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Issues and prospects: Coal power generation in Pakistan

Discussion in 'Pakistan Economy' started by Neo, Jun 22, 2008.

  1. Neo

    Neo RETIRED

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    Issues and prospects: Coal power generation in Pakistan - I


    ARTICLE (June 21 2008): Coal is at present world's fastest growing fuel, particularly in the developing countries. Coal's importance can be judged from the fact that it provides 26% of primary energy and 40% of world electricity supply.

    Coal has gained special importance due to growing concerns for energy security prompted by the abnormal surge in world oil prices mounting tensions of the western countries with Iran, interruptions in the international supply network of gas from Iran and Russia and ongoing stand-off in the Arabian Gulf.

    Coal offers a solution, which is still found in abundance locally in most parts of the world. World coal consumption is expected to increase by 74% from 2004 to 2030. World trade of coal is expected to increase about 40%, from 800 million tons in 2007 to 1122 million tons in 2030. Coal share in world energy consumption is expected to increase to 28% by 2030 but its share in power generation is expected to remain 41% roughly at the current level. Coal as an indigenously available resource has a strategic importance and is world's fastest growing fuel.

    Today China is world's largest producer as well as the biggest consumer of coal which accounts for 78% of its total energy requirement. Realising importance of coal many countries in other parts of the world have switched over to coal to meet their energy needs. India, Indonesia, Germany, USA, Australia and UK are among those countries that have embarked upon new coal based power plants. USA is world's second largest user of coal whose 60% requirements for energy are met with coal.

    Usage of coal as a source of energy, in the developing countries, has been downplayed by powerful multinational oil companies and cartels who do not wish to see coal as a substitute of oil that they sell. Negative perceptions about the utility of coal have some how, adversely affected policies of the countries such as Pakistan. Coal as a fuel had been ranked low on the list of Pakistan's development priorities primarily due to concerns about its quality and requirement for huge upfront capital. Apart from this, in the absence of a strong political will to promote coal based power projects, foreign investors have not been supported as much as they ought to be.

    Quite a few were forced to withdraw their initiatives after incurring heavy losses. As a result what we see today is that share of coal in Pakistan's energy mix is about 5 % and in power generation even less than 1 %. Pakistan is one of the lucky countries which are blessed with vast deposits of coal. By increasing the share of coal in our energy mix we could have conserved more valuable gas, which is depleteable resource. Unfortunately, we have compromised our future by relying excessively on natural gas, and are now running the risk of energy security.

    Pakistan's major known coal reserves are located in the province of Sindh, specifically in Thar, estimated at 175.5 billion tons which account for the bulk of Pakistan's total reserves, estimated at 185 billion tons. Other coal deposits of significance in Sindh are located at Sonda (Jharruk) 5.5 billion tons and Lakhra (Dadu) 1.33 billion tons. Current estimated value of the Thar coal deposits is S 8 trillion and if converted into energy its values comes to $25 trillion.

    It has the potential to generate 100,000 MW of electricity for 300 years. Pakistan is 6th largest coal rich country in the world and the aggregate energy potential of these resources is more than the combined energy potential of the resources that Saudi Arabia and Iran possess. Unfortunately there are factors, other than those mentioned above, that have not supported investor's initiatives for the exploitation of Pakistan's coal resource in the past.

    THESE ARE AS FOLLOWS:

    1) Lack of necessary infrastructure (roads, water, life support systems, community services and communication network) to support project activity.

    2) Inconsistent government policy.

    3) Inaccessibility to national grid.

    4) Political uncertainty.

    5) Security concerns - Law and order situation.

    6) Tariff issues originating from uncertainties surrounding price instability of the capital equipment and other input costs as well as inherent risks associated with a typical coal mining and power generation venture.

    7) Uncertainties in the lead time required in the delivery of capital equipment.

    8) Mining is a provincial subject. Thus hostage to vested interests.

    9) Coordination with Federal and Provincial Government departments and ministries.

    Consequently, Pakistan continues to rely considerably on imported coal to fulfil requirements for a range of industrial applications. Major industrial consumers are cement industry, brick kilns, power plants, chemicals and steel industry. Major suppliers are China, Indonesia and South Africa.

    In recognition of the growing importance of coal, it should be the cornerstone of our future energy policy. GoP is committed to increase substantially the share of coal in Pakistan's current energy mix. Under the Vision 2030 strategic plan, Pakistan's coal power generation is planned to be increased from present 200 MW (which is about 1 % of total power generation) to 1060 MW by 2010 and to

    19,910 MW by 2030. Also share of coal in the overall energy mix is planned to be increased from 5% to 19% by 2030 and to 50% by 2050.

    According to IEA estimates presently known reserves of crude oil with project demand will last 41 years, natural gas 67 years and coal 192 years. Given the relative importance of coal in relation to highly inflated prices in the international oil market, these targets are well justified. However, given the checkered history of the plans to exploit existing coal reserves in Pakistan, these targets appear to be over ambitious.

    GoP will have to bring about a drastic shift in the list of its development priorities and demonstrate its seriousness through a strong political will to make these goals look real. The exploitation of cheaply available indigenous coal would help Pakistan benefit in two ways. Firstly it would help achieve objective of self reliance and relieving burden of costly oil imports and secondly to generate power, as a least cost solution.

    THE QUALITY ISSUE: Unfortunately, utility of the coal deposits found at Thar had been viewed doubtful. Lignite coal has certain characteristics that makes it a low BTU fuel and difficult to extract and transport. It has high moisture content (almost 40-50%) and mineral matter (especially sodium).

    These can affect adversely the efficiency of the plant by causing severe slugging and fouling in conventional boilers and thus make operation costly. But SFBD technology designed to produce dry coal, now developed commercially, provides a solution to these problems.

    The other concern about the quality of locally available coal relates to the presence of high sulfur content which can be dealt with Circulating Fluidised Bed (CFB) technology. Also the Integrated Gasification and Combined Cycle (IGCC) technology is designed to make best use of high moisture lignite coal for power generation. Coal found in Pakistan has high sulphur content.

    Therefore for certain applications, Pakistan has to rely on imported coal. However local coal can be processed to produce clean coal by setting up sulphur washing plants at respective mine sites. Thus appropriate technologies are available to ensure desired utility of the available coal deposits in Pakistan.

    Business Recorder [Pakistan's First Financial Daily]
     
  2. Neo

    Neo RETIRED

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    Issues and prospects: coal power generation in Pakistan - II


    ARTICLE (June 22 2008): EMISSIONS AND ENVIRONMENTAL CONCERNS: While coal is going to be the fuel of next century, the issue of emissions control and pollution abatement shall have to be properly addressed in the context of climate change under Kyoto protocol. In the longer term one must also keep in mind that CO2 mitigation initiatives down the road may become mandatory for countries like Pakistan. This may add to the cost of coal power generation as has happened in the developed world.

    The pollution abatement costs in the developed world have reached levels where projects have started yielding negative returns. One must keep in mind that a typical power coal plant generates 3 million tons of CO2 or 17 tons of carbon per megawatt and draws about 2.3 billion gallons of water per annum from nearby source while on land, whereas Sindh is seriously deficient in the supply of water even for agriculture; produces mercury which not only renders water useless for human consumption but also for irrigation purpose as well.

    So the challenges are ahead in the use of coal as a fuel which involves adoption or the development of technologies that minimise the environmental impact. This would certainly mean higher up-front costs as a compromise too much higher long-term costs that will have to be paid in the form of environmental impact. Use of coal presents a challenge in preserving the quality of the environment.

    TARIFF ISSUES: Issue of tariff remains to be a point of contention between the sponsors of coal based power projects and NEPRA. Demands for 9.5 cents per KWh have been contested by NEPRA with the argument that a tariff of over 7.8 per KWh cannot be justified.

    From a sponsors viewpoint the matters at the heart of the issue are the risks associated with so many unknowns involved in a typical coal based project within an entirely new environment lacking fully developed infrastructure and a track record. The argument that goes in favour of up-front tariff is that international price of oil is uncontrollable and a deeply embedded upward trend in prices may persist till an indefinite future.

    Project sponsors use price of oil, prevailing in the international market at a particular time, as a benchmark. While intricate and time consuming tariff negotiations are underway sudden upwards movement in the price of oil invalidate the whole rationale of the predetermined tariff and the exercise has to be done all over.

    Delays cost money and keep on adding to the cost of the project till it becomes unfeasible or the investor is forced to look for better opportunities elsewhere. Under the Power Policy 2002, competitive bidding process is time consuming and takes two years to conclude which no investor can afford in times of uncertainty of prices of everything and supply constraints while risking losing US $7-9 Million in development costs.

    In order to alleviate investors concerns, government should be willing to share the risks and contingencies that investors perceive subject to certain conditions. There is a need for an equitable policy that would enjoy the confidence of all stakeholders. GoP needs to come up with a cost based pricing formula which should form basis for competitive bidding on the tariff to avoid recurrence of bitter experience of 1994 power policy. But at the same time the proposed approach would ensure incentives to the investor without putting excessive burden on the domestic consumer and conserving competitiveness of the industrial consumer.

    Adjustments can be made to tariff based on a cost based formula in line with shifts in prices upward or downwards. Another approach should be that demand for the up-front tariff(as an indicative tariff) should be accepted right away subject a review based on actual costs with the condition of a strict monitoring role jointly by NEPRA, Sindh Coal Authority and PPIB.

    The idea would be to ensure a reasonable rate of return to the project sponsors with minimum risk in the spirit of private-public partnership. This should be done at least for the first project sponsor for Thar as a showcase to attract other international investors.

    Costs should be monitored closely along with overall project activity for necessary adjustments to the indicative tariff to ensure that consumer is not overly burdened with a highly inflated tariff.

    THE WAY FORWARD: Plans to exploit coal resources in Pakistan through a piecemeal approach have not met with any success so far. Any initiative to develop and exploit Pakistan's coal resources, in the absence of a comprehensive strategic plan, is bound to fail.

    Formulation of a strategy based on an integrated approach with the participation of all stakeholders should ensure long term viability and success of any project which would form part of a long term coal development program.

    New democratic government may consider creating a high powered body (Commission for the development of coal) which should not only serve as a think tank for the formulation of strategic plans and policies but also should serve as one window facility and a high powered decision making body for the speedy implementation of coal mining and power projects.

    The proposed commission may draw representation from Federal Ministries of Planning, Water and Power, PPIB, NEPRA, WAPDA, KESC, Provincial Government Planning and Development Department, Mineral and Mining Dept and Sindh Coal Authority (for the province of Sindh), HDIP, PMDC and professionals, consultants, research institutions and experts.

    Private sector should be encouraged, through a package of incentives, to come forward and participate in the socio-economic uplift of the target areas. They may also be invited to participate in the private/public sector joint venture schemes which government must launch for the socio-economic uplift of target areas so that basic conditions to attract investors could be satisfied.

    To name a few, these schemes could include recreational facilities, shopping centers, sports facilities, housing schemes, educational institutions, hospitals, etc. Also, in order to attract serious investors, a more detailed feasibility study is needed, especially on the mineability and suitability of Thar coal on the quality and utility.

    In addition more information and data on configuration and size of the reserves being claimed for large scale power generation projects be made available, it is imperative that extensive research may be undertaken by the national scientific research institutions to determine feasibilities of appropriate technologies that would ensure most efficient yet cost effective exploitation of the coal resources.

    Foreign institutions that have excelled in coal mining/power generation technology from countries such as UK, Germany, USA, South Africa, China, India, Poland and Russia may be invited to establish institutional linkage for carrying out coal based technical studies and research projects.

    This would provide a platform for the exchange of knowledge, learning of best industry practice, transfer of know-how and technologies, adoption of international quality standards, knowledge on the application of modem technologies, etc-etc.

    In the past there had been setback to the Chinese initiative to invest in the coal power generation in Pakistan. Despite that there is a lot of scope for co-operation and collaboration with China. Pakistan must establish institutional linkage with China to benefit from their extensive R&D program to develop cost effective and environment friendly technologies involving coal as fuel.

    Lessons learned from the bitter experiences of the past must be applied to attract investors and joint venture partners to exploit coal resources of Pakistan. The ongoing co-operation with China for the development of power and exploitation of coal deposits of Pakistan need to be boosted further.

    This could be achieved through promotion of institutional linkages and collaborative research projects for adoption of latest technologies making best use of indigenous resources in a cost-effective manner. Engineering Development Board can play a catalytic role to facilitate the process.

    Pakistan's heavy engineering industry in the public sector is operating considerably below capacity, in particular the HMC Taxila and KSEW Karachi; these industries have the potential for the transfer of technology to fabricate coal-fired power plants or their components in Pakistan. This will not only create new employment opportunities but also help lower cost of the plant and equipment based on local inputs.

    These organisations with the support of EDB should be brought into the loop of proposed institutional linkage. Pakistan has a lot to gain from China from their experience in the research and application of CTL technology as well.

    In order to revive interest of Chinese investors in coal-fired power projects they need to be offered a better incentives package with a guarantee for the protection of their capital and a competitive rate of return on their invested capital. Time is the essence of any project program.

    The Board of Investment has an important role to play and need to move fast to attract potential investors from the world over. The proposed high powered commission for the development of coal should serve as a one window operation to support smooth implementation and timely completion of projects free of procedural hurdles.

    Business Recorder [Pakistan's First Financial Daily]
     
  3. muse

    muse PDF THINK TANK: CONSULTANT

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    Thar Coal project was scheduled to be developed with the assistance of Pakistan's true ally, but now the "democratic" politicians true to their calling are to collect $$ - switching to the those who have bought and paid for them:


    Thar coal conference in US next month

    * Minister says people will start noticing improvement in power supply from August

    KARACHI: A round-table international conference on Thar coal project will be held in the United States next month, Federal Water and Power Minister Raja Pervez Ashraf said on Tuesday.

    The world’s top investors and experts in coal development and power generation have been invited to attend the conference, Ashraf told reporters after attending the cabinet’s Economic Co-ordination Committee (ECC) meeting at Governor’s House. He said Thar coal could help generate an unlimited amount of electricity.

    “Initially, we have planned to generate at least 6,000MW of electricity from the Thar power project in the next one year ... we have completed our planning in this regard and this conference will help attract not only foreign investment but also the latest technology in the coal-based power generation.”

    Improved power supply: The minister said there would be no load shedding in the country from 2009. “This will be an historic achievement of this government ... we will eliminate load shedding from the country for good,” he said.

    He said people would start noticing improvement in power supply from August this year.

    He said the ECC meeting had decided that Independent Power Producers (IPPs) and GENCOs [power generation companies] of WAPDA would get uninterrupted fuel supply round the year.

    “This will help them generate uninterrupted electricity round-the-clock.” He said the meeting also decided that the duration of load shedding would not exceed six hours a day.

    He said the government had taken a serious note of the unscheduled load shedding in Karachi by the Karachi Electric Supply Company (KESC).

    He said the government had accepted all demands of the KESC management and the PEPCO was supplying 500MW to it “then why they are resorting to more than one-and-a-half-hour load shedding?” app
     
  4. mujahideen

    mujahideen SENIOR MEMBER

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    Can anyone tell me why this conference is being held in the US. Now we will get dictation on how to develop this project from abroad. Have all of the experts on this sort of project died in Pakistan, that such a conference will be held overseas.
     
  5. muse

    muse PDF THINK TANK: CONSULTANT

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    Chinese were supposed to develop this with us - but ofcourse, "democractic" government ministers cannot collect $$ and so... to the mecca. Americans controlling our armed forces, their equipment, now Americans in control of power projects -- none of this would be problematic under different contexts, but we have all this going on in a effort to change the orientation of Pakistan and to harm our true ally - for what? for whom? for whose benefit?.

    Time is short, confrontation, in my opinion is inevitable, A major power needs to pluge Asia into conflict and Pakistan's "democrats" are their chosen tool.
     
  6. maqsad

    maqsad FULL MEMBER

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    What is going on with these people in charge? The wealth is there so simply start building the infrastructure. Get financing from banks and pay foreign engineers and scientists to work on the extraction and refining but make sure the project is owned by the Sindh and/or Pakistani federal government.

    And why did Musharaff's 8 years of rule not produce one single coal project? Neither did Musharaff force the construction of Kalabagh damn. The only thing he was interested in doing was getting lots of civilians and soldiers slaughtered while the ordinary people in Pakistan cursed and spat at him for 8 years so why should making Kalabagh damn or a Coal mining site be so hard for Musharaff the great patriot?
     
  7. muse

    muse PDF THINK TANK: CONSULTANT

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    Basically, stabbing our brother ally China in the Back - why not? our politicians can stab their own army in the back, so why not our brother ally


    Pak-US strategic dialogue on 29th

    Tuesday, September 02, 2008
    By Qudssia Akhlaque

    ISLAMABAD: The much pending third round of the Pakistan-US Strategic Dialogue will be held in Washington on September 29 to bolster bilateral cooperation in diverse areas ranging from energy to counter terrorism, diplomatic sources in Islamabad and Washington confirmed on Monday.

    The dialogue will be co-chaired by Foreign Minister Shah Mehmood Qureshi (on the Pakistan side) and Deputy Secretary of State John D Negroponte (on the US side).

    Basically the secretary-level dialogue, it was recently upgraded from the Pakistan side as the previous two rounds were led by the foreign secretary. Pakistan raised the level on a US request. Last year, the US government had upgraded it to the level of deputy secretary of state from the under secretary. The decision to raise it to the foreign minister's level was taken during Prime Minister Gilani's first visit to the US.

    Diplomatic sources in Washington indicated that in the fourth round the US side might be led by the secretary of state, equivalent of foreign minister in Pakistan.The upcoming dialogue will focus on the vital issues of food and energy security as well as terrorism, according to informed diplomatic sources. "In the meeting, both sides will review progress in bilateral cooperation in varied fields, consider new proposals and agree on next steps for future engagement," a senior Foreign Ministry official said of the meeting agenda.

    "A key point of discussion would be mapping of energy resources with the objective to indulge large-scale investments in coal and gas," US Ambassador Anne Patterson had disclosed in an interview recently. The last round was held in Islamabad in September 2007. Under the 2006 bilateral agreement, the two countries are supposed to hold the Strategic Dialogue every six months alternately in Washington and Islamabad. The third round of the Dialogue was due last year in October but it had to be deferred more than a couple of times due to a ìschedulingî problem. The inaugural session was held in Washington in April 2006. Subsequently, the Bush Administration upgraded it to the level of deputy secretary of state.

    The Strategic Dialogue was launched under the Pakistan-United States Strategic Partnership affirmed by the presidents of the two countries during the visit of President Bush to Islamabad in March 2006. It includes cooperation on counter-terrorism, education, science and technology, and expansion of economic opportunities.