KARACHI: Pakistan offers attractive opportunities to foreign and local investors in its power generation sector, but the menace of red-tape and terrorism hampers new investments, a top official of a leading business group said on Wednesday.
“There is need to develop a sense of urgency regarding Pakistan’s energy crisis,” said Khalid Mansoor, chief executive officer of Engro Energy, which recently inaugurated its first 217-MW power plant in Qadirpur, Sindh.
“The electricity demand outstrips supply by around 4,000 megawatt,î he said. “Indications are that it will broaden in the coming years if the government fails to attract massive investment in power generation sector.î
Mansoor praised the governmentís power policy and said that it offers lucrative opportunities to both local and foreign investors, who not just get a guaranteed 15 percent rate-of-return, but also protection against the rupee depreciation and inflation.
However, Pakistan’s poor credit ratings and security concerns deter investors, he said.
The cumbersome process of getting approvals from different government departments remains one of the key issues, said Mansoor, who headed many projects for Engro, but finds installing a power plant as most challenging.
Engro Energy, the subsidiary of Engro Corporation, was set up in 2006. The same year it started work on the power plant, which came on line in 2010 at a cost of $205 million.
He said that negotiations were held at different stages of the project implementation with Private Power Infrastructure Board (PPIB), National Electric Power Regulatory Authority, Water and Power Development Authority and the government.
“When PPIB has been established as one window facilitator for the all the power projects then why involvement of all the other agencies?” he asked.
Engro’s power plant is located in Qadirpur, located 600 kilometers north of Karachi. It uses poor-quality permeate gas from Oil and Gas Development Company Ltd-operated Qadirpur Gas Field that cannot be used by households and industry. “The idea struck us that why can’t we use it to generate electricity?”
Depletion of gas reserves in recent years has compounded the energy crisis. Production of natural gas, which meets 50 percent of the energy needs of the country, is approximately 25 percent less than its demand.
As an alternative, expensive furnace oil is being imported to run thermal power plants. Pakistan State Oil officials say that country will import 9.1 million tons in 2009/10 against 5.7 million tons the previous year.
Qadirpur Power Plant is likely to hit by gas shortage in 2017 when reserves at its nearby field deplete.
“Answer to this crisis is reliance on domestic coal reserves to meet the energy demand,” said Mansoor.
Engro Energy has embarked with Sindh government in a public-private partnership to explore prospects of using vast Thar coal reserves for generating electricity, he said.
The project will take at least two years to start. There are also question marks regarding the availability of $3 billion needed for mining and setting up a 1,200 MW coal-run power plant. But Mansoor has no doubts about its potential. “We just need one coal-fired power plant to start production and it will change the fortune of this country.”
