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Editorial: Saudi bailout and our energy map
According to unconfirmed reports, Saudi Arabia has agreed to defer payment on half of Pakistans oil imports. The bill our friends in Riyadh have been requested to shelve is about $6 billion, which, if it happens, would cut by half our $12 billion cheque for yearly oil imports. There is, however, no indication how long the concession will last, but it is certain that it wont be forever, and that Pakistan will have to pull up its socks to reduce its dependence on oil in sectors where other fuels like coal can be used.
The possible Saudi concession would be equal to our foreign remittance level yearly which is about $6 billion annually. In other words, as far as the budget makers are concerned, we could eventually have $12 billion to play around with. The trade gap stands at a record of over $20 billion and will have to be brought down to make the Saudi concession meaningful. At the same time, the relief coming from the concession will give the government some leeway in negotiating solutions in some industrial sectors now threatened with closure because of the disincentives placed on the import of their inputs.
When such a Saudi deferment was made available to us the last time round, we did not do much to solve our energy crisis. The concession lasted for three years and the money was finally written off. But we simply cannot expect to behave as we did in the past. In 1998, when the concession started following our economic slump in the wake of nuclear testing, we were not faced with the energy crunch. So we should have projected our demands into the future and paid attention to an alternative that was available. We knew we had the worlds fifth largest coal deposits in Sindh. And we knew that India, which produces only 30 percent of its oil supply domestically, just like us, was making 70 percent of its electricity out of coal. But we ignored the writing on the wall.
Those who think that Saudi Arabia will once again write off the oil dollars should take another look at the world oil situation. The prices are rising on a daily basis, and what was yesterday simply a comparatively modest gesture to a Pakistan under nuclear sanctions, would today amount to extravagance. Therefore Pakistan should move quickly to exploit its coal deposits so that the dependence on Saudi largesse doesnt become highly irresponsible, if not politically suspect.
There are, of course, factors that might make us less vigilant and entangle us in red tape and corruption once again. The power situation could ease a bit because of the rains, which have improved the river-flows and filled up the dams and allowed them to produce more cheap electricity. Also, an improvement in the gas supply to power stations has resulted in an increase in power production by the Independent Power Producers (IPPs). Thus the national power deficit, which was a colossal 4,000MW, has come down to 2,300MW. Officially, we need 11,000MW but produce only 9,000. But the truth remains that we are short by more than just 3,000MW.
Gas is not a good fuel for making electricity. It is as expensive as oil and has other more important uses than just burning it in powerhouses and cars. We may not feel the financial bite of using our own gas at one-third the international price, but we are living beyond our means today. Tomorrow, when gas deposits are depleted, we will be shown how spendthrift we were when we had the gas. So when we think of alternative sources of energy, out of all of them hydro, wind, sun coal is the most practically and politically feasible.
The dams are filling up because of the rains in the catchment areas of the tributary rivers and high temperatures in the catchment area of the Indus River. Indeed, because of the 12-year cycle, the rains are predicted to be ample this year. Already, statements about how much good water is flowing uselessly down Kotri are trickling in. Therefore, in the coming days a wave of opinion on the need to build the Kalabagh Dam could well flood Pakistan and create more discord than consensus. It is true that electricity produced from dams is the cheapest provided one is reductive about the ecological damage the dams inflict but one has to do some realistic lateral thinking on the issue.
The project of Thar Coal has been lingering questionably during the Musharraf years. Now the Sindh chief minister, Mr Qaim Ali Shah, has the matter placed in his hands. If the PPP government doesnt move swiftly, it will have to face blame. As for the thinking that the Saudi bailout has a price tag in the shape of allowing President Musharraf to carry on, let us remember that for some time now wisdom imposed on us from abroad has only served to sanitise our extremist thinking. In fact, the 2008 post-elections political landscape would not have materialised if Saudi wisdom had not intervened. *
Daily Times - Leading News Resource of Pakistan
According to unconfirmed reports, Saudi Arabia has agreed to defer payment on half of Pakistans oil imports. The bill our friends in Riyadh have been requested to shelve is about $6 billion, which, if it happens, would cut by half our $12 billion cheque for yearly oil imports. There is, however, no indication how long the concession will last, but it is certain that it wont be forever, and that Pakistan will have to pull up its socks to reduce its dependence on oil in sectors where other fuels like coal can be used.
The possible Saudi concession would be equal to our foreign remittance level yearly which is about $6 billion annually. In other words, as far as the budget makers are concerned, we could eventually have $12 billion to play around with. The trade gap stands at a record of over $20 billion and will have to be brought down to make the Saudi concession meaningful. At the same time, the relief coming from the concession will give the government some leeway in negotiating solutions in some industrial sectors now threatened with closure because of the disincentives placed on the import of their inputs.
When such a Saudi deferment was made available to us the last time round, we did not do much to solve our energy crisis. The concession lasted for three years and the money was finally written off. But we simply cannot expect to behave as we did in the past. In 1998, when the concession started following our economic slump in the wake of nuclear testing, we were not faced with the energy crunch. So we should have projected our demands into the future and paid attention to an alternative that was available. We knew we had the worlds fifth largest coal deposits in Sindh. And we knew that India, which produces only 30 percent of its oil supply domestically, just like us, was making 70 percent of its electricity out of coal. But we ignored the writing on the wall.
Those who think that Saudi Arabia will once again write off the oil dollars should take another look at the world oil situation. The prices are rising on a daily basis, and what was yesterday simply a comparatively modest gesture to a Pakistan under nuclear sanctions, would today amount to extravagance. Therefore Pakistan should move quickly to exploit its coal deposits so that the dependence on Saudi largesse doesnt become highly irresponsible, if not politically suspect.
There are, of course, factors that might make us less vigilant and entangle us in red tape and corruption once again. The power situation could ease a bit because of the rains, which have improved the river-flows and filled up the dams and allowed them to produce more cheap electricity. Also, an improvement in the gas supply to power stations has resulted in an increase in power production by the Independent Power Producers (IPPs). Thus the national power deficit, which was a colossal 4,000MW, has come down to 2,300MW. Officially, we need 11,000MW but produce only 9,000. But the truth remains that we are short by more than just 3,000MW.
Gas is not a good fuel for making electricity. It is as expensive as oil and has other more important uses than just burning it in powerhouses and cars. We may not feel the financial bite of using our own gas at one-third the international price, but we are living beyond our means today. Tomorrow, when gas deposits are depleted, we will be shown how spendthrift we were when we had the gas. So when we think of alternative sources of energy, out of all of them hydro, wind, sun coal is the most practically and politically feasible.
The dams are filling up because of the rains in the catchment areas of the tributary rivers and high temperatures in the catchment area of the Indus River. Indeed, because of the 12-year cycle, the rains are predicted to be ample this year. Already, statements about how much good water is flowing uselessly down Kotri are trickling in. Therefore, in the coming days a wave of opinion on the need to build the Kalabagh Dam could well flood Pakistan and create more discord than consensus. It is true that electricity produced from dams is the cheapest provided one is reductive about the ecological damage the dams inflict but one has to do some realistic lateral thinking on the issue.
The project of Thar Coal has been lingering questionably during the Musharraf years. Now the Sindh chief minister, Mr Qaim Ali Shah, has the matter placed in his hands. If the PPP government doesnt move swiftly, it will have to face blame. As for the thinking that the Saudi bailout has a price tag in the shape of allowing President Musharraf to carry on, let us remember that for some time now wisdom imposed on us from abroad has only served to sanitise our extremist thinking. In fact, the 2008 post-elections political landscape would not have materialised if Saudi wisdom had not intervened. *
Daily Times - Leading News Resource of Pakistan
