (2008), "Sustainable Energy Options for Pakistan", Renewable and Sustainable Energy Reviews, 13(4): 903-909. 23 Government of Pakistan (2010), Economic Survey of Pakistan, "Energy'', URL: www.finance.gov.pk/survey _ 091 O.html 24 Sahir Mukhtar H. and Arshad H. Qureshi (2007), "Specific Concerns of Pakistan in the Context of Energy Security Issues and Geopolitics in the Region", Energy Policy, 35(4): 2023-2030. 25 CFR (2007), Council on Foreign Relations, Bajoria, Jayshree "The Troubled Afghan-Pakistani Border", URL: http:/ /www.cfr.org/publication/14905/troubled _afghanpakistani_ border.html

101

Its growing economy is mainly supported by Pakistan's industrial sector that has been

expanding at a target growth rate of 12.5%26• With the growing demand for energy

due, the energy sector is expected to play a critical role in economic and social

development, all the while aiming for a balance between energy security and

sustainable developmene7, including such issues as environmental security and

human development, especially when in the latter category, other countries of the

region have climbed up from low to middle category of human development index

(HDI), Pakistan continues to remain in the low categorr8.

In 2007, Mukhtar Ahmad, the then Advisor to Pakistan's Prime Minister on Energy

listed out the major policy objectives for Pakistan's energy sector. These are29:

a) To have an adequate and affordable energy supply to meet the needs of an

expanding economy.

b) To guarantee security of energy supply through a balanced energy mix and

maximum indigenous resource utilization.

c) To ensure long term validity of the energy sector through appropriate

distribution of responsibilities, (policy formulation, regulation and

administration), through a rational industry infrastructure (Government's

"strategic" presence, public-private ownership, exclusive private ownership)

and through a sustainable pricing regime (cost-of-service, transparent and

targeted subsidies.)

Thus, Pakistan's energy vision in the ongoing balance of country dynamics is to

explore energy resources including hydel, thermal, nuclear, gas and LNG, apart from

importing gas and electricity from neighbouring regions, with a view to lessening

26 "Vast Opportunities of Pakistan's Trade with UK", Pakistan Times 26 August 2005, [Online: Web], Accessed on 5 April2008, URL: http://pakistantimes.net/2005/08/26/business3.htm 27 National Strategies for Sustainable Development (2000), "Pakistan's National Conservation Strategy: Renewing Commitment to Action", Report of Mid-Term Review, November 2000. [Online: Web], Accessed on 6 March 2007, URL: http://www.nssd.net/country/pakistan!mtrchl.htm 28 U.N. (2009) United Nations, "Human Development Report 2009 - HDI Rankings", URL: http://hdr.undp.org/enlstatistics/ 29 Ahmad, Mukhtar (2007), "Pakistan's Energy Strategy and its Role in South Asia", Presentation given by Mukhtar Ahmad, Advisor in matters of Energy to Prime Minister, Shaukat Aziz, February 19, 2007.

102

dependence on oil, due to its tenacity to drain the national coffers30. Apart from this, it

is also to create an environment conducive to the participation of the private sector

and to develop an energy scenano m the context of the regional perspective,

enhancing participation in the sector, including manufacturing of plants and

equipment by strengthening regulatory frameworks and related institutions and

development of infrastructure. 31

Pakistan's primary energy supplies in 2004-05 amounted to 55.5 MTOE, though

demand was more. Oil and gas formed the bulk of this supply of primary energy,

contributing about 80.1 %, of which oil contributed 29.4%, gas 50.3% and LPG 0.4%.

Other sources included coal 7 .6%, hydro electricity 11.0% and nuclear electricity

1.2%32. This is indicated in Figure 3.1 below:

Figure 3.1: Primary Energy Supplies (2004-05)

Coal 6.5

50 Gas

Renewable 0

Source: Government of Pakistan (2005), Pakistan Energy Yearbook 2005

30 Hakeem, Fazal (2008), "Overcoming the Energy Crisis in Pakistan", [Online: Web] Accessed on, 12 March 2007, URL:www.optblog.com/ .. ./overcoming-the-energy-crisis-in-pakistan/ 31 "Introduction", Hathaway and Kugleman, no. 9, "Energy Security" (2005), [Online: Web] Accessed on 21 March 2007, URL: http//: www.Pakistan.gov.pk. 32 "Industry Overview" no. 77

103

A table depicting primary energy supplies by source from 2003 to 2009 is given

below:

Table 3.2: Primary Energy Supply from Source (TOE) (2003-2009)

Source 2003-04 2004-05 2005-06 2006-07 2007-08 Oil"1 15,221,024 16,329,979 16,411,034 18,188,280 19,206,441

29.9% 29.4% 28.3% 30.0% 30.5% Gas 25,254,481 27,953,380 29,169,971 29,304,612 29,863,194

49.70% 50.30% 50.3% 48.40% 47=50% LPG"2 205,526 251,789 400,430 470,998 418,952

0.40% 0.50% 0.70% 0.80% 0.70% Coal 3.300,491 4,227,842 4,049,654 4,426,678 5,783,844

6.50% 7.60% 7% 7.30% 9.20% Hydro

Electricity 6,431,312 6,127,429 7,366,452 7,626,755 6,851,955 12.60% 11.00% 12.70% 12.60% 10.90%

Nuclear Electricity 420,135 667,234 592,887 546,159 734,537

0.80% 1.20% 1% 1.00% 1.20% Imported Electricity 17,418 26,050 34,775 40,781 47,550

0.00% 0.00% 0.10% 0.10% 0.10% 50,850,387 55,583,703 58,026,004 60,604,262 62,906,473

100% 100% 100% 100% 100% Annual Growth

Rate 8.06% 9.31% 4.39% 4.44% 3.80%

1) Excluding petroleum products exports and bunkering 2) Include imports and production from field plants

2008-09 20,103,060

32.1% 30,241,540

48.30% 401,705 0.60%

4,732,823 7.60%

6,631,841 10.60%

385,165 0.60%

54,266 0.10%

62,551,399 100%

-0.56% 14.12%

Unit:TOE %Share ACGR 5.70%

3.70%

14.30%

7.50%

0.60%

-1.70%

25.50%

4.20%

3) Converted@ 1000Btu/K.Wh to represent primary energy equivalent ofhydro and nuclear electricity as if it was generated by

using fossil fuel 4) W APDA imported electricity from Iran since Oct 2002 Source: Government of Pakistan (2009), Pakistan Energy Yearbook 2009

Pakistan consumed nearly 58 million TOE of primary energy in 2005-06, ofwhich 23

million TOE was used for electricity generation while the remaining 35 million TOE

104

was used by the industry, transport, domestic use, commerce, agriculture and

government. 33 This is indicated in the pie chart below.

Figure 3.2: Final Energy Consumption By Different Sectors (2005)

2%.agrl culture

2~'->other govt

3%commercal 2Pt.>domestic

Source : Government of Pakistan (2005), Pakistan Energy Yearbook 2005

Figure 3.3: A Comparison between Energy Consumption by Source (2003-04 /2008-

Q2}

(Z003-04)

'---------

Source: Government of Pakistan (2010), Economic Survey of Pakistan 2009-10

33 Khan, no. 20

105

The current energy matrix in Pakistan is a composite of various types of energy34• As

of2008-09, the percentage share of gas in the primary energy mix stood at 47.5%, Oil

at 30.5%, Hydel at 10.9 %, Coal at 9.2%, Nuclear at 1.2% and LPG at 0.7%.35

Table 3.3: Annual Energy Consumption (2007-10)

Petroleum Products Gas Electricity Coal

Fiscal Tonnes Change (mmcft) Change (Gwh) Change M.T* Change

Year (000) (%) (%) (%) (000) (%) 07--08 18,080 7.3 1,275,212 4.4 73,400 0.9 10,111 28.1

08--09 17,911 -0.9 1,269,433 -0.5 70,371 -4.1 8,390 -17

Avg. 10

Years 0.5 6.8 5 12.5

Jul-Mar

08--09 12,892 931,700 55,614 4,822

09-10 13,937 8.1 959,475 3.0 54,653 -1.7 5,304 10.0

• -Million Tonnes

Source: Government ofPakistan (2009), Economic Survey of Pakistan 2009-10

The following sections look into the status of various sectors of energy in the present

context, starting from 1988. They include: 1. Power; 2. Oil; 3. Gas; 4. Coal; 5. Hydro;

6. Nuclear; ?.Renewable and Traditional sources to a very small extent.

34 Iqbal, Farkhand and Basharat Hasan Bashir, "Pakistan Country Paper", [Online: Web], Accessed on 5 June 2006, URL: http://209.85.175.104/search?q=cache:1guEdAoBVeUJ:www.apo­tokyo.org/biomassboiler/D 1_ downloads/presentations/Nepal_ Program _D EC2006/Country _ Papers/Paki stan/Pakistan_ CP .doc+pakistan+current+energy+mix+of+different+types&hl=en&ct=clnk&cd= 3 &gl=i n&client=firefox-a 35 Malik, Arshad Maqsood and Ashfaq Ahmad Shaikh (2009), "Country Report on Energy Security and Power Crisis", [Online: Web], Accessed on 12 October 2010, URL: eneken.ieej.or.jp/data/3147.pdf

106

Natural Gas

According to the Pakistan Ministry of Petroleum and Natural Resources, " "natural

gas" means petroleum which at standard atmospheric conditions of pressure and

temperature ts m a gaseous phase, including non-hydrocarbon gas, which is in

association with and produced at the surface together with such gaseous

hydrocarbons"36

The Seventh Plan (1988-93) had laid down a fully planned out strategy for the

development of gas as a credible source of energy in Pakistan, especially during a

time when there was a move away from the consumption of oil, due to the soaring

world prices, that had continued to be the prime source of energy for the country since

its independence37•

The plan had envisaged that future plans for gas consumption in Pakistan should be

supply driven instead of demand driven38. The approach adopted in the Seventh Plan,

therefore, was to first estimate the available gas supplies, and then allocate those

among various sectors39• Average supply for natural gas was expected to increase

from 1,200 MMCFD (equivalent to 1,071 MMCFD from Sui fields due to higher

average thermal content of Sui gas), in 1987--88 to 2095 MMCFD (1,776 MMCFD

Sui equivalent) in 1992-9340•

36 Government of Pakistan, no. 32. 37 Associated Press of Pakistan, "Senate Body for Accelerating Oil, Gas Exploration" [Online: Web], Accessed on 7 June 2008, URL: http://www.app.com.pk/en _/index.php?option=com _ content&task=view&id=53804&1temid=2 38 Smith, Michael R. (2003), "The Future for Asia-Pacific Oil and Gas", [Online: Web], Accessed on 16 December 2007, URL: http:/1209 .85.175.104/search?q=cache: UQn­uwuoiZwJ:www.energyfiles.com/articlesfiles/Future%2520for>lo2520Asia­Pacific%2520(Sept%25202003).pdf+gas+plan+pakistan+supply+driven&hl=en&ct=clnk&cd=10&gl=i n&client=frrefox-a 39 IMF (1998), International Monetary Fund, "Pakistan: Enhanced Structural Adjustment Facility Policy Framework Paper 1998/99-2000/01", URL: http://www.imf.org/extemal/NP/PFP/pakistan!INDEX.HTM 40 World Bank, (1988), Vedavalli, "Petroleum and Gas in Non-OPEC Developing Countries: 1976-1985", URL: http://www­wds. worldbank.org/extemal/default/WDSContentServer/WDSP /IB/2003/0 1/23/000178830 _981 019034 00638/Rendered/INDEX/multiOpage.txt

107

The development that was envisaged for the existing fields, during this plan period is

as follows. In the Pirkoh gas field, sixteen wells had been drilled so far and thirty

additional wells were to be drilled and processing and surface facilities provided41•

Reservoir studies were to be undertaken and water injection initiated, if required42• In

the Loti gas field, five wells had been drilled and were awaiting surface facilities

during this Plan period43• In addition, 13 wells were to be drilled and surface and

processing facilities provided. Similarly, for Sui, seventy-eight wells had been drilled

at Sui so far while seven development wells and one deep well along with seismic

prospecting was to be completed during this Plan period, to appraise deeper prospects

in the Sui field44• In the Bodh Blek Fields in the Badin Block, which comprised of 17

fields (including oil fields for associated gas), 75 wells had already been drilled45• An

additional66 wells were to be drilled during the Seventh Plan. In Mari, one deep well

was to be drilled to appraise deeper prospects46• Reservoir studies were to be

undertaken here as well and a development plan prepared if found feasible. In Uch,

the second well had been re-appraised by the OGDC. Four additional wells to

appraise deeper prospects were to be drilled during the Seventh Plan47• In Qndhkot,

twenty wells had been drilled up till 1988. In addition 12 wells had to be drilled to

develop the existing horizon and appraise deeper prospects in the Mazarani gas field

41 World Bank (1985), "Pakistan and the World Bank: Partners in Progress", URL: http://wwwwds.worldbank.org/extemal/default/WDSContentServer/WDSPIIB/2006/02/14/000090341

20060214143854/Rendered/INDEX/34897. txt 42 AAAS (1998), American Association for the Advancement of Science, Nizamani, Aijaz et. al, "Case Study: Pakistan: Population and Water Resources", [Online: Web], Accessed on 17 March 2007, URL:http://www.aaas.org/intemational/ehn/waterpop/front.htm, Sherbinin Alex de and Victoria Dompka, Water and Population Dynamics: Case Studies and Policy Implication [Online: Web], Accessed on 17 June 2006, URL: http://wilsoncenter.org 43 OGDCL, Oil and Gas Development Corporation Limited "Loti Gas Field", URL: http://www.ogdcl.com/about-us/Fields.html#top 44 Government of Pakistan, Ministry of Petroleum and Natural Resources, "Gas Pricing Policy", [Online: Web] Accessed on 12 October 2006, URL: http://www. pakistan. gov. pk/ divisions/Contentlnfo .j sp?DiviD=49&cPath=7 68 _ 805&ContentiD=4 5 81 45Zaigham, Nayyer Alam and Khalil Ahmad Mallick (2000), "Prospect of Hydrocarbon Associated with Fossil-Rift Structures of the Southern Indus Basin, Pakistan", APG Bulletin, 84(11 ): 1833-1848. 46 "Mari Gas Company Limited", Economic Review, February I, 1992. 47 Kalim, Mohammad, (2003) "Gas Industry of Pakistan- A Historical Perspective of Gas Market Transformation", Escon (Private) Limited, Karachi, [Online: Web], Accessed on 5 August 2008, URL: http://www.igu.org/html/wgc2003/WGC _pdffiles/1 0379 _1 044716730 _ 2356l_l.pdf .•

108

during the Seventh Plan period was in the category of a dormant gas field48• Two

wells were to be drilled during this Plan period to appraise the field. Similarly, in the

Sari/Hundi/Kothar gas field, there were 5 wells at this time. The fields were dormant

due to low wellhead pressure. An additional two wells along with a compression

system were to be completed to meet the projected target49• In the Nandipur/ Punjpir

gas field, nine wells had been drilled. Two additional wells along with surface

facilities were to be completed during the Seventh Plan50. Development of dormant

gas Fields; Uch, Nandpur, Panjpir and Zin was planned as well so that they could be

used for power generation. Efforts were also to be made to harness the energy

available in other dormant gas fields to augment supplies. 51•

Regarding the policy for the utilisation of gas, priority was to be allocated to the use

of gas as feedstock for the fertilizer industry and the replacement of high-speed diesel

(HSD) in power generation52• The strategy envisaged for the Seventh Plan regarding

hydrocarbons was the replacement of kerosene in the domestic sector, replacement of

furnace oil in the industrial sector and the substitution of furnace oil in power

generation53. Regarding Natural Gas transmission and distribution, transmission

facilities associated with Loti, Pirkoh and Sui were to be enhanced and transmission

lines provided for connecting the Adhi and Dakhni fields54. The capacity bf the

Kandhkot- Guddu pipeline was to be increased to augment supplies from Kandhkot.

However, in lieu of the additional Kandhkot gas, Sui gas was to be released from the

Guddu power station for meeting demand on the network system. This was to include

48 Zaigham, Nayyer Alam and Khalil Ahmad Mallick (2000), "Prospect of Hydrocarbon Associated with Fossil-Rift Structures of the Southern Indus Basin, Pakistan", APG Bulletin, 84(11): 1833-1848. 49 AAAS, no. 42, Sherbinin and Dompka, no. 42. 50 OGDCL, no. 43. 51 Government ofPakistan, no. 51. 52 Ahmad, Adeel and Mithilesh Kumar Jha (2008), "Status of Petroleum Sector in Pakistan- A Review", [Online: Web], Accessed on 17 December 2007, URL: http://www.ogbus.ru/eng 53 Ex-President of Pakistan, General Pervez Musharrafs Address at the Seminar of Human Development Forum, January 24, 2002, Islamabad, (Online: Web], Accessed on 14 November 2006, URL: http://209.85.I75.104/search?q=cache:Lzc9Wxs­IkoJ:presidentofpakistan.gov.pk/FilesSpeeches%255CPolicy%255C I 0282004I24333PM I 0202004800 26AMword%2520file.pdf+substitution+of+furnace+oil+in+power+generation+pakistan&hl=en&ct=cl nk&cd=2&gl=in&client=firefox-a 54 Kuo, ChinS. (1994), "The Mineral Industry ofPakistan", (Online: Web], Accessed on 15 September 2008, URL: http:/ /209.85.17 5.1 04/search?q=cache:ppw­eh Uy5s Y J :minerals. usgs. gov/minerals/pubs/country/ 1994/93 24094. pdf+pakistan+natural+gas+transmi ssion+ 1992&hl=en&ct=clnk&cd=33&gl=in&client=firefox-a

109

the completion of the Sui Northern Gas pipeline (SNGPL) project to increase supply

from Sui by 69 MMCFD. Secondly, the completion of (a) phase-I of SNGPL project­

VI to transmit an additional 70 MMCFD from Loti and of MMCFD from Pirkoh to

Sui for processing and onward transmission and (b) Phase-II ofSNGPL project-VI for

increasing ex-Sui transmission capability to 650 MMCFD for providing gas facilities

to new cities and towns was to be undertaken. 55 Thirdly, completion of the Sui Gas

Transmission Company's (SGTC) Indus Right Bank capacity expansion project was to

increase in capacity from 175 to 240 MMCFD at Karachi56• Fourthly, completion of

transmission link-up of Badin block fields and construction of pipeline to Jamshoro

with a capacity of 100 MMCFD; was to be undertaken. Fifthly, supply of gas to new

towns within 30 km of the existing system in addition to Pishin and Mastung was also

to be undertaken57• Sixthly, supply of gas to industrial estates under one window

operation was to be undertaken58• Seventhly, provision of about 800,000 new

domestic connections was envisaged, of which at least 50 per cent were to be in the

less developed areas59• LPG production was estimated to increase in the coming years.

The additional LPG was to be produced by Dhodak, Dakhni and Adhi LPG plants60•

The allocation made to all LPG marketing companies except the Southern Gas Co.

Ltd. (SGCL) was subject to the condition that 25 percent of their allocation would be

marketed in the areas of NWFP, F ATA, "AJK" and the Northern Areas. SGCL were

obligated to supply 25 per cent of their allocation in the interiors, of Sindh and

Baluchistan. The increase in LPG production was to be utilized to replace kerosene oil

in areas where natural gas was not available61•

55 ADB (1987), Asian Development Bank, "Southern Gas Transmission and Distribution", URL: http:/ /www.adb.org/Projects/approvals.asp?browse= 1 &query=gas&fld=7 &srt= 1 &ctry= ALL& year= AL L&offset=O 56 ADB (1995), Asian Development Bank, "Impact Evaluation Study of Bank Operations in the Gas Sector in Pakistan", URL: http://www.adb.org/Documents/PERs/ie36.pdf. 57 "Five Decades of SSGC: A Saga of Success", [Online: Web], Accessed on 2 March 2007, URL: http://209.85.175.104/search?q=cache:q4vxKlRUYOcJ:66.175.11.85/gssgclcompany/supplement.pdf+p akistan+badin+block+transmission+jamshoro&hl=en&ct=clnk&cd=2&gl=in&client=firefox-a 58 Bashar, Amanullah (1999), "Karachi: Step Motherly Treatment?", [Online: Web], Accessed on 7 September, 2006, URL: http://www.pakistaneconomist.com/database2/cover/c99-15.asp 59 ADB, no. 56 60 "Liquified Petroleum Gas (LPG), LPG Production in Pakistan; Oil and Gas", Economic Review, June 1, 1991. 61 Government of Pakistan, no. 51.

110

In the 1990s, 16 more gas discoveries were also made, thereby adding 30 to 35 per

cent to the country's reserves. However, due to the financial limitations that Pakistan

faced as far as their development was concerned and, since these fields were in

remote areas they needed common infrastructure to be developed and to connect them

to markets, which was not yet available. Thus, these fields could not be developed

properly. The price of gas was also a contentious issue since it had to balance the

needs of both the consumer and the investor. 62

Pakistan's natural gas consumption experienced an average annual growth rate

(AAGR) of 5.5% in the 1995-2000 period63• In 1999, natural gas remained the most

popular source of energy in Pakistan64 In terms of sectoral consumption, the power

sector accounted for almost one-third of the annual consumption. The demand from

this sector, for natural gas was expected only to increase, therefore, accelerating

growth65• The fertilizer sector, also, a big consumer of natural gas accounted for one­

fourth of the total gas consumption using it as both fuel and feedstock66• The

residential sector used gas at an annual rate of 7.6% annually. This was supplemented

by an expansion in the distribution network67.The period between 1990-91 to 2001-02

saw a 3.5% increase in the consumption of natural gas per annum68• As of 1 April

2003, the recoverable reserves of natural gas were estimated at 28.3 trillion cubic feet.

The average production of natural gas during July- March 2002-03 was 2, 648

MMCFf per day, as against 2,256 MMCFT during the same period 1990-91, showing

an increase of almost 5%.

62 Government of Pakistan, no. 5 63 Vahidy et. al. (2002), "Pakistan's Gas Discoveries Eliminate Import Need", Oil & Gas Journal, 100(4), 2002:24-34 64 "Country Profile-Pakistan", [Online: Web], Accessed on 17 March 2008, URL: http:/ /earthtrends. wri.org/text/ energy-resources/ country-profile-140 .html 65 "Energy Sector in Pakistan", Economic Review, 1 August, 2002. 66 World Bank (2003), "Pakistan Oil and Gas Sector", URL: siteresources. worldbank.org/P AKIS T ANEXTN/Resources/pdf-Files-in-Events/Oil-and-Gas­Sector/POGSR-2003.pdf 67 Vahidy, no. 63. 68 Pakistan Almanac 2003-04, Karachi: Royal Book Co.

Ill

Figure 3.4: Sectoral Consumption of Natural Gas (2000-01) (Total=774.4 Billion

cu.ft.)

17.9 general industry

commercia l 2.7

17.1 fertiliserlfeedstoc

k

37.1 power

.6 transport

domestic 18.2

Source: "Energy in Pakistan", [Online: Web] Accessed on 5 April 2008, URL:

www. waterinfo.net.pk/pdf/ep.pd

The main companies engaged in oil and gas production in Pakistan in 2003-04 were

OGDCL, Pakistan Petroleum Limited (PPL), Pakistan Oil Fields Limited (POL), OPI

Gas Pvt. Ltd., Lasmo, BHP Billiton, Mari Gas Company Limited (MGCL), British

Petroleum (BP) (Pakistan) and TULLOW oil.69 The production capacity of these gas

companies during the period 2000-2001 can be seen in Table 3.4 below

69 Pakistan Almanac, no. 68

112

Table 3.4: Production Capacity Of Pakistani Gas Companies (2000-2001)

Ser. No. Company Qty. in Mn. Cubic

Ft./Day

(Jui2000-Mar 2001)

1. LASMO 61

2. MGCL 406

3. OGDC 693

4. OPI 5

5. POL 43

6. PPL 924

7. UIP 206

8. TULLOW 33

TOTAL 2371

Source: "Energy in Pakistan", [Online: Web] Accessed on 5 April 2008, URL:

www. waterinfo.net. pk/pdf/ep.pd

Table 3.5: Drilling Activities (Achievements) (Number ofWells) (2008-10)

July- July-

2008- March March Change Sector 09 2008-09 2009-10 (%)

Public Sector (OGDCL) 30 20 16 -20.00

i) Exploratory 12 7 8 14.29

ii) Appraisal/Dev. 18 13 8 -38.46

Private Sector 56 40 34 -15.00

iii) Exploratory 15 10 10 0.00 iv) Appraisal/Dev. 41 30 24 -20.00

Total 86 60 50 -16.67 Source: Government ofPakistan (2010), Pakistan Energy Yearbook 2010

113

According to 2005 indicators, the demand for natural gas has been increasing from 7

to 8% per annum, regionally70. They showed a fast growing demand for gas as a

preferred source of energy in Pakistan. This was mainly due to the fact that gas is a

relatively cheaper source of energy than oil, the major source of energy in Pakistan till

recent years. Moreover, it is environment friendly. This increase in the demand for

gas, compared to that of oil was in keeping with an lEA study that says that demand

for gas is soon going to replace that of oil and that world gas demand would double

by 2030.1t says that this demand would soon surpass the demand even of oit11• The

US Energy Research Agency also projects that natural gas would become the largest

energy resource globally so that its global consumption share would increase to

27.7% by 2030 and that oil and coal would decrease to 26.25% and 21.18%

respectively72• In 2005, about 72% of total energy requirements were met through

indigenous production, with gas forming the mainstay of the domestic supply of

primary energy supplies covering almost 50% of domestic energy in 2005 73.

Natural gas sectoral consumption during 2005-06 was: power (40.2%), fertilizer

(16.2%), cement industry (1.3%), general industry (22.8%), domestic (14.0%),

commercial (2.4%) and Transport (CNG; 3.2%)74.

In addition, the government has also been focussing on diversification of the supply

of energy, in terms of importing gas and LNG, along with indigenous production of

gas7s.

70 (2005), "Energy Resources and Regional Economic Cooperation", Spotlight on Regional Affairs, 24(4), Islamabad: Institute of Regional Affairs. 71 lEA (2002), International Energy Agency "Conference on Cross -Border Gas Trade", 26 March 2002 at lEA Headquarters, Paris. 72 (2005), Spotlight on Regional Affairs, no. 70 73 Burki, Shahid Javed {2009), "The Weight of History: Pakistan's Energy Problem", Hathaway and Kugleman, no. 9 74 [Online: Web], Accessed on 13 September 2009, URL: Pakistan.Gov.pk%20-%20The%200fficial%20Web%20Gateway%20to%20the%20Govemment%20of1%20Pakistan.webarch tve 75 "Energy Security", no. 31.

114

Furthermore, international investments are also taking place in the Pakistani

hydrocarbon sector. The British Petroleum sees immense potential in Pakistan for the

development of gas, especially in the Indus region, which being an expansive and

ancient river system would have considerable hydrocarbon potential. It has been

continuing exploration activities here, seeing there is great demand for energy in the

country76•

As per 2007 indicators, total resource potential of gas is 282 tcf and its production is

3, 825 Mac/d. The distribution network for gas is estimated to span about 68, 000

kms. and transmission network about 9,063 kms. Domestic consumers of gas in

Pakistan are calculated to be around 4.41 million, while the commercial consumers of

gas are averaged to be about 70, 00077•

Gas exploration chances in the future are bright as well. Pakistan has 28tcf reserves of

gas, by which it ranks 6th in the Asia Pacific region. Pakistan's oil and gas reserves are

located at Sui, Uch, Mari, Qadirpur, Sawa, Zamzama, Kandra, Manzalai, Bhit, Mar

Deep, Kandkot, Miano, Makori, Pirokh and Dhodhak78• The Government plans to

carry out further extensive and active onshore exploration and production in the gas

sector, while some are already in place79•

In 2008, the share of gas consumption increased by 2.8% in the first nine months of

2007-08 fiscal year over the same period of 2006-07. 80 The supply of gas has

exhibited an increase of 1.6 percent during July-March 2009-10. The increase in

supply owes to higher production of 1.6 percent in natural gas during the period under

review. Due to this increase in availability of natural gas, the overall consumption of

76 British Petroleum (2006), "Powering up Pakistan", [Online: Web], Accessed on 14 March 2008, URL: http://www. bp.com/sectiongenericarticle.do? categoryld=90 13063&contentld=702 5 692 77 "Industry Overview'' [Online: Web] Accessed 15 January 2007, URL: http://www.pogeepakistan.com/industry%20overview.htm 78 Hakeem, no. 30 79 Ahmad, Mukhtar (2007), "Pakistan's Energy Strategy and Its Role in South Asia", Presentation given by Mukhtar Ahmad, Advisor in matters of Energy to Prime Minister, Shaukat Aziz, February 19, 2007, Islamabad. 80 Government of Pakistan (2008), Economic Sull'ey of Pakistan, "Energy", URL: www.finance.gov.pk/survey _ 091 O.htrn1

115

gas remained higher during the period. Furthermore, the sector wise consumption of

gas suggests that the household, commercial, fertilizer and transport sector witnessed

positive growth in consumption of gas during 2008-09. More recently, with the

exception of cement and power sectors, many major sectors have witnessed positive

growth rates during July-March FYI 0. The consumption of gas by industry has

witnessed a significant increase of 5.3 percent during July-March 2009-1 0 especially

after the decline of 1.1 percent during 2008-09. The increase in industrial

consumption owes to rise in domestic demand for manufacturing production during

the period. The maximum decline of 72.7 percent has been witnessed in cement

sector's gas consumption on the back of contraction in its external demand during the

period along with the switch over to coal for production. On the other hand, gas

consumption in the transport sector increase due to shift from imported fuel oil to

reJatively cheaper source of gas during July-March 2009-10.81 Decline in power

sector's gas consumption is based on the inter corporate circular debt reason.82

Liquefied Petroleum Gas (LPG)

In 2004, 1000 tons per day of LPG was being produced locally. 29 LPG companies

were involved in marketing the indigenous and imported LPG. This was in

accordance with the Government's efforts to ensure availability of domestic and

imported LPG at competitive and viable prices in rural areas where supply of natural

gas through pipeline is not economically feasible. Since September 2000, moreover,

the Government has deregulated the allocation and price of LPG with a view to

keeping price at a reasonable level. 83

81 Government of Pakistan, no. 23 82 "Circular Debt" is when there is an "imbalance" between cost of generation and distribution and the final tariff. This is the root cause of the "circular debt" issue, with each downstream player in the energy chain being forced to delay payments to upstream entities (for fuel supplies). The net effect is a declining effective utilization of available generation capacity in the system. 83 Pakistan Almanac, no. 68.

116

LPG contributes about 0. 7 percent of the country's total energy supply mix currently.

The main objective to enhance the use of LPG is to stop deforestation in the areas

where the supply of natural gas is technically not viable. As a result of government's

investor friendly policies, LPG supplies have gradually increased. The comer stone of

LPG Policy is to ensure enhanced availability of LPG at a competitive price to the end

consumer. LPG marketing companies have imported around 62,920.3 MTOE of LPG

during July-March, 2009-10.84

Compressed Natural Gas (CNG)

The Hydrocarbon Development Institute of Pakistan (HDIP) has actively been

advocating the use of Compressed Natural Gas (CNG) as an environment friendly

option85. It has been doing this mainly in road transport as an economically viable

inter-fuel import substitution in the petroleum sector, with a view to reduce reliance

on petroleum import and improve the environment86• Thus, in the current energy

scenario, the use of CNG is becoming an extremely important sector of energy. The

commercial application of CNG technology now forms an important element of

Government's petroleum policl7• HDIP's CNG stations at Karachi where

operations are temporarily suspended, and Islamabad, besides converting vehicles

on CNG and dispensing CNG fuel, are developing indigenous technology in the

field and monitor the performance of CNG technology in the country. The CNG

stations of HDIP at Lahore, Peshawar and Quetta are also operational88• HDIP's

CNG stations also act as Advanced Fuel Resource Centres to advise the

84 Government of Pakistan, no. 23 85 Government of Pakistan, Ministry of Petroleum, Hydrocarbon Development Institute of Pakistan "Compressed Natural Gas (CNG)", [Online: Web], Accessed on 15 September 2008, URL: http:/ /www.hdip.com.pk/index. php?id=6 86 Government of Pakistan, Ministry of Petroleum and Natural Resources, "CNG: Inter Fuel Substitution", [Online: Web], Accessed on 17 January 2008, URL: http://www. pakistan.gov. pk/ di visions/Contentlnfo .j sp?Div ID=49&cPath=7 68 _ 815&ContentiD=4840 87 SAARC South Asian Association for Regional Cooperation Energy Centre, "CNG Development in Pakistan", URL: http://www.saarcenergy.org/view _pages. php?pageid= 13

• 88 [Online: Web], Accessed on 07 April2007, URL: http://www.cng.com.pk/hdip.html

117

Government on safety and regulatory aspects and to conduct inspection, training

and human resource development89•

The Government of Pakistan offered number of incentives for encouraging the use

of CNG in the country. These included a) Strong Government commitment to

promote CNG use; b) Liberal policy to provide license for CNG retailing; c)

Deregulated market consumer price ofCNG; d) Natural gas tariff for CNG linked to

petrol ;e) Priority of natural gas connection to CNG stations; f) Exemption/reduction

of import duty and sales tax on import of machinery and equipment, CNG kits and •

cylinders; g) Federal cabinet also proved a package of incentives and

recommendations for replacement of diesel oil with CNG. 90

This provided a boost to the industry and more than 1. 7 million vehicles began using

CNG as fuel. Thus, more than 1-052 licenses for installation of CNG stations were

issued by 2004. 362 stations had already come up by 2004, which included 358 in the

private sector and 4 in the public sector. Many more are under construction in the

private sector so much so that 2063 CNG stations are operational in different parts of

the country, as ofFebruary 2008. With these developments, Pakistan has become the

leading CNG user country in in the world91.

In an effort to reduce dependency on other fuels as well as to improve the

environment, the use of CNG in vehicles is being encouraged. Due to existing price

differential between CNG & Petrol, vehicles are being converted to CNG and

approximately 2.0 million vehicles are using CNG in the country. The Government

has recently approved the project of "Private-Public Partnership Based Environment

Friendly Public Transport System for Major Urban Centers of Pakistan" which is

being actively pursued with the provincial governments leading to gradual phase out

of diesel operated intra- city urban transport to achieve import substitution.92

89 Government of Pakistan, no. 85 90 Government of Pakistan, no. 85 91 Government of Pakistan, no. 86. 92 Government of .Pakistan, no. 23

118

Liquefied Natural Gas (LNG)

The Government is encouraging LNG import by the private sector. Accordingly,

Pakistan Mashal LNG Project (PMLP) was conceived to cater for the energy need of

the country as envisioned in the 25 years National Energy Security Plan and identified

in the Energy Gap Coverage Strategy. PMLP is to be set up on an integrated basis

whereby a private sector project developer will manage the entire supply chain

including procurement and shipping of 3.5 million tonnes per annum, LNG,

construction and operation of an onshore LNG receiving terminal, and delivery of 500

MMCFD regasified LNG to the SSGC's system in Karachi. Mashal (Phase I) will be

based on Floating Storage and Regasification Unit (FSRU).93

The Seventh Plan laid out a general strategy for the oil sub-sector during the 1988-93

period.94Assuming that the demand for petroleum products depended on the fuel

utilization policy, the policy adopted for the Seventh Plan was aimed at (i) replacing

the base year requirement of high speed diesel (HSD) in power generation with

natural gas; (ii) substituting kerosene in the domestic sector with natural gas and

liquefied petroleum gas (LPG); and (iii) use of furnace oil for thermal generation until

coal-fired, hydel and nuclear generation projects could be implemented95• Regarding

the supply of petroleum, the production of indigenous crude in 1987-88 was expected

. to reach an annual average of 43 mbpd (2.1million tonnes)96• In addition, there was

more potential to produce an additional 5,000 bpd, which, at the time, was not being

93 Government of Pakistan, no. 23 94 Government of Pakistan, (1988), Planning Commission of Pakistan, "Eighth Five Year Plan: Energy'', Accessed on 13 March, 2008, [Online: Web] URL: http:/1202.83 .167 .93/pcportal/five%20yeaf'>/o20plans/7th/Part%20III%20E/part3e000 I 0 l.pdf 95 Beg D. and J.R. Armstrong (1989), "Energy Conservation in Pakistan: a Unified Approach", Power Engineering Journal, 3 (6): 337-343. 96 Looney, R.E. (1995), "Pakistan: Energy Development and Economic Growth in the 1980s", OPEC Review, 19(2): 149-167.

119

harnessed due to refinery constraint. However, production from existing producing

fields was likely to decline to 37,300 bpd during the Seventh Plan period. Additional

production of 38,700 bpd was estimated from new discoveries and the unutilized

potential from already discovered fields (5,000 bpd) was to bring total production at

the end of the plan to 76,000 bpd97• Indigenous production, by the beginning of the

Eighth plan was expected to meet 25 per cent of oil demand (with conservation) as

compared to about 23 per cent at the beginning pf the Seventh Plan. The deficient

supply was expected to be met through imports, expenditure on which was expected

to rise to about $1.8 million from about $1 million considering the rise in imported

crude oil prices98• In addition, $0.2 billion was to be paid to international oil

companies operating in Pakistan for their share in local production99•

The main features of the Seventh Plan regarding the exploration and development

programme included the development of geologically attractive blocks by seismic

prospecting, issuing requests for proposals for exploratory drilling and visits by

delegations to attract international companies for exploration, increasing private

sector investment in exploration by offering better producer prices and other

incentives. A policy package was to be designed to include he following in this

regard. Also, minimal or no discount in crude oil prices for offshore discoveries was

to be made. Exploration activities were to be extended to offshore and less explored

on-shore areas through incentives. Expeditious appraisal and development of Adhi,

Dhodak, Chak Norang Gullarchi, Layari, Hallipota Lashari South, Thoara, Sono,

Lashari Centre, Kunnar, Ghughro and deeper prospects in the Dakhni fields were to

be explored. In view of the demand for petroleum products and the expected increase

in indigenous production, the existing refineries also needed to be upgraded. This was

97 "An Overview ofOGDC" (1994), Economic Review, 1 October, 1994. 98 "Foreign Economic Relations: Foreign Trade", [Online: Web], Accessed on 9 March 2007, URL: http://countrystudies.us/pakistan/47.htm 99 Government of Pakistan, (1988), Planning Commission of Pakistan, "Eighth Five Year Plan: Energy", Accessed on 13 March, 2008, [Online: Web] URL: http:/ /202.83.167 .93/pcportaVfive%20yeaf'l/o20plans/7th!Part%20III%20E/part3eOOO 10 1.pdf

120

to increase crude processing capacity by 15,000 bpd. 100

The Eighth plan summarized many factors responsible for inadequate indigenous

production of oil and gas, reflected in the number of wells drilled, investment and area

prospected. These included the lack of information about the area to be explored,

better geological prospects and incentives available elsewhere in the world, lack of

discovery of large resource of oil reservoirs in oil discovered so far, security concerns

and the drawbacks and shortcomings of existing petroleum policies. 101

Taking due cognizance of the factors mentioned above, the Government set up a new

strategy for the petroleum policy during the Eighth Plan period. 102. The salient

features of the policies and strategies related to exploration and development of oil

and gas covered two aspects namely, the procedural and regulatory measures 103:

i) The procedures for expeditious disposal of concession applications were stream

lined. It was decided to introduce a new concession, award process through

competitive bidding for the work programme, thereby introducing transparency and

mining discretion. All applications for exploration licenses were to be decided within

60 days, except for contested applications. Furthermore, it was decided to create a

negotiation cell in the Directorate General Petroleum Concessions (DGPC) for

expeditious disposal of applications in accordance with the deadlines.

ii) Special measures for Operations in Baluchistan and Tribal Areas: A high level

committee was to be formed to review operational and security problems in

Baluchistan and the Tribal Areas ofNWFP. Special economic benefits were also to be

given to industrial operations in these areas.

100 ibid 101 ibid 102 Ghouri, Salman Saif (1996), "Pakistan's New Petroleum Policy 1994: An Immense Promise", Energy policy, 24(5): 477-88. 103 Government of Pakistan (1997), Ministry of Petroleum and Natural Resources, "Petroleum Policy 1997", [Online: Web], Accessed on 27 June 2006, URL: www.mpnr.gov.pld

121

A problem faced during the Seventh Plan period (1988-93), relating to oil, was the

inadequacy of the refineries to be able to refine produced crude oil. In the beginning,

there were three oil refineries operating in Pakistan: two near Attock and one near

Karachi. The quantity of oil being produced in the South soon exceeded that being

produced in the North, but was not capable of being refined at the Karachi refinery in

he South which could cater only to lighter imported crude. Inadequate transportation

infrastructure made it impossible to ship the crude to the Attock refineries. The Eighth

Plan, therefore, anticipated upgrading these refineries and constructing and improving

the pipelines carrying oil to the refineries104.

Pakistan imported almost 90% of its oil requirements in the 1970s, and despite

domestic oil production having gone up four-fold in the 1980s due to setting up of

new oil fields in Sindh105, almost three-quarters of oil requirement was still imported

during the early 1990s106• Pakistan, due to this dependence, was rendered extremely

vulnerable during the GulfWar (1991), as more than halfofthe country's oil came

from imports from Kuwait107• Also, another ill effect of the Gulf crisis was that,

while, in the early 1980's, labour remittances from the Middle East were so

significant that Pakistan was a net beneficiary of the oil price increases during the

Gulf war, these declined at an annual rate of 10% to $1,356 in 1989-90, as there was a

massive return of overseas workers to domestic labour force108• These problems of

increase in prices paid for oil imports, loss in labour remittances, and problems of

resettlement of displaced overseas workers became a huge crisis for the government.

104 "Pakistan - The Economy'', [Online: Web], Accessed on 17 June 2006, URL: http://www.mongabay.com/reference/country_studies/pakistan/ECONOMY.html 105 Belokrenitsky, Vyacheslav (1991), Capitalism in Pakistan: A History of Socio-Economic Development, New Delhi: Patriot Publishers. 106 Dunn, Karen Turner (1991), "Pakistan's Energy Position: Problems and Prospects", Asian Survey, 31(12): 1189. 107 Anwar, Tilat (1996), "Structural Adjustment and Poverty: The Case of Pakistan", Pakistan Development Review, 35( 4): Part II: 911-926. 108 Kazi, Shahnaz (1993), "The Economic Impact of the Gulf Crisis on Pakistan", Wickramasekara, Piyasiri (2006), The Gulf Crisis and South Asia: Studies on the Economic Aspect, Geneva: International Labour Organisation Office.

122

The government responded by increasing domestic oil prices, encouraging energy

conservation, and seeking soft loans from the international community109• "What

really matters in an energy system which is largely supplied by finite resources is their

"conservation". Within this broader meaning of energy conservation, the renewable

sources must be included in the series of 'conservation" technologies and their

effects."110

As a result of the Gulf Crisis, during the 1980s, therefore, indigenous production of

crude oil increased sharply, from almost 4.0 million barrels from FY 1982 to 22.4

million barrels in 1992. Oil exploration was vigorously pursued in the 1980s and 90s

and a number of new discoveries were made as well111• While the Gulf Crisis had

played an extremely important role in making Pakistan start its own indigenous

production of oil, a big booster was also the Government policy to open the power

sector to private investment in 1997.This led to an addition in the country's thermal

capacity by over 3000 MW by IPPs, increasing to 5500 MW in 2000 taking the total

generating capacity of the country over 17 GW112•

The petroleum policy of 1994, succeeded to a large extent in developing Pakistan's

upstream sector. However, it failed in developing the downstream sector, offshore

areas and the Baluchistan Basin113• The 1997 policy was based on a review of the

1994 policy. The policy also emphasised on building a strong indigenous exploration

and production base to achieve greater self-reliance and cost effectiveness. It also

sought private sector investment in oil and gas114• As a part of the privatisation policy

109 Dunn, no. 106. 110 Tosato, et. al (1984), Energy After the Eighties: A Cooperative Study by Countries of the lEA, Oxford: Elsevier, an Energy Technology System Analysis Project. 111 'Pakistan: Energy', [Online: Web], Accessed on 17 January 2008, URL: http://www. photius.com/ countries/pakistan/ geography/pakistan _geography_ energy.html, 112 Vahidy, no. 63. 113 Ghouri S. S. (1996), "Pakistan's New Petroleum Policy 1994: An immense Promise", Energy Policy, 24(5): 477-488. 114 Siddiqui, R. (2004}, "Energy and Economic Growth in Pakistan", Pakistan Development Review, 43(2}: 175-200.

123

the Government in 2000 initiated the process of setting up the Natural Gas Regulatory

Authority and the Petroleum Regulatory Board. Authorities also sought to foster

competition and improve efficiency and availability through the augmentation of the

transportation and distribution network and improved regulation. 115The Privatisation

Board, in 2000, decided to privatise six oil wells and a number of gas discoveries that

had been made in the late 90s116. The sale of 26% stake in the Oil and Gas

Development Corporation's asset, especially in the Qadirpur gas field and the

Dhodhak and Dullian oilfields is estimated to have raised $400-500 million.

Furthermore, the divestment of the exploration and production company, Pakistan

Petroleum Limited (PPL ), was being negotiated with the International Finance

Corporation, which had invested about $50 million and held 6.09% equity in the

company117• The government also envisaged a divestment of up to 26% of its direct

holding in Sui Southern Gas Transportation Company. The divestment of the entire

oil and gas industry in Pakistan was expected to generate $14 billion, while the sale of

20-30% of the government's holdings were estimated to generate an investment of

$50 million-60 million by the end of2000118.

The remaining recoverable reserves of crude oil in April 2003 were estimated to be

302 million barrels in the country. The average crude oil production during March­

July 2002-03 was 64, 907 barrels per day as against 64, 361 barrels per day during the

same period in 2001-02, showing an increase of 0. 8%119•

115 "Energy Policy in Pakistan", Petroleum Economist [Online: Web], Accessed on 10 November 2010, URL: http://www.petroleum-economist.com/ 116 Government of Pakistan (2007), Privatisation Commission, "Pakistan Implementing Comprehensive and Broad-Based Privatisation Programme", [Online: Web], Accessed on 14 March 2007, URL: http:/ /www.privatisation.gov. pk/Handout/HO-AR-07 I Apr-07/H0-1 0407%20Pakistan%20Implementing%20Comprehensive%20and%20Broad%20based%20Privatisatio n%20Program.htm 117 Shaikh, Hafeez (2004), "Government to get Rs. 5.6 Billion through IPO of Pakistan Petroleum Limited Shares", [Online: Web], Accessed on 15 July 2007, URL: http://www.privatisation.gov.pk/Handout/HO-AR-04/July-04/H0-07704%20Goverment%20to%20Get%20Rs.%205.65%20billion%20through%201P0%20of0/o20PPL% 20SharesHandout.htm 118 Government of Pakistan, no. 5 119 Pakistan Almanac, no. 68

124

Indigenous production of crude oil during 2002-03 was 64,268 barrels per day. This

production met only 17% of the country's oil requirements and 83% was imported.

Sectoral oil consumption during the year 2002-03 was 49.1% in transport, 36.6% in

power 9.8% in industry, 1.7% in the domestic, 1.6% in the government sector and

1.2% in agriculture120.

A comparison between crude oil production between the 1990-2001 and 2008-2010

periods is given below in Figure 3.5 and Table 3.6 respectively.

Figure 3.5: Crude Oil Production (Barrels Per Day) (1990-2001)

66,000

64,000

62,000

60,000

58,000

56,000

54,000

52,000

50,000

48,000

64,349 c=.

61,390

,.:::::;: 59,987

-~

57,549 5~76 57,762 - 1--- "'"•"'+" H 56,284 F

- r- _F - """" " .,..,,55,723 -.... , .. uc v-I

F

- - - .0::: - - _Fi_ - -

- - - r- 1--- - - - -- - -

- - - ~ r-- - - - - - -

- - - - - -1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000-

91 92 93 94 95 96 97 98 99 00 01

Source: "Energy in Pakistan", [Online: Web], Accessed 5 April 2008, URL:

www. waterinfo.net.pkfpdf/ep.pd

120 Muneer T. and Asif M. (2007), "Prospects for Secure and Sustainable Electricity Supply for Pakistan", Renewable and Sustainable Energy Reviews, 11(4): 654-71.

125

Table 3.6: Crude Oil Production (Barrels Per Day) (2008-10)

July- July-March March

Change Region 2008-09 2009-10 (%)

Northern Region 26,888.20 27659.17 2.9

Dewan 197.64 102.02 -48.4

OGDCL 15,351.43 15,095.14 -1.7

OPII 401.01 532.93 32.9

POL 3.839.05 4,079.64 6.3

PPL 4,672.11 4,635.96 -0.8

MOL 2,426.96 3,212.47 32.4

Southern Region 39,643.29 37,586.52 -5.2

OGDCL 25,393.15 21,83.2 -14.6

BP (Pakistan) 9,654.17 12,002 24.3

PPL 146.74 411.86 180.7

BHP 2,720.06 2,949.74 8.4

OMV 64.25 70.05 9

ENI 386 340.87 -11.7

OPII 1240.36 - -100

MGCL - 2.28

Petronas 38.56 126.8 228.5

Total: 66,531.49 65,245.69 -1.9

Source: Government of Pakistan (2009), Economic Survey of Pakistan 2009-10

Average consumption of petroleum products saw an increase from 1990 to 2001-02.

On average, the energy consumption increased by 4.6% per annum to almost 40% by

2000 from the 1990s, while it was negligible in the 1980s, due to lofty global prices, a

consequence of the Gulf Crisis.121. However, escalating prices of this source ever

since, have made its continued use highly undesirable. In 2002, Pakistan was

121 Pakistan Almanac, no. 68

126

importing two-thirds of its total requirement of fuel oil. It was estimated that at the

projected consumption rate, it was poised to become one of the largest importers of

fuel oil in the Asia-Pacific region by 2005, causing a hefty depletion in its foreign

exchange reserves122•

As a result, oil consumption registered a decline in certain sectors like the cement

industry and the power industry, which shifted to gas as well as in the agriculture and

household sector. However, other sectors such as transportation, industrial and other

government sectors showed an increase in the use of oil. 123 Pakistan's refining

capacity has also been in need of overhaul. It was planned to increase the same by the

commissioning of the Pak-Arab refinery in Punjab, the Iran-Pakistan refinery n

Balochistan and the Mid Country refinery project near Multan124• In addition, two

more refineries were being planned at Badin in Sindh and Korangi near Karachi. The

latter was being planned by the Pakistan State Oil, in collaboration with Hyundai, of

South Korea 125•

The price of Petroleum products was regulated by the Government using a strategy to

recover the cost of distribution and transportation. In addition, excise duty and

regulatery duty surcharge were levied on products such as high-speed diesel, furnace

oil and high octane burning component. Taxation was high for products such as motor

spirit and high-speed diesel that are consumed by the high-income groups and low for

kerosene and light diesel oil, which was used by low income groups. 126

As far as transportation of oil is concerned, the Pakistan State Oil (PSO) was the

largest company involved in the storage, marketing and distribution and related

activities of oil. A new 900 km crude pipeline had been planned by the Government

122 Vahidy, no.63. 123 Ali, Fahd (2005), "Pakistan's Future Energy Needs", South Asian Journal, No. 9: 49-58. 124 Presentation by Ahmad, Munawar B., Managing Director, Sui Southern Gas company Limited (SSGCL), (2007), "Pakistan: Asia's Emerging Energy Hub", 3rd Pakistan Oil and gas Conference, Islamabad. 125 Baloch, Latif (2005), "KARACHI: 14 Schemes along Coast nearing Completion: WB team told", Dawn, May 16,2005. 126 126 Government of Pakistan, no. 5

127

from Port Qasim to Mahmood Kot. The contract had been awarded to Pak Arab

refinery (Parco). Another pipeline was being put into operation by the PSO. It is an

80km, 14-inch pipeline from Zulfikarabad terminal to the hub power plant to transport

up to 18.32 million barrels of fuel oil. Another pipeline from Zulfikarabad to J anshoro

is also being planned by PS0127•

As of 2007, Pakistan's total oil resource potential was 27 billion barrels, its refining

capacity stood at 12.82 million tonnes/year, the consumption of oil amounted to 18.5

million tonnes/year and imports, about 14 million tonnes/year. The demand for oil

was more than supply128• Sectoral oil consumption during the year 2005-06 was:

power (28.8%), transport (55.8%), agriculture (0.6%), industry (11.5%), domestic

(0.9%) and government (2.5%)129•

The balance recoverable reserves of crude oil in the country as on January 1st 201 0

have been estimated at 303.63 million barrels. The average crude oil production

during July-March 2009-10 was 65,246 barrels per day as against 66,531 barrels per

day during the corresponding period of last year, showing a decrease of 1.9 per cent.

During the period under review, 27,659 (42 percent) barrels per day were produced in

northern region and 37,586 (58 percent) barrels per day in southern region, as against

26,888 (40 percent) barrels and 39,643 (60 percent) barrels produced per day

respectively in the same period last year. During July-March 2009-10, production

crude oil has increased by 2.9 percent from northern region whereas productions

decrease in southern region by 5.2 percent as compared to same period's overall 1.9

percent oil production decreased in the country. 130

127 Government of Pakistan, no. 5 128 Industry Overview", no. 77. 129 Government of Pakistan (2005), Ministry of Petroleum and Natural Resources, "Pakistan's Primary Energy Supplies 2005-06", (Online: Web], Accessed 28 February 2008, URL: Pakistan.Gov.pk%20-%20The%200fficial%20Web%20Gatewayl'/o20to%20the%20Government%20of%20Pakistan.webarch ive 130 Government of Pakistan (2010), Economic Survey of Pakistan, "Energy", URL: www.finance.gov.pk/survey _ 091 O.html

128

Power

The power sub-sector in the Seventh Plan (1988-93) accounted for 72 per cent of the

investment by the public sector in energy and 26 per cent of the

total investment in the-public sector131• The country had been facing the problem of

load shedding since the early eighties while demand continued to grow in the grid

system without any signs of deceleration, while supply was less. The Seventh Plan

sought to redress this situation132•

The Seventh Plan (1988-93) laid down a few broad objectives for the power sector.

These included the completion of schemes started in earlier plans, continuation of

programmes to use indigenous sources of energy such as Lakhra coal and hydel,

bringing oil and gas plants on line to meet the short-term need of eliminating load­

shedding and to balance the country's generation capacity by providing greater

thermal generation which is unaffected by seasonal water fluctuation, laying the

groundwork for projects to cater to the needs of the Eighth Plan, initiating work on

large and medium hydels, including detailed engineering of Basha dam, a run-of-the­

river project at Ghazi Ghariala to assure significant contribution from low cost,

indigenous resource-based generation; and putting maximum reliance on the private

sector to help relieve the financial burden on the public sector in the Seventh, Eighth

and subsequent plans. 133

The Government of Pakistan followed an active policy of privatisation of all energy

sectors in the 1980s.134 As a result of this policy, 127 proposals were received both

from local and foreign investors that meant a capacity addition of almost 26,000.

Menthe 1292 MW oil-fired Hub River Power Project is the first and the largest

131 Tahir, Pervez (2000), "Economic Policies Continuation: A Critical View of the Eighth Plan 1993-98", The Lahore Journal of Economics, 5(1 ): 121-134. 132 Mahmud, Syed F. (2000), "The Energy Demand in the Manufacturing Sector of Pakistan: Some further Results", Energy Economics, 22 (6), December 2000: 641-648. 133 Government ofPakistan, no. 51. 134 Looney, Robert E. and Peter C. Frederiksen (1995), "Privatization Of Public Sector Enterprises In Pakistan: Prospects For Reducing Regional Imbalances", Review of Urban and Regional Development Studies, 7(2): 143-152.

129

privately financed IPP in the Indian sub-continent135• The project has provided a good

precedent for similar innovative power financing in the future. It was promoted by

National Power of the UK, Xenel Industries of Saudi Arabia, the Commonwealth

Development Corporation, Japan's Export-Import Bank and the World Bank, which

granted the project guarantee against political risk136• Pakistan has continuously been

taking aid and assistance from the IMP and the World Bank under hard conditions137•

Financial closure of seven other IPPs followed soon after the Hub River Project.

Under the new policy the Government planned to develop hydropower projects on a

BOOT basis and coal based thermal projects on a BOO basis. The Government had

received proposals for the generation of 7.5 GW of hydropower in the NWFP. The

Mataltan Hydel Power Company and the provincial Government ofNWFP signed an

agreement for the construction of an 84MW hydropower project at Mataltan 138•

During the Eighth Plan (1993-98), power generation was to increase from 9786 KW

to 16 MW, oil production from 60000 to 123000 barrels a day, gas production by 38%

and refining capacity by 18%. An important target was also the electrification of 19,

700 villages139•

WAPDA and KESC were faced with a number of problems since the 1990s.Some of

these were inefficient operations, high T &D losses, deterioration in infrastructure due

to inadequate renovation and maintenance 140, non-payment of electricity bills,

especially from the provincial governments, thereby reducing cash flow 141, a highly

distorted tariff structure with a heavy subsidy to the agricultural and domestic sectors,

135 "Power: 4x323 MW Hub River Thermal Power Plant", [Online: Web], Accessed on 15 August 2007, URL: http://www.descon.com.pk/Sectors/Power/mWHubRiverThermalPower.aspx 136 Inter-American Development Bank, "Directory of Innovative Financing: Pakistan", URL: http:/ /www.iadb.org/sds/ifm/publication/ gen _151_ 64 _ e.htm 137 Musarrat, Razia (2006), "Pakistan and the New World Order", Pakistan Vision, 7 (I): 117-147, Nayak, Pandav (1988), Pakistan: Political Economy of a Developing State, New Delhi: Khama Publishers. 138 Government of Pakistan, no. 5 139 Latif, Abdul (2004), The Implementation of Energy Policy in Pakistan, Karachi: Royal Book Co. 140 "W APDA, KESC Fail to Achieve Targets despite Rs. 55bn. Help", Dawn, 25 August 2003. 141 Chaudhry, Muhammad Bashar (2002), "Reforming Pakistan's Power Sector", Pakistan and Gulf Economist, 15-21 July, 2002, [Online: Web], Accessed on 17 August 2007, URL: http://www.pakistaneconomist.com/issue2002/issue28/i&e3.htm

130

and free supply to federally administered tribal areas and "Azad Jammu and

Kashmir", resulting in losses of over Rs. 30 bn. in 1977/78.142

Other constraints included associated over-pricing in the industrial and commercial

sector to a point where captive generation may become a more attractive

alternative143, the induction of a substantial amount of high-cost power from the

private power producers, which coupled with the slower than expected growth in

power demand, had placed a financial burden on W APDA, which was obliged to

purchase a large proportion of the high-cost power144and the government policy of not

increasing tariffs, in effect from February 1997 to March 1998145.

Figure 3.6: Energy Supply for Power Generation (2005)

Nuclear, 3%

Gas, 55%

Source: Government of Pakistan (2005), Pakistan Energy Yearbook 2005

142 Kemal, A.R. et. al. "Economy and Government: Privatisation and Regulation in Pakistan", [Online: Web] , Accessed on 17 January 2008, URLwww.competition­regulation.org.uk/conferences/mcr02/pide.pdf 143 Government of Pakistan (2005), Ministry of Petroleum and Natural resources, "Natural Gas Allocation and Management Policy", [Online: Web], Accessed on 22 September 2007, URL: bttp://209 .85 .17 5.1 04/searcb ?q=cache: W6n_q YL8RoOJ :www.pakboi.gov.pklpdf/N atural%2520Gas%2 520Allocation%2520-Management%2520Policy%25202005.pdf+captive+generation+WAPDA+KESC&bl=en&ct=clnk&cd = l&gl=in&client=ftrefox-a 144 Chaudhry, no. 141. 145 ADB (2000), Asian Development Bank, ''Pakistan", [Online: Web], Accessed on 26 September 2008, URL: www.adb.org/Documents/Books/ AD0/2000/pakistan. pdf

131

In 2003-04, the total installed capacity of electricity generation stood at 19,478 MW

as against 17,776 MW in 2002-03, showing an increase of9.6%146• The energy supply

from different sectors for power generation in 2005 can be seen in Figure 3.5 above.

The power demand was projected to grow with an ACGR of7.9% during the MTDF

2005-10 and increase from 15500 MW in 2005 to 21500 MW in 2010. WAPDA and

KESC were to continue their expansion programme for primary transmission,

secondary transmission and grids artd distribution programme to eKpand the power

network. Energy genenttion was planned to increase at an average annual compound

rate of 7.9 percent to reach 128670 Gwh by the terminal year of MTDF. The energy

sale was expected to increase at an ACGR of9.4 percent from 66100 Gwh in 2005 to

103500 Gwh in 2010. 147

In order to increase the production of power to keep up with the rising demand, the

government, in 2007 decided to undertake the following policies148:

a) Import of Electricity from Central Asian states: Further work to evaluate the

technical and economic aspects of power import to be evaluated.

b) Hydroelectric Generation: Proposals were invited from the private sector for 7

projects with a total capacity of 1,620 MW.

c) Power Generation from Thar Coal: Private sector was involved in preparation

of feasibility studies for mining and power generation.

d) Power Generation from Imported Coal: Work was initiated for involving

private sector in setting up power generation units in the coastal areas.

e) Power Generation from Renewable Sources: A framework was drafted and

incentive package defined for fast-track capacity additions.

In addition to the above, the government planned to divest 51 percent of its

146 "Pakistan: Power crisis feared by 20Q7''; fOnlintl' We\,] A""".,;ijt;U 13 Mnr~h 20M. Wll ' !!!~~N:

www,~nflrl[ybu lh=tin nctl!l33 .huul. ••

7 uov~rnmcnl nf JJnf:::::~:m (W01J. lil::;"!!iiu}f. CU1111Hiss•vnl MErfiWll Term l>evelopment Fr«mcwork JfJW Hi: ~unHn-w; Web) A~~essed on 17 0Gtobcr JQlO, URL! hHp;//www.planningc.;ommi~~ion.g~v.pk/riv(!o/o::!OV<rar'YuZOflllllY.html I'IH Ahmed, Mukhtur (.Z009J, "Meeting Pakistan's Energy Needs" in Hathaway and Kugleman no. 9.

132

shareholding in some specific concerns to give majority ownership and management

control to the private sector149: a) Power Generation and Distribution: Ashore Power

Company, Faisalabad Electric Supply Company, and Peshawar Electric Supply

Company, b) Oil Marketing: Pakistan State Oil Co. Ltd., the largest oil marketing

company in the country with approximately 70 percent share of the market, c) Gas

Transmission and Distribution: SNGPL and SSGCL, state owned utilities that

currently account for over 86 percent of the gas transmission and distribution business

in the country, d) Petroleum E&P: Pakistan Petroleum Ltd. and Oil & Gas

Development Co. Ltd., state owned companies that account for 45 percent of gas and

53 percent of oil production respectively in the country. In the case of Oil & Gas

Development Co. Ltd, divestment of 10-15 percent equity through simultaneous GDR

offering and domestic secondary offering was to precede the divestment of 51 percent

shares

The Structure of the Power Sector

The structure of the power sector is an integrated one that consists of two utilities: the

WAPDA and The KESC150• It also consists of the Pakistani Atomic Energy

Commission (P AEC) that owns nuclear power plants that are connected to the

W APDA and the KESC151. It also consists of IPPs that are connected to the national

grid at different points152•

149 Ahmed, Mukhtar (2007), "Meeting Pakistan's Energy Needs", Hathaway et. al. Fuelling the Future: Meeting Pakistan's Energy Needs in the 21'1 Century, Washington D.C.: Woodrow Wilson International Centre for Scholars. 150 Khan, Rafique Ahmad "Some Reflections On The Effectiveness OfNEPRA Established Under The Act Of 1997" [Online: Web], Accessed on 15 September 2006, URL: www.iepkc.org/about_in/power.htm 151 Khan, Zafar Ali (2007), "Pakistan Power Structures and Regulations", [Online: Web], Accessed on 17 January 2008, URL: http://209 .85.175.1 04/search?q=cache:KE8rrwVr6o8J:ficci.com/media­roornl speeches­presentations/2007/march/PPT/Session2/Zafarali.ppt+PAEC+part+of+power+sector+pakistan&hl=en& ct=clnk&cd=9&gl=in&client=firefox-a 152 IAEA (2007), International Atomic Energy Agency, "Pakistan", URL: http://209.85.175.104/search?q=cache:gCqMJsj7oTwJ:www-pub.iaea.org/MTCD/publications/PDF /cnpp2003/CNPP _ Webpage/PDF /2002/Documents/Documents/ Pakistan%25202002.pdf+IPPs+connected+to+national+grid+pakistan&hl=en&ct=clnk&cd=2&gl=in& client=firefox-a

133

Thus, the four mam public sector organisations involved in power generation,

transmission and distribution of electricity in the country are WAPDA, KESC,

KANUPP and Chashma Nuclear Power Plant, with the latter two belonging to the

PAEC153• WAPDA and KESC are interconnected through a 220-kilo volt double

circuit transmission line. It is W APDA, however, that dominates the power sector as

can be seen in Table 3.7 below154•

Table 3.7: Power Generation, Transmission and Distribution, (2002-03)

Name of Installed Installed

Power Capacity %Share Capacity %Share %Change

Company 2001-02 2002-03

WAPDA 9930 56.1 9694 54.7 (2.4)

Hydel 5009 50.4 5009 51.7 0.0

Thermal 4921 49.6 4685 48.3 (4.8)

IPPs 5549 31.4 5816 32.8 4.8

Nuclear 462 2.6 462 2.6 0

KESC 1756 9.9 1756 9.9 0

Total 17697 100 17728 100 0.2

Source: Government of Pakistan (2003-04), Hydrocarbon Development Institute of

Pakistan (HDIP), as cited in Pakistan Almanac (2003-04)

Apart from these, Independent Power Projects (IPPs), private sector entities involved

in power generation are also part of the Pakistani power structure. As has been

discussed above, his has been a result ofthe IPP policy of 1994, reviewed in 1998 and

finally in 2002, which resulted in the setting up of a Private Power Infrastructure

Board (PPIB), that has provided a one-window support to the private sector155• The

153 "Investment in Pakistan", [Online: Web], Accessed on 7 January 2008, URL: http://www.kpmg.com.pk/download/Investment.s/Chapter%20 1 %20-%20Pakistan%20in%20Brief.pdf. 154 Government of Pakistan, no. 5 155 Government of Pakistan, Ministry of Water and Power, [Online: Web], Accessed on 19 September 2006, URL: http://www.ppib.gov.pk/mwp.htm

134

NEPRA was also set up in 1997, by the Government for purposes of regulating the

power hectoring 1998156, the government also went ahead with reorganising the

WAPDA157, organising it into nine distribution companies called DISCOS, one

National Transmission and Distribution Company (NTDC) and four thermal

generation companies called GENCOS158• The hydroelectric power development and

organisation functions continued to remain with WAPDA. In order to carry out this

restructuring and reorganisation, a facilitating company called the Pakistan Electric

Power Company (PEPC) was also incorporated in 1998159•

While the KESC got transferred into private hands in 2005, when 73% of its shares

were sold to private investors, W APDA has, however, restructured itself into fifteen

incorporated entities, all ofthem state-owned.160

The number of consumers of electricity since 1990 has increased considerably due to

rapid urbanisation, extension of electricity grid supply to unelectrified areas and

rural/village electrification. The rural/village electrification programme is an integral

part of the total power sector development in order to increase the productive capacity

and socio-economic standard of the majority of the Pakistani population living in the

rural area. The table below indicates this trend. 161

The consumption of electricity increased by 4.9% during the period between 1990-91

to 2001-02, along with an increase in consumption of oil and gas. Sector-wise,

consumption pattern of electricity by different economic groups shows that the

domestic group is the largest consumer of electricity of 2002 -03 (44%), followed by

industrial (28.8%), agriculture (12.7%), bulk supply (9.2%), commercial (5.3%) and

156 NEPRA, National Electric Power Regulatory Authority, [Online: Web], Accessed on 23 January 2007, URL: http://www.nepra.org.pklindex.htm 157 Malik, Afia (2007), "Effectiveness of Regulatory Structure in the Power Sector of Pakistan", Seminar by Malik, Afia, Pakistan Institute of Development Economics, [Online: Web], Accessed on 26 November 2008, URL: http://www.pide.org.pk!index.php?option=com _ content&task=view&id= 175&1temid=407 158 Chaudhry, no. 141 159 Government of Pakistan, no. 5 160 Chaudhry, no. 141 161 Pakistan Almanac, no. 68

135

traction (0.02%). 162 A~ per the Pakistan Economic Survey 2003-04, the household

sector continues to be the largest consumer of electricity accounting to 44.2% of total

electricity consumption followed by industries 31.1 %, agriculture 14.3%, other

government sector 7.2%, commercial5.5% and streetlight 0.7%163•

Total installed generation capacity witnessed an increase of 2.1 percent during 2009-

10 against the 1.0 percent growth in corresponding period in 2008-09. With the share

of 31.6 percent in total installed capacity during 2009-10, private sector witnessed the

prominent growth of 7.1 percent in its installed capacity during the period under

review. On the other hand, installed capacity of WAPDA declined by 0.5 percent

during July-March 2009-10. Furthermore, the installed capacity of KESC stood at

1,955 MW during the period under review. 164

Table 3.8 below shows the electricity generated by W APDA between 2006-10.

Table 3.8 : Electricity Generation by W APDA (2006-1 0)

Year Hydro Share(%) Thermal Share(%) Total 2006-07 31,942 36 55,895 64 87,837 2007-08 28,667 33 57,02 67 8,269 2008-09 27,73 33 5,14 67 84,377

July-March 2008-09 20,665 34 40,653 66 61,318

2009-10 21,101 33 43,64 67 64,747 Source : Government of Pakistan (20 1 0), Pakistan Energy Yearbook 2010

Village Electrification Programme

In order to giVe a rural electrification a major boost, a crash programme of

162 Pakistan Almanac, no. 68 163 "Pakistan: Power crisis feared by 2007'', [Online: Web] Accessed 13 March 2008, URL: http//: www .energybulletin.net/83 3 .html. 164 Government of Pakistan, no. 23

136

electrifying 7700 villages by June 1995 was planned to be launched for which donor

funds were to be available from OCEF and IBRD. Subsequently target of 4000

villages was fixed for the balance of the Eighth Plan period165•

WAPDA by this time had already initiated preparation of a master plan for village

electrification, effective system management and expansion166• Towards this end,

mapping of existing feeders was put in progress. Regarding future expansion in new

areas, WAPDA was to carry out a survey of all areas and prepare a master plan for

electrification for the whole country167• Initially, however, priority was to be given to

electrification of areas within 20 km of the existing grid stations. Expansion in the

system though rural cooperatives would also be encouraged. Ministry of Water and

Power was to also install a system of monitoring of progress in achieving physical

targets ofvillage electrification, distribution of power and STG facilities168. In view of

the fact that a large part of the country is without electricity, it has to be recognised

that all far-flung areas could not be covered by extension of grid169• In order to meet

the needs of these areas, a programmed for providing decentralized electric power in

the far flung areas through diesel, solar or wind energy would be prepared and

implemented by WAPDA170• In principle, this programme was to focus on areas that

were not likely to get electricity in 10 years or those which were beyond 20 k.m. from

the grid system 171.

165 Government of Pakistan, Ministry of Local Government and Rural Development, Local Government and Rural Development Division "Tameer-e-Watan Programme (1991-93 and 1998-2000)", [Online: Web], Accessed on 6 April 2007, URL: http://www .aaas.org/international/ehn/waterpop/front.htm http://www.pakistan.gov.pk/divisions/Contentlnfo.jsp?DiviD=45&cPath=618 _ 621 &ContentiD=3270 166 FAO (1997), Food and Agriculture Organisation, Hafiz, Seema, "Appendix 7: Country Case Study: Water Policy Reform in Pakistan", URL: http://www .fao.org/docrep/006/ad456e/ad456eOd.htm#TopOfPage 167 "WAPDA to recover Rs. 69b from NWFP, Sindh and FATA", Daily Times, Jan 20,2004, [Online: Web] Accessed on 17 February 2006, URL: http://www.dailytimes.com.pk/default.asp?page=story_20-1-2004_pg7 _27 168 Government of Pakistan, Ministry of Water and Power, URL: http:/1202.83.164.26/wps/portal/Mowp 169 Government of Pakistan, Economic Survey of Pakistan 2004-05, Part -III, URL: www.accountancy.com.pk/docs/Economic-Survey-2004-05-Part-III.pdf 17° Central Asia/South Asia Electricity Trade Conference, May 8-9, 2006, Islamabad. [Online: Web] Accessed on 22 March 2006, URL:http://www.pakistan.gov.pk/ministries/water-power­ministry/media/NewBackgroundPaperforiSBMay.doc. 171 Government of Pakistan, no. 94.

137

The "Vision -2025 Programme", envisages many hydel projects like the Golan Gol

(106 MW), Khan Khwar (72 MW), Allai Khwar (121 MW), Duber Khwar (130 MW)

and Jinnah (96 MW), which were planned to be completed by 2008.Additionally, in

order to met the power demand in the coming years, the WAPDA has proposed to

install two high efficiency combined cycle power plants on natural gas of 450 MW

each, at Faisalabad and Balloki172 •

•

Table 3.9: Village Electrification (By Number)

Addition during the Progressive Growth Year year Total (%)

2006-07 14,203 117,456 14 2007-08 10,441 127,897 9 2008-09 9,868 137,765 8

July-March 2008-09 5,566 133,463 2009-10 9,273 147,038 10

Source: Government of Pakistan (2010), Economic Survey of Pakistan 2010

The village electrification growth rate during July-March 2009-10 increased by 10.0

percent over the 5.7 percent rise during the same period last year. Furthermore, the

number of electrified villages has increased from 137,765 by 30th June 2009 to

147,038 by the end ofMarch 2010. 173

The demand for coal during the late 80s was very low. However, the Plan estimated

the total demand for coal to be around 7 million tonnes in, 1992-93, with substantial

demand coming from the private sector. Various policy initiatives were taken during

the Seventh Five Year Plan to create a better environment for the development of

172 Pakistan Almanac, no. 68 173 Government of Pakistan (2010). Economic Survey of Pakistan, "Energy'', URL: www.finance.gov.pk/survey _ 091 O.htm1

138

coal. They included establishment of coal-fired power plants, introduction of coal in

cement and other energy-intensive industries to replace furnace oil, promotion of coal

briquettes as a substitute for kerosene oil and firewood, rationalisation of energy

prices to promote the use and development of coal, establishment oflarge-scale power

plants at or near the major coal fields to be preferred over imported coal by taking into

account socio-economic benefits, such as, employment and foreign exchange savings,

high priority to be given to coal exploration, especially in the hitherto unexplored

areas, major policy issues at the federal level in future be referred to the Energy

Policy Board, regulatory measures to be strictly enforced for royalty collection and to

control health and safety hazards in coal mining and mining rules and regulations to

be amended to allow (a) use of coalmines as collateral against loans; (b) merger of

smaller units into bigger economic units for purposes of mining on a cooperative basis

and (c) enhancement oflease tenure. 174

The Eighth Plan also set up a few policy objectives, keeping in mind that a well

conceived development strategy would be completed on priority basis so that a viable

and cheaper alternative to imported oil becomes available175. Under the Pakistani

constitution, coal is a Provincial subject. Elements of the coal policy for the Eighth

Five Year Plan are given below, while the details of policies and instruments to

implement these policies were to be determined by the Provinces176: Firstly, Thar coal

and other similar finds were to be used primarily as fuel for electric power plants with

unit size of 200 MW or larger. Secondly, for improving the level of confidence about

coal reserves for its mining, GSP as well as the Provinces were to embark upon a

coordinated programme for closed space drilling to supplement the resources

available to both these agencies.

Figure 3. 7 below points to coal production in the decade between 1990 and 2000-01.

174 Government of Pakistan, no. 51. 175 "Pakistan", [Online: Web], Accessed on 22 December 2008, URL: http://www.jantb.com/pakistan.htm 176 Government of Pakistan, no. 94

139

Figure 3.7: Coal Production (Million Tonnes) (1990- 2000-01)

4

4 ~-------------~

31

3

3

31

4 ~

,, '' f--;

I -·~

3~~~~~~~~~~~~s=~~~=r~~·L_=r~~ 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01

Source: "Energy in Pakistan", [Online: Web] Accessed on 5 April 2008, URL:

www. waterinfo.net.pk/pdf/ep.pd

The share of coal in power generation during the Seventh Five Year Plan had been a

mere 0.76%. The Plan had envisaged increasing the share of coal with the coming up

of a 280 MW of coal based generation capacity. 150 MW of this was to come from

the public sector while the remaining was to come from the private sector. However,

the share of coal in the national primary energy mix had only been declining since

independence, primarily due to a number of problems that had beset the coal sector

like bureaucratic hurdles and lack of proper infrastructure and also the increase in use

of natural gas as a preferred source of energy as compared to coal. However, there

were plans to increase the share of coal in the primary energy mix from 5% in 2003 to

20% by 2010, with the discovery of large coalfield having 175 billion tonnes resource

potential at Thar desert.

The cement industry also prepared itself for the use of indigenous coal rather than

furnace oil, as used earlier, a move that would save the exchequer about 50% foreign

exchange, being spent on coal177. Thus Pakistan was aiming to use coal as an

alternative to fuel oil. Already a power plant using Lakhra coal has been completed in

177 Pakistan Almanac, no. 68

140

the Sindh province178• The consumption of coal had been increasing very

inconsistency on an annual basis, showing wide fluctuation, since independence. The

annual trend of energy consumption recorded an annual growth of 1.2% annually179•

Coal consumption during 2005-06 was divided between brick kilns (54.7%), cement

and other industry (36.0%), power (1.9%) and coke use (7.3%). The brick industry

was the biggest user of coal in 2005, consuming about 4.2 million tonnes annually. 180

Cement manufacturing industry as well as boilers of textile and sugar industries

turned potential candidates for shifting from furnace oil/gas to coal for the reasons of

high prices of oil in international market and availability of coal as a cheaper source

of indigenous energy. During the MTDF period, all the cement plants were to be

converted to coal, resulting in increase of coal demand to 2.5 million tonnes.

Installing indigenous coal based power plants was to also increase the coal share in

power sector. The utilization ofhard coal of Punjab, Balochistan and NWFP was to be

enhanced in brick kiln, cement industries and in town gasification by enhancing coal

production from mines through improvements in mining techniques. Efforts were to

be made to mechanize the operational coalmines. To enhance the exploration and

evaluation activities during the MTDF period, the Geological Survey of Pakistan

(GSP) was to complete evaluation and appraisal of coal in various coalfields in

Balochistan, NWFP, and "Azad Jammu and Kashmir". 181

According to a 2007 survey, total proven reserves of coal in Pakistan are 185 billion

tonnes, production of which is 4.06 million tonnes and consumption, 5.60 million

tonnes. Demand is therefore, more than supply in the case of coal 182.

178 Government of Pakistan (2007), Ministry of Petroleum and Natural Resources, "Fossil Fuel Overview", [Online: Web], Accessed on 13 March, 2008, URL: bttp://202.83.164.26/wps/portal/Mopnr 179 Pakistan Almanac, no. 68 180"Energy in Pakistan", [Online: Web] Accessed on 5 April 2008, URL: www. waterinfo.net.pklpdfi'ep.pd 181 Government of Pakistan, no. 147. 182 "Industry Overview'', no. 77

141

Table 3.10: Production of Coal (000 tonnes) (2000-2009)

Year Imports Production Total 2000-01 950 3,095 4,045 2001-02 1,081 3,328 4,409 2002-03 1,578 3,312 4,890 2003-04 2,789 3,275 6,064 2004-05 3,307 4,587 7,894 2005-06 2,843 4,871 7,714 2006-07 4,251 3,643 7,894 2007-08 5,987 4,124 10, Ill 2008-09 4,652 3,738 8,390

July-March 2008-09 3,000 1,822 4,822

2009-IO(e) 3,600 1,704 5,304 Source: Government of Pakistan (2005), Medium Term Development Framework

2005-10.

After witnessing a decline of 17.0 percent in 2008-09, the total production of coal has

increased by 10.0 percent during July-March 2009-10 over the corresponding period

of 2008-09. This improvement owes to increased import of coal during the period as

indigenous production of coal witnessed a decline 6.5 percent during the period under

review. As a result, share of coal imports in overall availability of coal, increased

from 62.2 percent in July-March 2008-09 to 67.9 percent during current fiscal year.

About 58.9 percent of total coal in the country has been consumed by the brick kilns

industry whereas 39.6 percent was consumed by cement industry during the period of

July-March 2009-10. The coal consumption shares of brick kilns and power sectors

decreased by 2.4 percent and 35.8 percent respectively during July-March 2009-10

against the same period in 2008-09. Due to price differential between coal and furnace

oil, almost the whole cement industry has been switched over to coal from furnace oil.

Operational coal mines decreased production by 15 percent from 4.12 million tonnes

in 2007-08 to 3.49 million tonnes in 2008-09. 183

183 Government of Pakistan, no. 23

142

Nuclear

The Pakistan Atomic Energy Commission (P AEC) is responsible for all nuclear

energy and research applications in the country. Under the P AEC, there operate one

small (125 MW) Canadian PHWR nuclear power reactor that has been in operation

since 1971, and under international safeguards, the KANUPP, CHANSUPP-1 and

Chashma-2.

KANUPP and CHASNUPP have both been running successfully, and according to the

safeguards set by Pakistan Nuclear Regulatory Authority184• The construction of a

CHANSUPP twin, Chashma-2 started in May 2005 185• Enriched fuel for the reactors

was imported from China.

The Energy Security Plan of 2005 has called for an increase in generating capacity to

more than 160,000 MW by 2030 from 19,540 MW in 2005 186.This included plans for

lifting nuclear capacity by 8400-8800 MW by 2030 from 400 MW in 2005, 900 MW

of this by 2015. 187The Government, under this plan had also announced building two

more Chinese reactors, of 600 MW each. Pakistan also possesses a 1 0 MW research

reactor, Parr-1, of 1965 vintage operated by the Pakistan Institute of Technology188•

Pakistan's 50 MW PHWR reactors near Khushab, which started operations in 1988,

has the dubious standing of a "multipurpose" reactor due to its potential to produce

weapons-grade plutonium189• Another small uranium centrifuge enrichment plant at

Kahuta has also been operated by the P AEC since 1984 and does not have any

apparent civil use. It has not under safeguards190• Even though Pakistan is not a party

184 Pakistan Almanac, no. 68 185 World Nuclear Association (2008), "Nuclear Power in Pakistan", [Online: Web], Accessed on 16 January 2007, URL: http://www.world-nuclear.org/info/infl08.html 186 Ali, no. 123 187 "Pakistan Approves 25 Year Energy Plan", Pakistan Times, [Online: Web] Accessed on 12 June 2010, URL: http://pakistantimes.net/2005/03/23/business4.htm 188 [Online: Web], Accessed on 6 August 2006, URL: http://www.fas.org/nuke/guide/pakistan/facility/rawalpindi.htm 189 "Khushab Reactor", [Online: Web], Accessed on 11 July 2008, URL: http://www.powerset.com/explore/go!Khushab 190 "Pakistan's Nuclear Weapons Programme", (2008), [Online: Web], Accessed on 16 July 2007, URL: http://thecurrentaffairs.wordpress.com/tag!kahuta/

143

to the Nuclear Non-Proliferation Treaty, it does have its main civil reactors under IAA

safeguards.

The Pakistan Nuclear Regulatory Authority is responsible for licensing and

supervision, and in respect to CHASHMA, it works closely with China's NNSA!91

K-1, a CANDU type plant has been in commercial operation since 1971. K-1, after

completing its designed life of 30 years has been operating on extended life of 15

years. K-1 generated 456.94 million kWh of electricity during the period of July­

March 2009-10, raising its lifetime generation to 12.82 billion kWh. C-1, a

Pressurised Water reactor type plant with a gross capacity C of325 MWe, has been in

commercial operation since September 2000.

C-1 generated 2063.94 million kWh of electricity during July-March 2009-10, raising

its lifetime generation to 19.46 billion kWh. The construction and installation

.activities of C-2 are in progress as per schedule. The C-2 is expected to be operational

by 2011.192

The Pakistan Atomic Energy Commission was initially established as Pakistan

Atomic Energy Committee in 1955, the Ordinance for which was made and

promulgated by the President of Pakistan on 27th May 1965, which was later on

approved by the National Assembly on 21st July 1965193• PAEC was established for

the promotion of peaceful use of atomic energy in the country, the discharge of

international obligations connected therewith, the execution of development projects

involving nuclear power stations and matters incidental thereto in the fields of

agriculture, medicine and industry. The P AEC has a Chairman and four full-time

working members (representing finance, technical, power and administration), and

four part time members, appointed by the government of Pakistan (GOP) 194• PAEC

reports to the Pakistan Atomic Energy Council consisting of 22 members and is

191 "Pakistan", [Online: Web], Accessed 12 Mar 2007, and URL: http//country.studies.us/pak/html. 192 Government of Pakistan, no. 23 193 PNRA (2006), Pakistan Nuclear Regulatory Authority "Country Report on Control of Radiation Protection Practices In Pakistan", [Online: Web], Accessed on 16 January 2007, URL: http://www.rca.iaea.org/members!Projects/RAS9029/ Appendix%20%20 18A %20CountrY'Io20Report% 20Pakistan.doc. 194 Government of Pakistan, Pakistan Atomic Energy Commission Foundation, [Online: Web], Accessed on 20 October 2008, URL: http://www. paec.gov. pk/paec-fond/functions.htm

144

headed by the Minister in charge of Atomic Energy195• Since the inception ofPAEC,

this portfolio has always been retained by the various Prime Ministers of Pakistan or

by the Executive Head of the government. and for the execution of development

projects including nuclear power stations and the generation of electric power196•

PAEC also represents Pakistan's membership in IAEA197

Figure 3.8: Structure Of Pakistan's Nuclear Sector

Abbreviations:

Pakistan Atomic Energy Council

Member Technical

I Chair Man P AEC

I Member Power

PlEAS

PINS TECH

Agricultural Centres Medical Centres

I Member Administrator

KANUPP

CHASNUPP

INUP

KINPOE

ICCC

Exploration, Mining and Refining

PlEAS: Pakistan Institute of Engineering and Applied Sciences

PINSTECH: Pakistan Institute ofNuclear Science and Technology

KINPOE: Karachi Institute of Nuclear Power Engineering

KANUPP: Karachi Nuclear Power Plant

I Member Finance

195 IAEA (2003), International Atomic Energy Agency, "Pakistan", [Online: Web], Accessed on 18 September 2008, URL: http://www­pub.iaea.org/MTCD/publications/PDF /cnpp2003/CNPP _ Webpage/PDF /2000/Reports/P AKIST AN.pdf. I% Government ofPakistan, no. 194. 197 IAEA, no. 195.

145

CHASNUPP: Chashma Nuclear Power Plant

INUP: Institute ofNuclear Power

KNFC: Kundian Nuclear Fuel Complex

ICCC: Instrumentation, Control and Computers Complex

Source: Government of Pakistan, Pakistan Atomic Energy Commission Foundation,

[Online: Web], Accessed on 20 October 2008, URL: http://www.paec.gov.pk/paec­

fond/functions.htm

The P AEC is also responsible for the operation and maintenance of nuclear power

plants in the country. The National Centre for Non Destructive Testing (NCNDT)

supports the quality assurance programme for nuclear power plants, particularly

concerning the in-service insp~ctions for selected components of KANUPP198. The

Pakistan Welding Institute (PWI) provides guidance in the application of relevant

codes and standards and for improvement of the quality of welding in the country199•

Other P AEC research centres (e.g., PIN STECH) provide valuable backup research

and analytical services as required200• The P AEC has also been in charge of initiating

nuclear fuel cycle activities with a modest prospecting programme in the early

1960s201. A number of promising areas were located some of which are even now

being explored. Uranium ore has beet). mined and the first ore processing plant using

this indigenous ore has been in operation for some time202• Essential laboratory

facilities have also been set up to support the exploration and ore process

development work. Kundian Nuclear Fuel Complex (KNFC) has the facility for

fabrication of fuel for KANUPP. Appropriate radioactive waste management systems

have been designed for KANUPP and CHASNUPP to remove radioactive liquid,

198 ibid 199 Government of Pakistan, no. 194. 200 Government of Pakistan, Pakistan Atomic Energy Commission, Pakistan Institute of Nuclear Science And Technology, [Online: Web], Accessed 15 August 2008, URL : http://www.paec.gov.pk/pinstechl 201 Government ofPakistan, no. 194. 202 "Bayswater Uranium Corporation Start Phase 4 Drilling Programme at Elkhorn Project", [Online: Web], Accessed on 11 January 2007, URL: http://paguntaka.org/2008/08/11/uranium-mine­exploration-bayswater-uranium-corp-start-phase-4-drilling-program-at-elkhom-project/

146

gaseous and solid wastes arising from the plant. These waste management systems

operate by collecting, storing, allowing sufficient radioactive decay and process the

waste through filtration, ion exchange, evaporation, solidification, vitrification and

drumming203• Sufficient storage capacity is provided for the entire fuel discharged

during the life of the plant. High-level liquid wastes will be suitably located and

converted into solid wastes. These solid wastes are, then, packed in standard drums

for storage and subsequent removal to off-site disposal facilities for permanent

buriae04•

P AEC has developed expertise in energy forecasting, power plant economics,

generation expansion and electric power system analyses, and pre-project planning

(e.g. economic and financial analysis, feasibility studies, bid document preparation &

evaluation, etc.). Design and Engineering ofN.PP was initiated in 1980 and a formal

Design & Engineering Department (DED) was set up within CHASNUPP in 1985.

P AEC has also developed non-destructive testing (NDT) and quality assurance (QA)

capability05• The National Centre for Non Destructive Testing (NCNDT) and

Pakistan Welding Institute (PWI) have been set up and P AEC has trained a large

number of personnel in public and private sector206•

The estimated hydel potential of the country during the Eighth Plan was in the range

of26,563 MW out ofwhich 3768 MW ofpotential had already been exploited, by, the

end of the Seventh Plan. Preliminary ranking of a number of sites on Indus River for

future development had already been done whereas projects of Kalabagh Dam, Basha

203 IAEA (2003), no. 195 204 ibid 205 Government of Pakistan, PAEC (2003), Pakistan Atomic Energy Commission, NDT, National Centre for Non- Destructive Testing Commission, Newsletter, Online: Web], Accessed on 26 September 2008, URL: http://www­pub.iaea.org/MTCD/publications!PDF /cnpp2003/CNPP _ Webpage/PDF /2000/Reports/P AKIST AN .pdf. http://www. paec. gov. pk/newsletters!ndt-nl/ apr-jun-02 .htm

206 IAEA, no. 195

147

Dam and, Ghazi Barotha were at various stages of preparation and implementation207•

Besides the large hydel stations, there were a number of sites where small and mini

hydels were planned. These hydel projects could meet local needs. Salient features of

the policy for hydel development, adopted for the Eighth Plan included the

development of large and medium hydel plants and investigations and development of

small and micro hydel projects by the Provinces concerned for meeting local

demand.208

When Pakistan got independence in 1947, it inherited 60 MW generation capacity for

its 31.5 million people. The pace of electric power infrastructure development gained

momentum by the year 1970 and within the next five years, the instilled capacity rose

from 36 MW in 1970 to 1331 MW in 1975, with the setting up of a number ofhydro

and thermal power units209• In the year 1980, the system cap~city touched 3000 MW

and, thereafter it rapidly grew to over 7000 MW in 1990-91210•

Since the 1990s, thus, the installed capacity has more than doubled, with both thermal

and hydropower playing third part211• From 1960 to 2003, the installed capacity of

hydropower generation had increased at 48% per annum. At the same time, however,

the share of hydropower generation installed capacity in total electricity generation

mix decreased from 70% in 1960 to 28.3% in 2003 due to percentage increase of

other sources212• The electricity generation capacity in the country rose to 19,547 MW

in 2007, out of which 7707 MW was generated through IPPs. The installed electricity

generation capacity in Pakistan in 2007 was 19,547 MW out of which only 6599 MW

207 World Bank (2004), "Energy and Infrastructure Unit: South Asia Region", URL: http://www­wds. worldbank.org/ 208 Government of Pakistan , no. 51. 209 "$2.9 Billion required for Power Projects", [Online: Web], Accessed on 21 April 2008, URL: http://www.paktechsearch.com/outlook.asp 210 Mirza et. AI. (2007), "Hydropower use in Pakistan: Past, Present and Future", Renewable and Sustainable Energy Reviews, 12(6): 1641-51. 211 Government of Pakistan (2006), "Policy for Development of Renewable Energy for Power Generation Employing Small Hydro, Wind, and Solar Technologies", [Online: Web], Accessed on 15 September 2007, URL: 02.83.164 .26/wps/wcrn/ connect/27 d8 708046f9dc6f9fl 5 ff0561 b29469/PakistanREDevelopmentPolicy­Dec092006.pdf? 212 AsifM., no. 22

148

carne from hydropower.213 Of the total estimated hydropower potential in Pakistan in

2008, which was more than 42 GW, only 6.5 GW had been tapped by then. The

addition of 1450 MW capacity during 2001-05 through the Ghazi Brotha hydropower

project resulted in change in the hydro/thermal ratio from 0.40 in 2001 to 0.53 in 2006

The present installed capacity of hydropower generation is 5041 MW. Out of a total

potential of 40 GW, only 16% has been developed by 2008214•

Hydropower is increasingly being seen as an important source of energy in Pakistan.

The fact that it is non-polluting, environment friendly, low cost, relying on proven

technology, makes it an attractive source of energy. The Government aims to change

the hydel-thermal ratio in the national energy mix in favour of hydel power by the

year 2025. To achieve this, the government intends to pursue 'fast track development

ofhydel power generation.

Hydel energy is particularly useful for Pakistan as it lacks adequate supplies of non­

renewable energy sources like oil and gas215. Hydropower projects have the inherent

ability for instantaneous starting, stopping, load variation, etc. and help in improving

the reliability of the power system. They are the best choices for meeting peak

demand216• The generation cost is not only inflation free but also reduces with time. In

2000-01, the average cost of hydropower generation in Pakistan was about 0.20 per

Kwh. Hydropower projects also help in opening avenues for development of remote

and backward areas217•

The installed capacity ofPEPCO system is 18,233 MW as of March 2010 with hydro

6,555 MW and thermal 11,678 MW. The hydropower capacity accounts for 35.95

percent and thermal 64.05 percent.218

213 Mirza, et. al. No. 210 214 Muneer and Asif, no. 120 215 "Proper Usage ofHydel Power To Overcome Energy Crisis", The Nation, October 6, 2008. 216 Mirza et. al. no. 210 217 "Facts about Hydropower", Wisconsin Valley Improvement Company Accessed on I March 2008 [Online: web] URL: http/: www.wvic.com/hydro-facts.htm. 218 Government of Pakistan, no. 23

149

Further development in the hydroelectric sector has slowed down due to long-lead

time, political conflicts and high capital cost of dams219• Another obstacle is a number

of additional sites with major potential exist in the mountainous North but are areas

that are very difficult to access and becomes very costly due to the huge costs

involved in transmitting electricity to the South of the countrr20•

The three main rivers, Jhelum, Chenab and Indus travel across the country to reach

the Indian Ocean and are the main source of hydro electricity in Pakistan. A large

proportion of the hydro generators are located at the two large damn sites of Mangla

and Tarbela. The Tarbela is located on the Indus river in the NWFP and has an

installed capacity of 2,164 MW while the Mangla is located on the Jhelum river in

"Azad Kashmir" and has an installed capacity of 800 MW221• The Neelam river in

"Aiad Kashmir" also offers huge potential for small-scale hydro projects222.

The organizational and institutional infrastructure of the hydel sector of Pakistan

comprises of the following organizations.Z23The Ministry of Water and Power: This

organization plays the lead role in the implementation of all policies pertaining to

water and power issues in the countif24; Water and Power Development Authority

(W APDA): This organization, when established in 1958 had a massive agenda to

attend to including generation, transmission and distribution of electrical power

together with irrigation, water supply, drainage and flood control. It owns about 54%

of the country's total electric power generation capacity and serves 88% of all

electricity customers of Pakistan225; Private Power and Infrastructure Board (PPIB):

The was established in 1994 by GOP as an extension of the Ministry of Water and

Power for encouraging participation of private entrepreneurs in the power

219 Muneer and Asif, no. 120 220 "Pakistan Energy", Accessed on 23 April, 2007, [Online: Web] URL: countrystudies.us/pak/html 221 "Pakistan Energy'', no. 220 222 ''Need for Effective Energy Policy Stressed to Exploit Potential", (2007) Pakistan Tribune, 14 June 2007, [Online: Web], Accessed on 12 March 2007, URL: www. Paktribune.org. 223 Mirza et. al., no. 210 224 Government of Pakistan, no. 155. 225 Government of Pakistan, Water and Power Development Authority, [Online: Web), Accessed on 16 September 2007, URL: www.wapda.gov.pk/

150

generation226; Karachi Electric Supply Corporation (KESC) : KESC was established

in 1913 and is one of the oldest utilities in the South Asian region. It caters for the

electric power requirements of Karachi. KESC are principally engaged in the

generation, transmission and distribution of electricity to industrial and other

consumers within its licensed areas227; National Electric Power Regulatory Authority

(NEPRA). NEPRA was established under the Regulation of Generation, Transmission

and Distribution of Electric Power Act 1997.The main functions of NEPRA are to

grant licenses for generation, transmission and distribution of electric power,

prescribe and enforce performance standards for generation, transmission and

distribution companies, and determine tariff, rate etc. for the supply of electric power

services. Being a regulator, NEPRA is responsible for all matters related to the tariff

of electric power in the countri28; Energy Wing (Planning and Development

Division): The Energy Wing was created in 1988 under the Ministry of Planning and

Development to undertake technical, financial and economic appraisal of generation,

transmission and distribution projects submitted by WAPDA, KESC, etc. The Energy

Wing also prepares short-and long-term energy sector programs, including forecasts

on supply and demand of utilities229; Sarhad Hyde! Development Organization

(SHYDO). In 1986, the Government ofNWFP established SHYDO for carrying out

hydropower prospects, hydropower development and to act as a utility company for

the isolated rural communities. With the assistance of W APDA and German Agency

for Technical Cooperation (Deutsche Gesellschaft fur Technische Zusammenarbeit,

(GTZ), SHYDO has prepared a master plan for the development of more than 6000

MW hydropower potential identified in NWFP. It has successfully completed

feasibility studies of several hydropower projects ranging from 8 to 125 MW.

226 Government of Pakistan, Private Power Infrastructure Board, [Online: Web], Accessed on 27 August 2007, URL: www.ppib.gov.pk/mwp.htm

227 Government of Pakistan, Karachi Electric Supply Corporation Ltd. Government [Online: Web], Accessed on I 7 October 2007, URL: www.kesc.com.pk/ 228 Government of Pakistan, National Electricity Power Regulatory Authority, [Online: Web], Accessed on 16 July 2007, URL: http://www.nepra.org.pk/ 229 "Pakistan: Coal Power and Generation Potential", [Online: Web], accessed on 5 March 2007, URL: ww.nepra.org.pk!Policies/Coal%20Potential%20in%20Pakistan.pdf

151

Presently, SHYDO is implementing 81MW Malkand-III hydropower projece30,

Punjab Power Development Board (PPDB). PPDB was created in Punjab's Irrigation

Department in 1995 for the promotion of hydropower generation in canal sites in

PURjab. At different canals, about 324 potential sites of medium and low head were

identified, with a total estimated capacity of 5895 MW231, Irrigation Power

Department Sindh (IPDS). IPDS is responsible for the hydropower development and

identification of suitable sites on canals and barrages in Sindh232, "AJK" Hydro

ElectQ.c Board ("AJK" HEB) and "AJK" Private Power Cell ("AJK" PPC). In order to

exploit the plentiful hydropower resources of AJK, the Government of AJK

established the AJK HEB in 1989233, Northern Areas Public Works Department

(NAPWD). This was established to provide electric power to the isolated network of

the Northern Areas23\ Pakistan Council for Renewable Energy Technologies

(PCRET). This was created in 2001 by merging National Institute of Silicon

Technology (NIST) and the Pak~stan Council for Appropriate Technology (PCATi35,

Alternative Energy Development Board (AEDB) was created in May 2003 to at as a

central national body on the subject of renewable energy36.

23° Farooqui, G.H. (2008), "Sheshi Hydro Power Project ofSHYDO", Online: Web], Accessed on 18 September 2008, URL: http://www­pub.iaea.org/MTCD/publications/PDF /cnpp2003/CNPP _ W ebpage/PDF /2000/Reports/P AKIST AN.pdf. http:/ /www.groundreport.com/ Arts_ and_ Culture/Sheshi-Hydro-Power-Project-of-SHYDO 231 "PG: PPDB asked to meet power demands of Punjab: Minister'', Pakistan Press International, 29 April 07, Online: Web], Accessed on 21 September 2008, URL: http://www­pub.iaea.org/MTCD/publications/PDF /cnpp2003/CNPP _ Webpage/PDF /2000/Reports/P AKIST AN.pdf. http://www.accessmylibrary.com/coms2/summary _ 0286-30652817 _ITM 232 Irrigation and Power Department, Government of Sindh, Irrigation and Power Department, [Online: Web] Accessed on 17 March 2007, URL: http://www.aaas.org/internationaVehn/waterpop/front.htm www.sindh.gov.pk/dptllrrigation%20&%20Power/contactus.htm 233 Mirza, et. al., no. 210 234 "Community-Based Renewable Energy Development In The Northern Areas And Chitral, Pakistan", [Online: Web], Accessed on 6 July 2008, URL: http:/ I cdmpakistan. gov. pk/ cdm _doc/ community"/o20based%20renewable%20energy"/o2 Odevelopment %20in%20northern%20areas%20of%20pakistan.pdf 235 Government of Pakistan, Pakistan Council for Renewable Energy Technologies, [Online: Web], Accessed on 17 March 2007, URL: http://www.aaas.org/internationaVehn/waterpop/front.htmwww.pcret.gov.pk/ 236 Government of Pakistan, Alternative Energy development Board, [Online: Web], Accessed on 12 March 2008, URL: http://www.aaas.org/internationaVehn/waterpop/front.htmwww.aedb.org/

152

Renewable Sources of Energy

In view of the fact that fossil fuels are fast depleting off the face of the Earth, and

their limited supplies are under constant threat due to such factors as terrorism and

Pakistan's energy mix consisting mainly of fossil fuels237, Pakistan's energy security

is in grave danger. Where energy security means a consistent and continuous

availability of sufficient energy in various forms at affordable prices, these conditions

must prevail for long if they are to provide security for any country. During a panel

discussion in Islamabad on 2ih March 2006, Nobel laureates Prof. Charles Townes,

Ivar Giaver and Gerardust Hroft also stressed on the importance of renewable sources

of energy for Pakistan, along with nuclear238• The fast depleting reserves of gas and

the enormous expenditures that use of oil entail, for Pakistan, make both sources of

energy, fulfilling 79% of Pakistan's energy requirements239, an unsustainable option

for the long term, thus paving the way for a greater use of renewable sources.

Keeping this in mind, there is great stress on renewable sources, like wind and solar

energy as they are not limited in nature and can be a source oflong-lasting energy40•

Keeping this in mind, the Government of Pakistan set up the Alternative Energy

Development Board in 2006. The Chair of this Board reports directly to the Prime

Minister. The agenda of the Board was to exploit renewable energy, also known as

'soft energy'241 in a major way. The various sectors of energy that are seen to have

potential in this regard are wind, solar, micro wind, solar photovoltaic, solar thermal,

biofuels, biomass and micro-hydee42• The Board has been successful in spreading

237 Mirza, et al ,no. 210 238 Hakeem, no. 30 239 Hathaway, Robert M. (2007), "Introduction", Hathaway et. al., no. 149 240 World Energy Council (1996), Asish K. "Development of Alternative Energy Resources", Asia Energy Vision 2020:Sustainable Energy Supply, International Seminar, New Delhi: Concept Publishing Company 241 A term coined by Amory Lovins, as quoted in Forbes Ian A. (1978), "Energy Strategy: A Time for Realism", Corpulas, Milton R. (ed.), Energy Perspectives, Washington D.C.: Heritage Foundation. 242 Mukhtar A. and Arshad H. Qureshi (2006), "Assessment Of New And Renewable Energy Resources Potential And Identification Of Barriers To Their Significant Utilization In Pakistan", Renewable and Sustainable Energy Reviews, 12 (1): 290-98.

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awareness among policymakers on the need to stress on alternate sources of energy43•

According to the Board, the meaning of "alternative or renewable energy" means

energy that is produced by alternative or renewable resources as compared to the

conventional or that are replenished naturally, which do not deplete when consumed

and are non-polluting and environmental friendly44• Though renewable sources are

important for the future of Pakistan, there is a view, however, that they should be seen

as supplementary resources and not as alternatives till a proper institutional structure

and infrastructure for their development is completely in place245.

In view of high capital costs of solar and wind systems and the resource constraints,

the policy during the Eighth Plan continued to emphasise on the demonstration and

utilization of these sources of energy in far flung areas only, where conventional

sources of energy are not readily available. Moreover, this was to be the responsibility

of the organizations responsible for delivery of conventional energy. Pilot scale

systems in far-flung areas were preferred to rather small installations near the urban

areas as in the past. Some integrated projects (hybrids of wind, diesel and solar) were

to be established and operated by the agencies such as W APDA so that the cost of

maintenance was also reduced as well as the locations of the plants could be

coordinated with the programmers of transmission development and isolated diesel

generating sets. Similarly, solar water heating was to be promoted by gas and oil

companies246• For wind Energy, a wind resources programme was to be initiated so

that specific projects could be formulated depending upon the wind regime247• Imports

of equipment for use of renewable energy were to be considered for taxes and duty

243 Government of Pakistan (2008), Alternative Energy Development Board, [Online: Web], Accessed on 23 March 2008, URL: http://www.aedb.org/ 244 AEDB (2006) Alternative Energy Development Board, "Acts, Ordinances, President's Orders And Regulations", [Online: Web], Accessed on 23 March 2008, URL: http://www.aedb.org, Government Of Pakistan, Law, Justice And Human Rights Division, Islamabad, The 11th May, 2006", The Gazette of Pakistan, 13 May, 2006, Islamabad, Accessed on 15 May 2008, [Online: Web] URL: http://www.aedb.org/ordinance.php 245 Mukhtar and Qureshi no. 242. 246 Kumar, Amit (2000), "Energy Scenario in South Asia", Energy Technology News, Issue 1, [Online: Web] Accessed on 23 April2007, URL: http://www.teriin.org/opet/articles/artl.htm 247South Asia Regional Initiative (SARI), "Pakistan Energy Overview", URL: http://www.sari­energy.org/Pagefiles/Countries/Pakistan_ Energy_ Overview.asp

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exemptions248•

In terms of available solar energy, Pakistan is judged to be amongst the richest

countries in the world, having an annual global irradiance value of 1900-

2200 kWh/m2249• The best way to utilize solar energy is through photovoltaics that

convert the sun's energy directly into electricity. Since the late 1990s, Pakistan has

shown encouraging development in this field250• The National Institute of Silicon

Technology (NIST) under the Ministry of Science and Technology has already

developed the know how and technology to fabricate solar cells modules and

systems251. The photovoltaic technology is particularly suitable for small power

requirements and remote area applications252• It is thus quite relevant to Pakistan in

the area of rural electrification. About 17 stations have been installed in Pakistan in

the 1970s. Both the private and the public sectors are involved in the development of

this technology in Pakistan. There is also another type of solar technology that is

simpler, more low cost and can be more easily adopted This can be used for cooking,

heating and cooling of buildings, generation of high temperature steam, heating water

for domestic and industrial applications and for drying agricultural products under

controlled conditions of temperature. This technology can be utilized in solar dryers,

solar cookers, solar water heaters and solar desalinisers. Two plants consisting of 240

stills each with a capacity to clean 6 thousand gallons of water per day has been

installed at Gwadar already53•

248 Government of Pakistan, no. 94. 249 M. Asif (2009), no. 22 250 "Development of Alternative Energy Resources Urged", Daily Times 26 January, 2007. 251 Kabir, Aamir, "Prospects for Solar energy in Pakistan", Dawn 3 March, 2003 [Online: Web] Accessed on 12 February 2007, URL: http://www.dawn.com/2003/03/03/ebr1l.htm 252 Azfar A Khan, Air Cdre (R), "Solar Panels: Less Costly, If Produced Locally" Business and Finance Review, [Online: Web] Accessed on 12 February 2007, URL: http:/ /j ang.com. pk/thenews/ oct2008-weekly/busrev-06-1 0-2008/pS .htm 253 Anwer, Kurshid (2001), "Pakistan: Country Paper", Regional Seminar on Commercialisation of Biomass Technology, Economic and Social Commission for Asia and Pacific, 4-8 June 2001,Guangzhou, China.

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Regarding wind energy, about 30 windmills for pumping water were installed for

experimental purposes in different parts of Sindh and Baluchistan254• This project

suffered however due to the low quality of the mill and lack of infrastructure and

maintenance255• A local manufacturer, Merin LTD had also been engaged to fabricate

windmills to lift water. A proposal for wind survey had also been launched to provide

authenticated data of wind speed at different altitudes.

Pakistan Council for Appropriate Technology (PCAT), on a cost-sharing basis

installed 253 "run of river type" plants with a total capacity of 4 MW in the NWFP256•

The civil works including construction of power channel, powerhouse, electric poles

and the distribution networks were done by the beneficiaries themselves, while the

Institute provides mechanical equipment as well as technical expertise and

supervision. These plants were useful in providing electricity for light during

nighttime and also in small industrial units. In 2000 the Government had planned to

install another 300 plants through the PCAT257•

Under the MTDF, The AEDB was to facilitate alternative/renewable energy projects

and develop and implement off-grid electrification programme of rural areas.

Intensive efforts were to be made to ensure the installation of 100 MW wind power by

December 2005 at Kati Bander and Gharo Sindh and 700 MW by 2010. At least 5

percent of total national power generation capacity was to be met through these

resources by 2030 (i.e. 9700 MW). In addition, under the remote village

electrification programme, 54000 homes would be lit by solar/wind/micro

hydropower during the MTDF. AEDB would also undertake a comprehensive plan

for the development of solar products like, solar lights, solar fans, solar cookers and

solar geysers through the participation of private sector?58

254 (AEDB) Alternative Energy Development Board, "Resource Potential of Wind Project", URL: http:/ /www.aedb.org/respotential_ micro wind. php 255 Mirza, Umar K. et al (2007), "Identifying and Addressing Barriers to Renewable Energy Development in Pakistan", Renewable and Sustainable Energy Reviews, 13(4): 927-931. 256 Anwer, no. 253. 257 Anwer, no. 253. 257 Latif, no. 257. 258 Government ofPakistan, no. 147.

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Bio waste is another area of renewable energy that is an economical and environment

friendly way of producing energy through disposing of municipal waste that is

collected in tonnes in cities everyday59• In recent years, waste-to-energy technologies

have been developed to produce clean energy through the combustion of municipal

solid waste in specially designed power plants equipped with the most modem

pollution control equipment to clean emissions260• AEDB has signed a contract with a

foreign firm for carrying out a feasibility study for generating up to 1 0 MW of

electricity from Municipal Solid Waste in Karachi. The study is currently underway

and would lead to establish a 10 MW Waste-to-Energy power plant in Karachi.

AEDB has initiated a project for carrying out detailed studies for biomass I Waste-to­

Energy projects in 20 cities of Pakistan. Companies have been short listed for

issuance ofRFPs on basis of Expressions of Interest (EOI) submitted by them.261Yet,

solid waste management practices differ for developed and developing nations.

Developing countries like Pakistan, suffer from a vacuum as far as far as the running

of concerned institutions is concerned, in matters of responsibility delegation and

policymaking. There is also dearth of sufficient information and policy regarding this

energy sector in Pakistan. As a result, much has been achieved in this direction in

Pakistan so far. 262

Traditional Sources of Energy

During the Seventh Five Year Plan of 1988-1993, the government aimed at certain

objectives. At that time, mainly the traditional sources of energy were understood to

259 "Energy from Bio-waste", [Online: Web] Accessed on 01 April 2007, URL: http://www.auroville.org/research/ren _ energy/biogas.htm · 260 Bade 0. et al. "Integrated Concept for Decentralised Waste Water and Biowaste Treatment", [Online: Web] Accessed on 3 April2007, URL: http://cgi.tu-harburg.de/-awsww/NW/pdf/470.pdf. 261 Government of Pakistan, no. 23 262 Abbasi, Arshad H. "Waste to Energy needed in Pakistan", [Online: Web], Accessed on 16 March 2008, URL: http://www.altemative-energy-news.info/waste-to-energy-pakistan/

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be "renewables", as mentioned in the plan document as well263• Thus, Renewable

energy resources were derived almost entirely from biomass and fuel wood

constituted about 32 per cent or 1-L.5M TOE of total energy supply in Pakistan in

1987-88. In 1993, it was estimated that 90 per cent of the rural households and 60 per

cent of the urban households met their energy needs by use of biomass, including fuel

wood264• The contribution of solar, wind and mini-hydels, although small (less than

5MW), was measured by the positive impact they had on the quality of life in rural

areas. Thus, under the Seventh Plan a detailed master plan for renewable energy

development was planned ensuring proper institutional arrangements under which

coordination and leadership for the development of renewable resources, including

biomass, wind, solar and small hydels was integrated. Such an integrated approach

had been lacking so far265•

Similarly, under the Eighth Five Year Plan, traditional sources such as biomass were

again bracketed with renewable sources, like wind and solar. Again, based on a study

of the plan period of the Sixth plan, it was found that bio mass contributed as the main

source of energy among all the Traditional sources?66 Thus, various plans were laid

out develop it better, along with those for wind, solar and biogas. Thus, those laid out

for Biomass were Improvements in efficiencies of utilization of biomass (thus,

increase inefficiency of cook stoves, etc.), promotion of better utilization and

distribution practices of crop residues, improvement in the market structure for

firewood and crop residues267 and the promotion of forestry and increase in the

availability ofbiomass268•

263 "Pakistan: Pakistan Community-Based Renewable Energy Development in Northern Areas and Chithral", [Online: Web] Accessed on 12 May 2007, URL: http://www.evd.nllhome/index.asp 264 FAO (1997), Food and Agriculture Organisation, "FAO Corporate Document Repository: Rural and Urban Wood Energy Consumption", URL: http://www.fao.org/docrep/w7519e/w7519e08.htm 265 Government of Pakistan, no. 94. 266 Krisna V.V. and S.T.K. Nairn "The Islamic Republic of Pakistan", [Online: Web] Accessed on 23 June 2007, URL: http:/ /portal. unesco .org/ education/en/files/ 5 56001 11999616085Pakistan. pdfi'Pakistan. pdf. 267 Anwer, no. 253. 268 Ilyas, Syed Zafar (2006), "Biogas Support Program Is a Reason for its Success in Pakistan", American-Eurasian Journal of Scientific Research 1 (1): 42-45

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Bagasse, dung and firewood furnished about 32% of all energy in FY1988. Some

localities were denuded of firewood and had to resort to commercial energy sources

such as coal and kerosene?69•

Biogas

The Government of Pakistan started a comprehensive biogas scheme in 1974 and

commissioned 4,550 biogas units by 1990 throughout the counttY70• The units were

designed to provide 3000 and 5000 cubic feet of biogas per day for cooking and

lighting purposes271• This programme was developed in three phases. During the first

phase 100 demonstrations were installed under a Government grant. During the

second phase the cost of the bioga~ was shared between the beneficiary and the

Government. During the third phase while the Government withdrew financial

support it continued to provide the technical support. This marked the end in progress

of this project, however. Pakistan has a big potential for using biogas energy in rural

areas272•

269 Latif, no. 257. 270 Qaseem, Navida et al (2005), "Dissemination of Cooking Energy Technologies for Sustainable Household Consumption in Pakistan", Journal of Rural Problems, 41 (1 ), 206-211. 271 Hassan, Majid ul (2002), "BT To Light Up Villages In Pakistan", Dawn, September 14, 2002. 272 Anwer, Kurshid, no. 253.

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