Integrated Energy Plan 2015

Integrated Energy Plan
2015 – 2025

Energy Expert Group
April 2015

2015 INTEGRATED ENERGY PLAN 2015 ‐ 2025

TABLE OF CONTENTS

I. ACKNOWLEDGEMENTS ............................................................................................................. 8
II. ENERGY PANEL MEMBERS ...................................................................................................... 10
VISION: .................................................................................................................................................... 15
1. INTRODUCTION: ..................................................................................................................... 16
1.1. OVERVIEW ..................................................................................................................................... 16
1.1.1. How Does Pakistan Fare By Comparison To Other Economies ............................................. 17
2. EXECUTIVE SUMMARY ........................................................................................................... 20
2.1. Economic Prospects ...................................................................................................................... 20
2.2. Energy Sector ................................................................................................................................ 20
2.3. Summary of Recommendations .................................................................................................... 21
A. Power Generation ......................................................................................................................... 22
B. End User Side (Demand Side) ........................................................................................................ 22
C. Industry ......................................................................................................................................... 22
D. Transport ....................................................................................................................................... 23
3. PAKISTAN’S ENERGY SECTOR: PRESENT AND FUTURE ............................................................ 31
3.1. Current Energy Mix ....................................................................................................................... 31
3.1.1. Proposed Energy Mix ............................................................................................................. 32
3.1.2. Final Energy Consumption based on current and past trends .............................................. 33
4. ENERGY FLOW DIAGRAM ....................................................................................................... 35
4.1. Energy Flow: .................................................................................................................................. 35
4.2. Key Highlights ................................................................................................................................ 37
4.2.1. Analysis: If Effective Management of Losses: ........................................................................ 37
5. ENERGY CONSERVATION AND EFFICIENCY .............................................................................. 38
5.1. Introduction ................................................................................................................................... 38
5.2. Issues ............................................................................................................................................. 39
5.3. Recommendations ........................................................................................................................ 39
5.3.1. Power Generation .................................................................................................................. 39
5.3.2. End User Side (Demand Side) ................................................................................................ 39
5.3.3. Industry .................................................................................................................................. 40
5.3.4. Transport ................................................................................................................................ 40
5.3.5. Other Recommendations: ...................................................................................................... 40
6. CREATION OF ENABLING ENVIRONMENT ............................................................................... 42
6.1. Credibility ...................................................................................................................................... 42
6.2. Consistency and Quality of Energy policies ................................................................................... 42
Energy Expert Group 2


6.3. Ministry of Energy and the National Energy Authority ................................................................. 42
6.4. Capacity Building ........................................................................................................................... 42
6.5. Pricing and Treatment of Subsidies............................................................................................... 43
6.6. Integrated Energy Plan and Energy Mix ........................................................................................ 43
6.7. Enablers, Facilitators and Policy Makers ....................................................................................... 43
7. PAKISTAN’S ENERGY DEMAND & SUPPLY ............................................................................... 45
7.1. Total Energy Demand & Consumption Pattern ............................................................................. 45
7.2. Pakistan Energy Outlook: Highlights ............................................................................................. 46
7.3. Pakistan Energy: An Overview ...................................................................................................... 48
DETAILED SECTOR ISSUES AND RECOMMENDATIONS ....................................................... 49
8. OIL INDUSTRY ......................................................................................................................... 50
8.1. Exploration & Production – Oil & Gas ........................................................................................... 50
8.1.1. Exploration and Production Overview ................................................................................... 50
8.1.2. Outlook .................................................................................................................................. 50
8.1.3. Issues ...................................................................................................................................... 51
8.1.4. Recommendations ................................................................................................................. 52
9. GAS SECTOR ........................................................................................................................... 54
9.1. Overview of the Gas Sector in Pakistan ........................................................................................ 54
9.2. Transmission and Distribution Infrastructure ............................................................................... 54
9.3. Gas Price ........................................................................................................................................ 55
9.4. Policy Highlights ............................................................................................................................ 55
9.5. International Best Practices .......................................................................................................... 56
9.6. Projects in pipeline ........................................................................................................................ 56
9.6.1. Liquefied Natural Gas (LNG) Imports: .................................................................................... 56
9.6.2. Staged development of Iran‐Pakistan pipeline project: ........................................................ 56
9.7. Pakistan Gas Supply and Demand ................................................................................................. 57
9.8. Issues ............................................................................................................................................. 58
9.9. Recommendations ........................................................................................................................ 58
9.9.1. Right price residential natural gas for equity and conservation ........................................... 58
9.9.2. Increasing efficiency and reducing UFG ................................................................................. 59
10. LPG SECTOR ............................................................................................................................ 62
10.1. Significance of LPG in Pakistan’s Energy Mix ............................................................................. 62
10.1.1. Future ................................................................................................................................. 64
10.2. ISSUES ........................................................................................................................................ 64
10.3. Recommendations ..................................................................................................................... 66
11. REFINING SECTOR ................................................................................................................... 67
11.1. Overview of Refineries in Pakistan ............................................................................................ 67


11.2. Demand and Supply ................................................................................................................... 68
11.2.1. International trend and forecast ........................................................................................ 70
11.3. Projects in pipeline .................................................................................................................... 71
11.4. Issues ......................................................................................................................................... 71
11.4.1. Is the Refinery sector an economic and strategic necessity? ............................................ 71
11.4.2. Hydro‐skimming Units Limitations ..................................................................................... 71
11.4.3. Product Specification Vis‐à‐vis Sulfur contents ................................................................. 71
11.4.4. Consideration of Refineries as a Strategic Asset ................................................................ 72
11.5. Scenario Based Analysis ............................................................................................................. 73
11.7. Strategic Reserves ..................................................................................................................... 74
11.7.1. Pakistan: Current Stock Cover ............................................................................................ 75
11.7.2. Pakistan: Oil Product Consumption ................................................................................... 75
11.7.3. Pakistan: Main Product Storage ......................................................................................... 75
11.7.4. Pakistan: Estimates of Storage Cost ................................................................................... 76
11.7.5. Additional Storage Requirements for building 3 months reserve ..................................... 76
11.7.6. Recommendation ............................................................................................................... 76
12. OIL – DISTRIBUTION & MARKETING SECTOR ........................................................................... 77
12.1. Supply Demand Scenario and Country Deficit .......................................................................... 77
12.2. Domestic Crude Oil Reserves and Potential .............................................................................. 77
12.3. Distribution and Marketing Infrastructure ................................................................................ 78
12.3.1. Import Receiving Facilities ................................................................................................. 78
12.4. Pipelines ..................................................................................................................................... 79
12.5. Level Playing Field ...................................................................................................................... 79
12.6. Railway ....................................................................................................................................... 79
12.7. Downstream Marketing ............................................................................................................. 79
12.7.1. OMC Margin & Pricing Policies........................................................................................... 79
12.7.2. Liquidity and Financial issues ............................................................................................. 80
12.7.3. Supply Security ................................................................................................................... 80
12.7.4. Product Specifications ........................................................................................................ 80
12.7.5. Ethanol ............................................................................................................................... 81
12.8. Other issues and Challenges ...................................................................................................... 81
13. POWER SECTOR ...................................................................................................................... 83
13.1. GENERATION ............................................................................................................................. 83
13.1.1. Introduction ........................................................................................................................ 83
13.1.2. Generation Status .............................................................................................................. 84


13.1.3. Recommendations: ............................................................................................................ 85
13.1.4. The Advantages: ................................................................................................................. 86
13.2. TRANSMISSION (500kV, 220kV, 132kV) .................................................................................... 86
13.2.1. Introduction ........................................................................................................................ 86
13.2.2. Transmission System (500kV, 220kV) ................................................................................ 86
13.3. DISTRIBUTION (132kV, 66kV, 33kV, 11kV, 0.4kV) ..................................................................... 88
13.3.1. Introduction ........................................................................................................................ 88
13.4. TRANSMISSION & DISTRIBUTION LOSSES ................................................................................. 89
13.5. CIRCULAR DEBT .......................................................................................................................... 90
13.5.1. Past Resolution of stock and flow of circular debt ............................................................ 90
14. COAL SECTOR ......................................................................................................................... 92
14.1. Overview .................................................................................................................................... 92
14.2. THAR COAL ................................................................................................................................. 94
14.3. Issues ......................................................................................................................................... 96
14.4. Conclusion and Recommendations .......................................................................................... 99
15. NUCLEAR SECTOR ................................................................................................................. 101
15.1. Role of Nuclear Power in Electricity Generation ..................................................................... 101
15.2. Issues ....................................................................................................................................... 102
15.3. Recommendations ................................................................................................................... 102
16. ALTERNATIVE AND RENEWABLE ENERGY (ARE) SECTOR ....................................................... 103
16.1. Introduction ............................................................................................................................. 103
16.2. Potential and current status .................................................................................................... 103
16.2.1. Wind ................................................................................................................................. 103
16.2.2. Solar .................................................................................................................................. 105
16.2.3. Biogas/biomass ................................................................................................................ 106
16.2.4. Geothermal ...................................................................................................................... 108
16.3. Sector specific challenges ........................................................................................................ 110
16.3.1. Wind ................................................................................................................................. 110
16.3.2. Solar .................................................................................................................................. 111
16.3.3. Biogas/Biomass ................................................................................................................ 113
16.3.4. Common Recommendations ............................................................................................ 113
16.4. Sector specific recommendationS ........................................................................................... 114
16.4.1. Wind ................................................................................................................................. 114
16.4.2. Solar .................................................................................................................................. 115
16.4.3. Biogas/biomass ................................................................................................................ 115


16.4.4. Geothermal ...................................................................................................................... 115
16.5. Growth potential and outcomes over the next 10‐15 years ................................................... 116
16.5.1. Wind ................................................................................................................................. 116
16.5.2. Solar .................................................................................................................................. 116
16.5.3. Biomass/Biogas ................................................................................................................ 116
16.5.4. Geothermal ...................................................................................................................... 116
16.6. Conclusion ............................................................................................................................... 116
17. GOVERNANCE AND REGULATORY AUTHORITIES .................................................................. 118
17.1. Governance .............................................................................................................................. 118
17.2. Regulatory Issues and Recommendations: ............................................................................. 119
18. SECURITY OF ENERGY SUPPLY AND GEO‐POLITICAL SCENARIO ............................................. 121
18.1. Security of Supply .................................................................................................................... 121
18.1.1. Developing strategic relationships with buyer ................................................................ 121
18.1.2. National Contingency Plan ............................................................................................... 121
18.1.3. Setting up of refineries ..................................................................................................... 121
18.1.4. Alternate sources of diesel supply ................................................................................... 121
18.1.5. Prudent Financial Management ....................................................................................... 121
18.1.6. Hedging ............................................................................................................................ 121
18.1.7. National companies to venture overseas to secure hydrocarbon supply ....................... 122
18.1.8. National Strategic Storage ............................................................................................... 122
19. REGIONAL GEO‐POLITICAL STRATEGY ................................................................................... 123
19.1. (Turkmenistan Afghanistan, Pakistan and India) ..................................................................... 123
19.2. IP (Iran Pakistan) ...................................................................................................................... 124
19.3. China Pakistan Economic Corridor (CPEC) ............................................................................... 124
19.4. Conclusion ............................................................................................................................... 124
20. ANNEXURES ......................................................................................................................... 125



We, the Members of the ‘Energy Expert Group’ hereby submit our Final Report on the
“Integrated Energy Plan 2015‐2025”:

MEMBERS OF ENERGY EXPERT GROUP:

 Mr. Farooq Rahmatullah
Chairman Energy Expert Group
Member Economic Advisory Council

 Mr. Mumtaz Hasan Khan
Chairman, HASCOL Petroleum

 Mr. Aftab Husain
Managing Director, Pakistan Refinery Ltd.

 Mr. Javed Akbar
Dawood Hercules and Energy Expert

 Mr. Irfan Ahmad
Energy Consultant

 Mr. Abbas Bilgrami
Secretary General, Energy Expert Group

 Mr. Zubair Kazmi
Regional Manager‐ Pakistan, Sky Power

 Ms. Nida Farid Khan
Chief Engineer, NRF Engineering

 Ms. Selina Irfan
Energy Economist, Pakistan Business Council



I. ACKNOWLEDGEMENTS

The Energy Expert Group would like to thank the following people for taking out time to allow us to
interview and for their input and valuable contributions:

 Mr. Tariq Khamisani
 Mr. Ali Azfar Naqvi
 Mr. Sheikh Imran ul Haq
 Mr. Shamsuddin. A. Shaikh
 Mr. Asim Khan
 Mr. Moin Raza Khan
 Mr. Tahir Jawaid
 Mr. Tahir Basharat Cheema
 Mr. Rashid Aziz
 Mr. Ashfaq Mahmood
 Mr. Ehtesham Khattak
 Mr. Asad Tareen
 Mr. Asjad Imtiaz Ali
 Mr. Anjum Ahmed
 Mr. Khalid Rehman
 Mr. Zafar Mahmood
 Mr. Akhtar Ali
 Mr. Rafique Dawood
 Mr. Usman Ahmad
 Mr. Adnan Tapal
 Mr. Khalid Aslam
 Mr. Nadir Hussain
 Mr. Mohammed Omer Ghaznavi
 Ms. Natasha Jehangir Khan

Thank you to the following for their contribution to the document write‐up:

 Major General Mahmud Durrani for his input on Regional Geo‐Political Strategy

 For an alternate input in the Coal Chapter, for sharing his analysis on Thar Coal and for permitting the
use of his write‐up, we wish to recognize the efforts of Mr. Zahoor Abbasi (a geotechnical engineer
with over 40 years of work experience in Pakistan and the United States.).

 Dr. Ansar Pervaiz, Mr. Azfar Minhaj and Mr. G.R. Athar for the chapter contribution on Nuclear
Energy and projects.

 Mr. Sohail Qureshi, for his input on the LPG Chapter.



We would also like to acknowledge the assistance of the following in compilation of the data and
necessary information for the Integrated Energy Plan:

 Mr. Bilal Jumani (HUBCO)
 Mr. Shaheen Akhtar (PPL)
 Mr. Salman Murad (PPL)
 Mr. Ghazanfar Ali Yunus(PPL)
 Mr. Aqeel Hussain Jafri (AEDB)

Special Recognition for the efforts of Mr. Syed Abdul Qadir, Senior Manager, Technology Advisory,
A.F. Ferguson & Co. (member network of PWC) with assistance from Mr. Syed Umair Ashraf, Trainee
Engineer, Pakistan Refinery Ltd.; in effectively compiling the work of the Energy Expert Group and for
the development of the Integrated Energy Plan.

Special thanks for the hospitality and assistance of HASCOL Petroleum Ltd, Pakistan Refinery Ltd,
Pakistan Business Council, Pakistan Institute of Petroleum and many others who provided generous
support.



II. ENERGY PANEL MEMBERS

Mr. Farooq Rahmatullah
CHAIRMAN ENERGY EXPERT GROUP – EAC
CHAIRMAN ENERGY PANEL – PAKISTAN ECONOMIC FORUM

Mr. Farooq Rahmatullah is a law graduate from University of Peshawar. He joined
Burmah Shell Oil and Distribution Company in 1968 and worked in different
capacities i.e. Chemicals, Human Resources, Marketing, Supply, Distribution, Retail,
etc. he was transferred to Shell International, London in 1994.
In 2001 Mr. Farooq, was appointed as Chairman of Shell Companies in Pakistan and Managing
Director of Shell Pakistan Limited. He has been a founding member of PAPCO (Pak Arab Pipeline
Company). He retired from Shell on June 30, 2006.
Mr. Farooq is currently Chairman of Pakistan Refinery Limited (PRL) since June 2005, Chairman and
Director of Faysal Bank Ltd. and Director on the Board of HASCOL (Oil Marketing Company). He is
Founding member of Pakistan Human Development Fund, Director on the Board of Society for
Sustainable Development, member of Resource Development Committee of Aga Khan University
Hospital, member of Board of Trustees of Legends Trust formed by the Government of Sindh. He has
also been in the past Chairman of LEADS Pakistan, Chairman of OGDCL, Director General of Civil
Aviation Authority of Pakistan, Director on the Board of PIA, member of the Pakistan Cricket Board
(PCB), member of National Commission of Government Reforms member of Pakistan Stone
Development Company.

Mr. Mumtaz Hasan Khan
SPECIALIST OIL ‐ DOWNSTREAM

Mr. Mumtaz Hasan Khan Chairman & CEO of Hascol Petroleum Limited (Formerly
HASCOMBE Storage Limited), has over 50 years experience in the Oil Industry. He
started his working life in Burmah Shell Oil Storage and Distribution Company in
May 1963 and worked there till January 1976, where his last assignment was
International Sales Manager. From February 1976 to July 1980 he served as
Managing Director, Pakistan Services Limited, which was the owning company of
four Intercontinental Hotels in Pakistan. In August 1980 he moved to London to start his own oil
trading business and established Hascombe Limited, which started trading in Crude Oil and
Petroleum Products. Hascombe brought crude and products from Middle Eastern sources and sold
to major international trading companies like Shell and Elf. Under his leadership Hascol has been
granted an oil marketing license by the Government of Pakistan in Pakistan, and now Hascol has
established a retail network of 260 Petrol pumps and CNG stations from Karachi to Peshawar. Mr.
Mumtaz Hasan Khan is also the Chairman of Sigma Motors Limited (Sole distributor of Land Rover
vehicles in Pakistan). He is also a Trustee of the Foundation of Museum of Modern Art (FOMMA).



Mr. Aftab Husain
SPECIALIST REFINING – DOWNSTREAM

Mr. Husain is currently working in Pakistan Refinery Limited, Karachi as Managing
Director & CEO since November 2011. He is a Chemical Engineer and MPA from
IBA, Karachi. Mr. Husain has a career in oil refining with over 37 years of diversified
experience with PRL, having led all Operations, Technical and Commercial functions
in the Refinery. He is also member of the National Integrated Energy Plan in the Energy Expert Group
of the Economic Advisory Committee and serves as Refining Specialist. Mr. Husain has been
associated with different committees and working groups on oil pricing mechanism, deregulation and
refinery issues with the Ministry of Petroleum, Government of Pakistan.

Currently, Mr. Husain is Chairman, Oil Companies Advisory Council (OCAC). He is a member of the
Managing Committee of Overseas Investors' Chamber of Commerce and Industry (OICCI). Mr. Husain
is also serving as Director of Petroleum Institute of Pakistan and Pak Grease Manufacturing Company
(Private) Limited.

Mr. Khalid Mansoor
Chief Executive, HUBCO

Mr. Khalid Mansoor is the Chief Executive of The Hub Power Company
Limited (Hubco) since May 20, 2013. He holds a Degree in Chemical Engineering
with Distinction and honors.

Mr Khalid Mansoor is Chairman of Laraib Energy Limited, a subsidiary of (Hubco). He has over 32
years of experience and expertise in Energy & Petrochemical Sectors in leading roles for mega size
Projects Development, Execution, Management and Operations.

He has previously served as the Chief Executive Officer of Algeria Oman Fertilizer Company (AOA)
which has constructed the worlds’ biggest Ammonia & Urea fertilizer Complex including a 120MW
Captive Power Plant which is located in the Arzew Industrial Zone.

Prior to AOA, he held the position of the President and Chief Executive Officer of Engro Fertilizers
Limited, Engro Powergen Qadirpur Limited (EPQL), Engro Powergen Limited (EPL) and Sindh Engro
Coal Mining Company (SECMC).

He has also held various key assignments at Engro and with Esso Chemicals Canada including leading
the development and execution of various major diversification and expansion Projects for Engro. He
has as served as a Director on the Boards of Engro Corporation, Engro Fertilizers Limited, Engro
Polymer & Chemicals Limited, Engro Powergen Qadirpur Limited, Engro Powergen Limited and Sindh
Engro Coal Mining Company. He had also served as a Director on the Boards of Engro Foods (Pvt.)
Limited, Engro Vopak Terminal Limited and Chairman of the Board of Engro Powergen Limited in the
recent past.



Mr. Abbas Bilgrami
SECRETARY GENERAL, ENERGY EXPERT GROUP
SPECIALIST LPG & ENERGY INFRASTRUCTURE
HEAD FOCUS GROUP ENERGY PANEL – PAKISTAN ECONOMIC FORUM

Mr. Bilgrami is the Managing Director of Progas Energy Limited and Juniper Advisors
(Pvt) Ltd. His first degree from Karachi University was in Commerce, he obtained a
second degree in Business Studies and an accountancy qualification from Concordia University,
Canada.

Mr. Bilgrami has been involved in developing projects in power generation and energy infrastructure
in Pakistan, Bangladesh and Southern Africa. He has had extensive exposure in project development
work and actively advised the world’s leading LPG marketing and shipping companies over the past
20 years. The company built Pakistan’s largest and first fully integrated LPG and energy business with
an import Terminal and storage at Port Qasim Authority in Karachi and with operations throughout
the country. The terminal has subsequently been acquired by the Sui Southern Gas Company.

Mr. Bilgrami worked with Deloitte Haskins and Sells in the U.K. in their management consultancy
division before joining the Project Development Company of Sharjah as an investment analyst and
worked with them managing their North American investments in the hydrocarbons industry.

He has advised Camping Gaz, Sui Southern and Sui Northern Gas companies on the LPG sector in
Pakistan and is currently developing energy projects in Mozambique and the UAE.

Mr. Javed Akbar
DAWOOD HERCULES AND ENGRO ENERGY

Javed Akbar has a Masters degree in Chemical Engineering from United Kingdom
and has 40 years experience in fertilizer and chemical business with Exxon, Engro
and Vopak. He retired as Chief Executive of Engro Vopak Terminal Limited, a joint
venture of Engro and Royal Vopak of Holland. He was part of the buyout team
when Exxon divested its stake in Engro.

After retirement in 2006, he has established a consulting company specializing in analyzing and
forecasting petroleum, petrochemical and energy industry trends and providing strategic insight. He
currently serves on the Board of Directors of 5 companies of Engro and Dawood groups, and Pakistan
Petroleum Limited. He also provides expertise to Pakistan’s programs on energy and the
environment.



Mr. Irfan Ahmad
ENERGY CONSULTANT

Irfan Ahmad graduated in Electrical Engineering (with Hons.) in 1971 from the
Engineering College, University of Peshawar and later did his Masters in Electrical
Engineering from the Technical University Aachen in Germany.

During his professional carrier of more than 35 years, Engr. Irfan Ahmad has worked in both public
and private sectors in Pakistan and in Germany. After a stay of more than 10 years in Germany,
where he was engaged at the forefront of technology, Engr. Irfan Ahmad returned to Pakistan in
1985 and joined Siemens Pakistan. Since then, he has been working mainly in the fields of electrical
system design, network consultancy and renewable energies. Currently Engr. Irfan Ahmad is the
Divisional Head of Renewable Energies in Siemens Pakistan and is responsible for large projects
acquisition and execution.

Engr. Irfan Ahmad is Fellow of the Institution of Electrical & Electronics Engineers Pakistan (IEEEP)
which he joined in 1985. He also remained Honorary Secretary of IEEEP Karachi Centre for more than
5 years. At present he is Convener of Energy Committee of IEEEP Karachi Centre. Engr. Irfan Ahmad is
also General Secretary of Renewable & Alternative Energy Association of Pakistan (REAP), Karachi
Chapter.

As a professional engineer, Engr. Irfan Ahmad has been able to serve the engineering community and
the general public at large by making numerous technical presentations on burning energy issues in
the Technical Seminars and Symposia organized by professional bodies both in Pakistan and abroad.

Mr. Zubair Ahmed Kazmi
EXPERT ON RENEWABLE ENERGY

A renewable energy professional with more than 10 years of experience, Zubair
Kazmi is currently the Regional Manager of Pakistan for Skypower Global
(www.skypower.com), one of the largest solar developers in the world. In this
role, he identifies viable projects and manages progress from initial proposal
development through to permitting, licensing, and financing.
Zubair has worked on energy projects ranging in size from small‐scale rural homes to large grid‐tied
power plants. Zubair’s expertise includes extensive business development, B2B and B2C
collaborations, tenders, as well as partnerships with non‐government and nonprofit organizations.
Prior to joining SkyPower in early 2014, Zubair held the position of Business Unit Manager at Reon
Energy, the renewable energy arm of the Dawood Hercules Group in Pakistan, where he oversaw
nationwide solar sales activity. In 2006, Zubair founded a solar power company that provides rural
electrification services in Pakistan. He managed all business development activities, coordinated with
global suppliers, and managed engineering teams and after‐sales support.



Ms. Nida Farid
EXPERT ON RENEWABLE, EFFICIENCY AND CONSERVATION
MEMBER‐ ENERGY EXPERT GROUP

Nida R. Farid is an aerospace engineer and renewable energy consultant. Recently,
she was Program Manager at UAC Alu Menziken in Switzerland where she drove
the complete production line for a crucial electro‐structural system of Airbus’ new
plane, the A350XWB. Nida has also worked extensively with wind farm development and
management, energy policy and gas turbine combustion in North America and Europe. She is
passionate about spreading energy efficiency awareness in Pakistan and elsewhere. She has an SB in
Aerospace Engineering from MIT and an MS in Mechanical Engineering from ETH Zurich, specializing
in aircraft engines.

Ms. Selina Irfan
ENERGY ECONOMIST
PAKISTAN BUSINESS COUNCIL
MEMBER‐ ENERGY EXPERT GROUP

Selina is presently working as an Analyst‐Energy Economics at the Pakistan Business
Council on the Energy Sector in Pakistan. She has obtained a B.Sc. in Economics and
Management from the London School of Economics and University of London
External Program. Subsequently, she has an M.Sc. in Economics from Quaid‐e‐Azam University and
an M.Sc. in Energy Economics and Policy from University of Surrey, United Kingdom.

She possesses vast experience and exposure to the energy sector of Pakistan, having worked at the
Sui Southern Gas Company of Pakistan, and as Energy Economist in the Ministry of Finance. A
member of the British Institute of Energy Economics and the International Association of Energy
Economics, she has also assisted in academic research for the United Kingdom Energy Research
Centre, Department of Energy.



Energy Expert Group

VISION :

To provide a road map for Pakistan to achieve greater energy self‐sufficiency
by pursuing policies that are sustainable, provide for energy security and
conservation, and are environmentally friendly.

Integrated Energy Plan 2015‐ 2025



1. INTRODUCTION:

This document is a brief developed over several months of engagement and work by the Energy
Expert Group. The findings and recommendations were then debated and discussed by the
Chairmen, CEO’s of various organizations from within the energy industry, in a series of
engagements. The subsequent document which is at hand has been made more concise and is the
ultimate distillation of this work. It is largely based on the Integrated Energy Plan developed by the
Energy Expert Group in 2009 which was constituted by the Economic Advisory Council under the
auspices of the Ministry of Finance and subsequently updated for the Pakistan Business Council in
2011. This document has once again been revised with the input of the members of various
ministries, eminent energy specialists and partner development financial institutions. This document
is being presented as an Agenda for the Energy Sector discussions with the Government, industry and
international partners. We hope that this document can be a catalyst for an ongoing, informed and
important engagement with all stakeholders within Pakistan so that a more diverse, secure and clean
energy future can be achieved.

This new revised Integrated Energy Plan, after the introduction includes sector specific chapters
within the Energy Industry. Each chapter provides a status on each sector highlighting issues, and
remedial recommendations for the Government to undertake to resolve them. The impact of these
issues related to the individual sector within the industry is also discussed. Additionally the Panel
provides very concise proposals to overcome the challenges faced by each sector.

1.1. OVERVIEW

Pakistan in the past decade has seen its economic circumstances go through a cycle of growth and
then a correction. The signs of a recovery are evident. Despite the security worries and geopolitical
problems, Pakistan’s economic circumstances seem to be more stable. However the crisis in the
energy sector remains. The impact of this crisis is recognized by the Government of the day in that
they recognize that this creates a drag of 4‐7%1 on the GDP of the country. This equals a loss of
between US$ 10 to 15 billion to the economy. The sector’s continuing crisis stems primarily from a
number of reasons.

Largely the Government of Pakistan's inability to:

 To implement Integrated Energy Planning within the Government ;
 Forcefully and purposefully deregulate the energy sector;
 Consolidate the disparate sections of energy policy making in Government into an Energy Ministry
and creation of a National Energy Authority;
 Building capacity in the regulators and improving governance in state owned enterprises with the
aim to privatize these entities;
 Rolling out the necessary reforms within the state sector necessary to attract investment;
 To improve the aging power generation capability and its efficient conversion of fuels,
 Recovering fully the cost of power generation;
 Upgrading the national grid to ensure that line losses are brought in line with the international
benchmarks;

1
Vision 2025 Planning Commission


 Diversifying Pakistan's energy mix so we are more reliant on local resources viz; coal, renewable
energy including hydel, wind, biomass and solar;
 Seeking sustainable off grid solutions for those communities where it is not economically viable to
connect them to the national grid;
 Aggressively encouraging exploration and production activities from within Pakistan's existing
hydrocarbons assets;
 Proper prioritization of indigenous energy resources like Natural Gas and thereby maximizing its
economic return to the country ; and
 Most importantly through pricing energy sensibly and achieving energy efficiency and conservation.

One of the results of this crisis is evident in a continuing circular energy debt, low growth, low
investment and a social crisis which is threatening the economic well‐being of the state.

Despite the fact, that the current Government went ahead and settled the entire circular debt, but
failed to resolve the underlying issues. It has therefore had to fund the Rs.592 billion in 2013 and
settled a further Rs.300 billion in 2014 and faces a further debt of as much in the current fiscal year.

How long can the national economy continue to sustain this hemorrhaging of resources?

The solutions are known, evident and need implementation.

1.1.1. How Does Pakistan Fare By Comparison To Other Economies

Pakistan ten years ago was comparable to the Philippines and Turkey who had all embarked on
deregulating their economies and reforming their energy sectors. However in 2007 it is interesting to
note how each country reacted to the increase in hydrocarbon pricing. All three countries are greatly
dependent on imported energy to meet the shortfalls in their hydrocarbon needs. Philippines passed
on all increases in cost of energy and ensured that it did not need to provide huge subsidies. People
suffered in the short term but this simple action of political resolve allowed the country to navigate
the shock of huge price increases by reducing consumption and becoming more efficient in their use
of energy. Philippines also quickly diversified its energy mix and by identifying and then using a
natural resource the government encouraged the use of geothermal resources and today is the
second largest producer of power from this renewable resource.

Turkey used this massive increase in energy prices to push for building massive energy infrastructure
from as far away as Russia, Turkmenistan and Iran to become the alternative highway for the supply
of energy to Europe. It also set up LNG terminals so it had the options of importing natural gas from
Algeria and Libya which provided it greater energy security. While it continued with its deregulation
of its energy sector. It sensibly devolved its large energy monopolies from power generation to
distribution in a resolute and enlightened fashion. Its economy like the Philippines has continued to
grow and both countries have become investment grade economies.

Pakistan which was poised to grow at a rapid pace could not maintain its growth curve due to one
reason. That was the untenable and unfunded energy subsidies that it continued to provide in the
illusion that it was trying to cushion the shock of energy price increases. In the past 6 years these
losses have amounted to more than US$ 20 billion. They have all lead to massive Government
borrowing. The Governments fiscal space has shrunk greatly as its tax revenues today barely cover its
annual net borrowings. This is an unsustainable state of affairs.



And yet Pakistan's comparable economies through merely ensuring fiscal prudence in its energy
sector ensured that they have not bankrupted themselves. Bangladesh, Philippines and Turkey have
all prospered despite there being energy shortages and despite their economies suffering due to
higher pricing of energy. Despite all this they have been able to sustain themselves economically,
politically and most important of all socially. This disproves the facts that higher energy prices will
adversely affect an economy and consumers. It is a matter of good governance and political resolve.
The fabric of Pakistani society today is held together due to the resilience of its people, not due to
any efforts of any government.

We continue to remain optimistic, however, and believe that the role of the private sector will
expand in the years ahead, as the government continues its policies of privatization and deregulation.
In the past few years the investment from within Pakistan in its energy sector has risen through a
process of consolidation. If they country’s own private investment buys into the energy sector, this
will help attract foreign investment as well.

It is essential to institute appropriate accounting systems for energy demand and supply as a first
step, followed by national efforts to tackle inefficiencies in energy generation and distribution. Large
hydroelectric projects should be undertaken after low‐cost conservation measures have been fully
utilized. The government’s current “supply‐side approach” to energy has stifled environmental
consciousness and efforts toward energy conservation while leading to massive investments in
energy generation at the expense of ecological considerations. Above all, we should reconsider what
constitutes a successful energy policy. It is important to challenge perceptions, for instance, that
reaching the country’s energy extraction potential is necessarily a sign of achievement. Affordability,
energy security, energy diversity, a sensible balance between fossil fuel and renewable coupled with
energy efficiency and conservation and a recognition of the country’s carbon footprint all must surely
be counterpoints to consider as well.

The centrality of secure and affordable sources of energy for Pakistan’s future along with job
generation, economic growth, and political stability all go hand‐in‐hand with plentiful and affordable
energy supplies. Pakistan, by virtue of its location and natural endowments, has many technologically
feasible options to meet its growing energy requirements. The challenge lies in establishing the
commercial and political feasibility of these options, and in utilizing the country’s limited capital and
execution capacity optimally.

There already exists widespread agreement on at least the broad outlines of an energy strategy for
Pakistan. Pakistanis know what needs to be done. But solemn promises and soaring rhetoric will not
get the job done. Preparing for Pakistan’s energy needs over the next quarter century will require
long‐term vision, a national commitment widely shared among the country’s political and business
leaders, inspired leadership sustained from one government to the next, and most of all, political will
to make and carry out difficult choices. Pakistan—the country, not just the government of the day—
needs to decide that muddling through is not enough. Pakistan, as a country, has to decide that it
must get serious about creating an energy strategy, and then—and this is the hard part—about
implementing it.

It is with this in mind that the Energy Expert Group, consisting of industry professionals has
developed on a pro bono basis, over a period of several months revisited the Integrated Energy Plan
2011 and updated it for the period 2015 ‐ 2025. This exercise has provided a comprehensive
document which provides an integrated approach to the development of Pakistan’s energy industry.
This document was developed after consultation with local and international sector specialists, public


and private sector stakeholders and with the Government of Pakistan. This plan has seen support
from most sectors of the Government of Pakistan its major international partners but it now requires
implementation in totality. In this the formation of an Energy Ministry within which a National
Energy Authority must be authorized to implement the Integrated Energy Plan to put Pakistan on
the road to a sustainable, affordable and clean energy future is the most important
recommendation that the Energy Expert Group proposes.

The Energy Expert Group published their first Integrated Energy Plan 2009 – 2022 (IEP) in March,
2009. The plan was accepted by the Government of Pakistan (GoP) and other stakeholders, but
regretfully the implementation did not take place due to a lack of political resolve on the part of
the GoP. Even the subsequent IEP 2010‐2025 published in 2011 remained unimplemented. The
negligence on part of the authorities to take seriously the recommendations of the experts has cost
the country heavily, which it cannot afford for the future.

This plan shows, for the first time, one of the least discussed aspects of our energy sector’s failing.
This has to do with the immense amount of energy wasted through inefficient consumption,
conversion and subsidization. If Pakistan’s energy intensity could be reduced its energy shortages
could be removed with nominal investment and within the shortest possible time. Pakistan’s Energy
Flow diagram developed by the Energy Expert Group which appears in the relevant chapters is worth
spending time to understand and we hope can be another starting point for discussion and
engagement with Government, the public and private sector.



2. EXECUTIVE SUMMARY

This executive summary is an overview of hundreds of man hours of discussions, interviews, research
and studies including analysis of plans from different countries undertaken by the members of this
Energy Expert Group.

Meeting the energy challenge is of fundamental importance to Pakistan’s economic growth and its
efforts to raise levels of human development. The broad vision behind the integrated energy plan is
to meet the demand for energy needs of all sectors in a sustainable manner with greater reliance on
and development of indigenous resources.

2.1. ECONOMIC PROSPECTS

Pakistan’s future economic growth depends on its ability to meet these challenges by implementing
an integrated energy plan for the country.

Real GDP growth for the proposed Integrated Energy Plan period (2015‐2025) is projected at an
average of 5% per annum. This compares with a historic average real rate of economic expansion of
approximately 3.5% over the past five years.

Pakistan has historically experienced short, intense spurts of growth lasting typically 4 to 5 years,
followed by several years of low/sluggish growth and investment. In each case, high economic
growth has coincided with periods of greater capital inflows into the economy, with official capital
(multilateral/bilateral) playing a large role in most episodes of growth, barring the most recent.

In projecting Pakistan’s average annual real GDP growth for the Integrated Energy Plan period, the
following factors/assumptions have been used.

First, that Pakistan’s energy availability constraint is relaxed gradually over the forecast horizon, with
a somewhat modest improvement in the first five years. In addition, constraints to faster economic
growth in the medium term have also been explicitly recognized, such as the possibility of a slow
return of investor confidence (due to internal security challenges and/or political stability issues) and
the existing energy crisis.

To attain this growth rate through to the year 2025 and to meet its objectives of greater self‐
reliance, Pakistan needs, at the very least, to increase its primary energy supply twofold and its
electricity generation capacity/supply three times.

It is, therefore, imperative that the energy mix be changed to provide a more affordable and
sustainable energy model for the country which maximizes the use of indigenous resources.

2.2. ENERGY SECTOR

Pakistan in the past decade has seen its economic circumstances go through a cycle of growth and
then a correction. The signs of a recovery are evident. Despite the security worries and geopolitical
problems, Pakistan’s economic circumstances seem to be more stable. However the crisis in the
energy sector remains. The impact of this crisis is recognized by the Government of the day in that


they recognize that this creates a drag of 4‐7% on the GDP of the country. This equals a loss of
between US$ 10 to 15 billion to the economy.

On the other hand, the exercise of the Integrated Energy Plan has for the first time highlighted one
of the least discussed aspects of our energy sector’s failing; that is the immense amount of energy
wasted through inefficient consumption, conversion and subsidization. If Pakistan’s energy
intensity could be reduced its energy shortages could be removed with nominal investment and
within the shortest possible time.

The primary focus of this plan is to emphasize:
 Creation of Ministry of Energy as well as formation of National Energy Authority, as a planning
and executing arm under the Ministry of Energy.
 Development and expansion of indigenous resources through effective policy implementation
and pricing.
 Prioritization of policies and plans towards provision of indigenous and low cost resources to
those sectors that are major contributors of GDP growth.
 Privatization of public sector enterprises particularly in the distribution network based on a multi‐
seller model.
 Deregulation of the oil downstream industry, removal of pricing distortions.
 Development of infrastructure for strategic reserves to ensure security of energy supply and
avoid disruptions to the chain.
 Improvements in the governance and regulatory environment of the sector
 Emphasis on the policy for Efficiency and Conservation to overcome the high levels of energy
wastage.
 To promote clean energy, share of renewable energy in the primary mix must be encouraged.
 Development of strategic storage and reserves for the country.

2.3. Summary of Recommendations

The recommendations for each sector as below:

I. The creation of a Ministry of Energy and National Energy Authority.
II. The formation of an integrated energy policy to ensure consistency and ensure sector
coordination.
III. Improved energy efficiency and removal of government intervention in consumer pricing.
IV. Improvement in the role of the existing sector regulators through Capacity improvement,
empowerment and legislative amendments in their ordinances.
V. Appointments and employment of top management/ Chairmen, CEOs and members of all state
sector organizations be made transparent and based on sector relevant professional experience.

VI. Energy Efficiency and Conservation:

Energy Flow Diagram

Lost to useful energy ratio of 83/17 is an eye opener. The flow diagram shows exactly where we
are losing energy. Loss of energy means increase in entropy or direct global warming, increased
costs to the economy. This ratio partly results from high T&D losses of about 30%, a figure proven


by load flow studies of at least 3 utilities. The NEPRA determination of the T&D loss of 21% is
therefore at odds with our findings. It is important to note that a 1% loss of electrical energy is
equivalent to a loss of revenue of Rs. 13 billion per year; other indirect losses excluded can amount
to a lot more than the T&D loss alone. This Plan is extremely dense and based on ground‐breaking
research undertaken by the Energy Expert Group. The recommendations for this section are given
below:

A. Power Generation

 All existing simple cycle power plants must be upgraded to combined cycle power plants using the
latest, cost efficient technologies, and with minimum efficiencies over 50%.
 Power plants that are located close to industrial zones, should be upgraded to CHP plants that will
provide process heat to the factories, with minimum efficiencies over 70%.
 New power projects must be vetted diligently to ensure that old technologies and equipment are not
being used, which may prove a heavy burden on the economy.

B. End User Side (Demand Side)

 It is imperative that an Energy Rating Labeling scheme is established immediately to rate the energy
consumption of all the appliances available on the market, especially important for domestic and
commercial sector, as well as motors and pumps. This will immediately increase consumer awareness
and lead to smarter purchasing decisions.
 Minimum efficiency standards need to be established for all appliances being sold in the market,
whether locally produced or imported. The minimum standards should be increased every year to
keep up with latest technological advancements. In addition, on the industrial side, minimum
standards must be established by industrial sector. ENERCON has joined the “Barrier Removal to the
Cost Effective Development & Implementation of Energy Efficiency Standards and Labeling (BRESL)”
scheme in partnership with other Asian countries. However, those standards have not been
implemented yet in Pakistan.
 Energy efficiency campaigns need to be launched to increase the awareness of domestic, commercial
and industrial consumers and help them reduce energy wastage at demand side.
 Standards should be implemented to use High Power Factor CFL bulbs (HPF>0.9), and stop the use of
low power factor ones that increase the need for reactive power, and the load on the grid.
 Energy Efficiency departments should be established in universities to increase available capacity and
labor on the ground.
 Passive heating/cooling/lighting, as well as zero‐energy building designs should be introduced into
the syllabus of architecture faculties around the country

C. Industry

Adoption of current available best practice to reduce energy usage by at least 30‐35% on average in
Industry:
 Detailed analysis of energy use and energy intensity needs to be carried out across all different
industries to get better understanding of where wastages are taking place. This will allow better
policies and focused measures to be taken.
 Waste heat recovery should be introduced. As a first step, waste heat recovery should be used to
make processes more efficient, and reduce the use of fuel. As a second step, the remaining waste
heat can be used to cogenerate electricity for plant use and sale to the grid.


 Introduction of voluntary energy/steam audits of factories with incentives for participation.

D. Transport
 Clean, cheap, comfortable and efficient public transport needs to be introduced in all cities and
towns.
 Energy rating labels showing the km per liter of petrol should be made mandatory for all vehicles on
sale.
 Energy efficiency campaigns to increase consumer awareness about cost savings of smaller cars, and
the cost savings of regular tune‐ups.
 Optimal fuel efficiency is between 50‐80 km/h. However, traffic flow is being hampered by lax
implementation of traffic laws, reducing average speeds of cars and wasting between 20‐30% of fuel
per trip.

General Recommendations:

E. It is proposed that a National Energy Conservation Program be developed through a dialogue with
all stakeholders and the assistance of international organizations
F. In view of the shortage of indigenous production of hydrocarbons, all allocations including existing
allocations if not tied down due to water tight Agreements, should be based on efficiency of fuel
usage.
G. Energy Audits through independent organizations or companies to assess the efficiency of the sector
and to develop national standards and benchmarks for the energy sector.
H. Revision of utility and product pricing to discourage energy wastage and promote efficiency
I. Regulations to be put in place to discourage fuel inefficiency in vehicles.
J. Building codes should be developed and enforced as policy tools to encourage energy efficiency in
new buildings.
K. Education campaigns to inform the consumers about efficient use of energy at homes.
L. Use and implement hybrid systems in provision of universal access to electricity to remote
communities, thereby saving on transmission losses, reducing the carbon foot print and improving
efficiency.

VII. Exploration And Production (E&P) Sector:

1. Concessions awarded to companies be reviewed under a strict timeline of 5 years for seismic
geological and production activity and if targets are not met within the timeline, the government
should consider rebidding for the concession
2. Privatization of the state‐owned exploration companies within the next 2‐3 years.
3. A Shale gas policy needs to be announced after a detailed study of the Shale Potential has been
undertaken by the Government.
4. Existing tight policy relating to old fields needs to be rationalized to allow for additional
investment to be made for extract of maximum resources by allowing them same prices on
incremental quantity.
5. There is a need for rationalization of the existing pricing policy as an incentive to the E&P
companies.
6. The tight gas policy should be revised to allow 2012 price +40% which would be about $8.5
/MMBTU as opposed to the 2009 price + 40% of $6 /MMBTU.


7. The additional potential of old fields must be covered under the new policy prices as well as
amendment to include mining lease must be added to encourage deeper exploration of existing/
old fields and to increase production from wells.
8. Political and bureaucratic interference must be minimized and the sector must be allowed
independence by hiring of professionals in management.
9. A process should be streamlined to avoid delays in award of concessions and agreements,
approval of extensions and well commencement notices to avoid additional costs to companies
and investors.
10. 10% of free equity of revenue from production should be given to local population / stakeholders.

VIII. Gas Sector:

1. Political interference in the running of the companies and their business must be removed.
2. Monopoly distributors‐ privatization of the distribution network must ensure competition and
the provision of choice to consumers, by unbundling of the distribution network into multiple
companies (moving to multi‐seller distribution model).
3. To move cheap gas for sectors with high contribution to economic growth‐ switching from gas
geysers to alternates.
4. Transnational pipelines‐ diversity of supply: delays in TAPI and IPI must be reduced and progress
must be made to allow for imports of the transnational pipelines.
5. Price parity with competing fuels must be achieved.
6. Phased reduction of cross subsidies‐ domestic and fertilizer over 5 year time period
7. RLNG to replace liquid fuel in power sector. LNG Policy 2012 to be revised accordingly. In the
short‐term till imports flow and infrastructure is developed, all new Power Plants to be dual fuel
CCGT plants.
8. Proper unaccounted for gas (UFG) control system should be introduced in both the Sui
companies as 1% reduction nearly equals to 40 MMCFD.
9. Gas Utility companies to work on margin based system as commercial organizations.
10. Gas subsidies or cross subsidies to be eliminated. Instead, the government should provide direct
support to segment of population below the poverty line.
11. No Gas supply should be allowed for water heating and room heating. Solar water heaters to be
used for all water heating requirements.
12. No expansion of Gas Distribution System till further discoveries.
13. Review of Load Management & Gas Allocation Policy and propose following changes in the
priority list:
i. Power Generation
ii. Industry
iii. Commercial
iv. Domestic
v. CNG
14. All New Thermal Power Plants to be coal based or Combined Cycle Gas Turbine (CCGT) Plants to
use LNG as this fuel has advantages over other liquid fuels.
15. CNG should only be used for buses in major cities for mass transit programs



IX. LPG Sector

1. LPG marketing companies collectively should be required to maintain at least 2 weeks cover of
their sales.
2. LPG pricing should be market‐driven and based on import parity pricing as stated in the LPG Rules
2001 and LPG Policy 2006. Similarly determination of price reasonableness should be avoided to
ensure that market is completely deregulated.
3. OGRA intervention on determination of consumer prices should be in exceptional circumstances
and take place when obvious cartelization is taking place in the market. In that situation price
determination should be based on individual cost structures of companies rather than imposing
one price across the board for all marketing companies as is clearly stated in the LPG Rules 2001.
4. OGRA focus should be on increased supplies to the market mainly through imports so that price
volatility and shortages are contained. This requires it to ensure investment not only in increased
storage but also in transportation of LPG by tankers to move product from Karachi ports to the
shortages in the north of the country.
5. PDL or a Royalty should be imposed on LPG production on low cost local gas extraction plants due
to low cost of indigenous gas. This PDL/ Royalty collected should be used to provide a means to
assist those poorest in society who need help to graduate to modern fuels and delivery of this
subsidy could be undertaken using the poverty scorecard developed by the Pakistan Poverty
Alleviation Fund.
6. In addition to assistance to the poorest of society, from an environmental perspective in
mountain areas; to curtail deforestation, a direct targeted subsidy in such areas should be
considered.
7. A policy for a transparent and level playing field be developed for the setup of LPG extraction
plants.
8. More applications of LPG, in power generation, Synthetic Natural Gas as a peak load shaving fuel
be evaluated so LPG can replace other fuels. This would help overcome overall fuel shortages in
the country by utilizing LPG in place of other fuels (such as natural gas in winter season).
9. GoP must improve the regulatory environment and increase focus on quality of service to
customers and HSE standards.
10. There is an overlap in the regulatory envelope of OGRA & Explosive department which increases
cost, causes confusion in the enforcement of conflicting standards in the complete LPG
distribution channel.
11. Discretionary powers of Chief Inspector of Explosives (CIE) as per their MIG rules 2010 leads to
corruption and arbitrariness.
12. Policy structures must be stable and not subjected to changes frequently.
13. The Regulator and Ministry require capacity building.
14. There must be greater coordination and communication between policy makers, regulators,
consumers, marketing companies and LPG producers.
15. Distributors and transporters need to be licensed by the Regulator. The Regulator must then
ensure all HSE rules, quality of LPG supply be enforced rigorously. A proper complaint and
complain resolution procedure must be put in place.
16. Greater efficiency within the market through consolidation is necessary. This can be undertaken
in a deregulated market.



X. Refining Sector

1. A comprehensive Refining Policy is needed to provide clarity and long term Vision to the
stakeholders and cover all key segments of oil refining sector; covering domestic oil refining and
downstream sector. In particular, we would like to recommend the deregulation of the
downstream sector.
2. Implementation of Policy Framework must be governed by separate rules.
3. Long Term Commercial Incentives to promote growth of capacity and infrastructure to be
uniformly applicable to public and private sector in an equitable manner.
4. Security concerns to be addressed with safe conducive environment to Investors.
5. Protection to Foreign Investors under Economic Reform Act 1992.
6. Tax Holidays and Duty Structure must be well defined with clarity to avoid ambiguity.
7. No Duty on Import of Crude Oil, Condensates and Feed Stock by Refineries.
8. Capacity Building of Regulators (OGRA) and Ministry of Petroleum with regards to the Refining
Industry and its impact on the overall economy and the Energy sector.’
9. Strategic Reserve:
o Strategic Storage to meet the country’s need during emergency should be the responsibility
of the State and should be developed within 3 years to avoid any unforeseen supply
disruption / emergency.
o The current decline in oil prices makes it an ideal time to invest in development of
infrastructure for strategic reserves and recovery through petroleum product price build‐up.
XI. Oil Downstream And Marketing Sector

1. It is recommended that the downstream sector should be deregulated in order to create
competition, reduce inefficiencies and mal practices. An international consultant of repute should
be engaged to develop a deregulation model for the country which protects the interest of the
consumers and promotes healthy competition in the industry. This will also reduce the cost to the
sector, with specific reference to the oil movement and its distribution.
2. An alternate criteria, to the current applicable one, for establishing a new OMC given as below:
 Upfront Equity be revised from Rs. 100 million to Rs. 1 billion
 The minimum investment program should be no less than Rs. 1.5 billion over a period of three
years
 The paid up capital should also be revised to Rs. 1 billion with loan for infrastructure storage and
retail outlets to be of about Rs. 2 billion.
3. FOTCO should develop infrastructure and capacity to receive increased Motor Gasoline cargoes
and carry out required modifications in the white oil pipeline to meet future demands and to
move the product through the pipelines.
4. The IFEM (Inland Freight Equalization Margin) to be disbanded and replaced by a de‐regulated
model on oil movement and distribution, where competition between oil companies would
bring in efficiencies and lower cost in the movement of oil products.
5. The government should create barriers to entry for fly‐by night operators from entering the
market.
6. Bureaucratic and political interference in the sector must be minimized and professionals should
be hired and given independence in decision making.
7. In order to ensure supply of Ethanol, it is recommended that the government should place
export volume controls and prioritize supply to the oil sector for Ethanol blending.



XII. Power Sector

1. Generation:

 Improvement in energy efficiency of the base load plants (by converting to combined cycle power
plants instead of open cycle) and utilizing cheaper resources of primary energy like indigenous
natural gas and coal should be the main stay of strategic planning.
 Conventional generation for base load requirement suitably hybridized with a renewable energy
resource in the proximity should be the first priority of the current generation plans. Eg.: Solar
Power Plants can be hybridized with conventional power plants running on diesel to provide
affordable and reliable power to the industry in Punjab.
 Hybridization of Renewable and Alternative Energy power plants to create synergies.
 Indigenous manufacturing of RE equipment (Solar Cells, Wind Turbine Towers and Blades) should
be encouraged progressively to achieve a much lower levelized cost of electricity (LCoE) from
renewable generation matching any conventional power plant
 Transmission and distribution networks should be strengthened for off take of sizeable
renewable power.
 A fair competitive environment to be provided to the local manufacturers by providing and
enforcing protection against duty free imports.

2. Transmission

 Proper load flow studies need to be carried out by third party professional engineers.
 The losses of more than 10 year old power transformers, especially those which are overloaded,
should be measured at site.
 Extended Energy Audit (Audit proposing implementable solutions in real time) of the existing
Transmission System by professionals in their related field is recommended.
 In order to encourage more private public partnerships, a policy to set up private transmission
networks with public utilities as quasi equity partners should be worked out.

3. Distribution:

 Monopoly distributors ‐ privatization of the distribution network must ensure competition and
the provision of choice to consumers, by unbundling of the distribution network into multiple
 Extended Energy Audit (Audit proposing implementable solutions in real time) for all the DISCOs
with participation of DISCO Panning Department having due share of responsibility.
 Training of DISCO personnel data collection and software use for Energy Auditing and
Management.
 DISCO networks should be strengthened to evacuate Renewable Energy upto at least 15% of their
total capacity.
 Wheeling should be made possible between dedicated private buyers and private suppliers
through a DISCO network.
 A policy to set up private 132kV distribution network with suitable wheeling tariff should be
implemented.
 Private sector distribution companies should be asked to share Renewable Energy integration in
their systems.


 Legislative cover should be provided to DISCOs so that net metering can be made possible at MV
level.

4. Transmission and Distribution (T&D) Losses

 Improvement in the calculation of T&D losses
 Use of software and SCADA systems for accurate identification of losses and theft

5. Circular Debt

 Determine the accurate number of Transmission and Distribution Losses and ensure full recovery
of generation and distribution costs.
 Independence of the Central Power Purchasing Authority and the establishment of an ESCROW
Account to implement effective collection of bills.
 Enforce bill recovery through the implementation of the Electricity Theft Act; thereby making
electricity theft and lack of bill payment an offence without bail.
 Privatization and unbundling of those distribution companies incurring the heaviest losses and
with the lowest collection, on priority basis.

XIII. Coal Sector

1. The UCG issue must be resolved by seeking a definitive professional opinion from the
international consultants of record involved in preparing the Bankable Feasibility for Sindh Engro
JV project in block 2 of Thar coalfield.
2. A study of international experience must be undertaken through which identify the most
appropriate technologies and resources that need to be deployed for the Thar coal resource.
3. The impact of such large scale mining and power projects will have on the people and culture of
Thar area needs to be studied and impact mitigated.

XIV. Nuclear Sector

1. The China link needs to be kept engaged and strengthened – as currently planned. Additional
nuclear power plant suppliers should be explored and approached.
2. Waiver of Nuclear Supplier Group embargoes may eventually be sought through political
strategies.
3. A technology vendor partnership will be needed for nuclear power plants.
4. The pre‐project construction time needs to be decreased as experience in construction of nuclear
power plant builds up and local capability in design, engineering and manufacturing increases.
5. Uranium exploration activities need to be enhanced in the country through improved security
and infrastructure.
6. Nuclear power plants are almost zero greenhouse gas (GHG) emission technologies as opposed to
its counterpart fossil fuel fired power plants that cause global warming. A continued nuclear
capacity addition and nuclear infrastructure development is necessary to mitigate GHG emissions
in the longer term.
7. The ability to handle nuclear waste is an essential part of the strategy in order to mitigate the
potential for environmental hazards. The costs of such activities need to be well understood


before commitments are made for the set‐up of new nuclear power plants. In this connection,
best international practices need to be identified and adopted.
8. There is need to educate the general public on the cost‐benefit analysis, usefulness and safety of
nuclear power plants.

XV. Renewable Energy:

In order to integrate Renewable Energy and to increase its share in the energy mix, the following
recommendations are made:
1. Integrated strategy for increasing renewable in the energy mix needs to be developed
immediately with aggressive targets for short, medium and long term and definitive task list,
timelines and budget needed to accomplish this including grid upgrades, financing, policy,
education/awareness etc.
2. Planning and financing of the evacuation network for RE projects should start from the Planning
Commission and become a part of its newly proposed Energy Reforms Agenda.
3. A private‐public partnership is necessary to enhance and expand the transmission networks to
evacuate electricity produced through renewable energy. A set of new (PPRA) rules are required
to attract investors for the transmission networks. Attention should be paid to wheeling and net
metering for all RE as well.
4. Upfront feed‐in tariffs should now be the only method of tariff determination, completely
removing the option of the Cost Plus method. Renewable energy has become one of the most
economically feasible options around the world, falling below the rates of electricity produced
using fossil fuels in many areas. By introducing feed‐in tariffs, all profits by reducing costs would
go to the developers and owners of the projects. This will encourage developers to create the
most efficient power projects that would reduce the costs and increase long‐term viability.
5. Financing models with back‐up support from international monetary institutions should be
worked out to reduce costs. This should cover both IPP level projects as well as consumers‐
targeted solutions.
6. Feed‐in tariffs should be paid in full for all electricity that is produced. Project owners should be
encouraged to choose sites with the highest capacity factors. Consequently, they should then be
rewarded for this due diligence. On the other hand, future feed‐in tariffs should very quickly
match world and regional averages to encourage project developers to bring cheap electricity to
the consumers.
7. Detailed studies and data gathering for all RE sources are still needed
8. The current process for developing a RE projects in Pakistan needs to be greatly simplified.
9. Energy is now a provincial subject. Accordingly the responsibility of RE development with
adequate functional authority should now be passed on to the Energy Departments of individual
provinces. Post 18th amendment AEDB role needs to be redefined. It should again become a non‐
profit Sponsor of RE Projects in the Country.
10. Rationalize taxation policy to provide tax exemptions for imports for as long as needed to either
develop a local industry capable of managing local demand or for the sector to reach tangible
scale.
11. Provide for quality control in the industry and ensure that substandard equipment is not allowed
to be deployed by having a stringent process for testing and monitoring the equipment that is
sold and installed. Further the EPC cost can be substantially reduced if a substantial increase in
local value addition can be made.



12. WIND

 New NTDC‐KE contract should include Renewable resource integration into KE network as a
part of the deal
 A better plant factor with Solar during the day time and Wind mostly in the evening due to
geography of the Gharo Wind Corridor
 Recommend Evacuation at 220kV level
13. SOLAR

 Provide further incentives to develop the sector such a tax rebates and allowances for
business/homes that install solar power and compulsory solar powering/heating components
requirement amongst others. All utilities should have viable renewable energy targets to
meet.
 Capacity building through technical and vocational institutes and colleges/universities, both in
the government and private sector.
 To incentivize conversion of domestic sector to solar net metering guidelines should be
approved by NEPRA and put into place with immediate effect.
 The State Bank of Pakistan should have an intervention to facilitate low interest loans from
the banking sector for conversion of domestic, commercial and industrial sectors to solar.
 If the requisite encouragement is provided in the solar sector target of achieving 5000 MW
of solar generation in the next 5 years could be achievable.
14. BIOMASS

 Municipal Solid Waste should be used to generate biogas that can then be used to run
public transport
 Waste generated in specific industries or zones like furniture making could also be used to
produce power for captive use by private industries.
 Bio‐CNG should be priced the same as CNG rates to encourage the development of this
resource.
 Provide frame work for public private partnerships between municipalities and project
developers that ensures security of feed stock availability on a long term basis

15. GEOTHERMAL

 Further studies of the geothermal potential of Pakistan are urgently required to identify
viable sites for geothermal power plants.



3. PAKISTAN’S ENERGY SECTOR: PRESENT AND FUTURE

3.1.CURRENT ENERGY MIX

The current energy mix of the country shows the heavy reliance on natural gas as a primary source of
energy in Pakistan followed by Oil the bulk of which is imported. Nuclear, hydro and Renewable
(insignificant at present) together form only 13% of the total energy mix. This is an unsustainable
state of affairs the reliance on hydrocarbons has increased from just under 80% to 82% in 2013‐14.

The total energy supply in 2013‐14 was 64.59 MMTOE of which natural gas constituted 48% share
followed by oil, with 33% of the total mix. This makes Pakistan’s reliance on imported fuels ever
greater. With imports of LNG about to commence our concern is that reliance on hydrocarbons will
increase further as well as on expensive imports which result in draining Pakistan’s foreign exchange
resources.
2013-14 Current Energy Mix
LPG, 1% Nuclear, 2%
Coal, 6%
Hydel, 11%
Gas, 47%
Oil, 33%
Source: Pakistan Energy Year book

The total energy consumption by sector excluding fuels consumed for thermal power generation but
inclusive of non‐energy use was 43.41 MMTOE in 2014. This can be seen in the chart below. Industry
including cement, fertilizer and general industry at 33% is the major consumer of total energy
followed by transport at 29% and domestic at 23%.

35% 33% Energy Consumption 2013-14
29%
30%
25% 23%
20%
15%
10% 7%
4%
5% 2% 2%
0%
Source: Pakistan Energy Yearbook



On the other hand, if we look at consumption by energy source we will see that natural gas at 44% is
the most consumed fuel followed by oil at 30% and then electricity at 16%.

Source: Pakistan Energy Yearbook
Consumption by source
2013-14
50%
45%
40%
35%
30%
25%
20%
15%
10%
5% 16% 9% 1% 44% 30%
0%
Electricity Coal LPG Natural Gas Oil

3.1.1. Proposed Energy Mix

The Integrated Energy Plan proposes to reduce Pakistan’s dependence on hydrocarbons, especially
imported hydrocarbons to around 60% from the 87% current trend of the energy mix by 2025. The
proposed energy mix not only looks at indigenous resources for energy but also the emphasis has
been placed on clean energy.

2025 Proposed Energy Mix

Nuclear, 8%
Renewable, Gas Import,
LPG, 2% 10% 10%
Gas Local ,
Coal, 10% 25%
Hydel, 15%
Oil, 20%



3.1.2. Final Energy Consumption based on current and past trends

The current consumption trend of Final Energy by sectors from 2007‐08 till present, will result in
allocation of low‐cost indigenous resources to domestic and transportation sector and thereby
stunting the economic growth of the country.

The study has built a forecast of the consumption by each sector in 2025. The forecast builds on an
exponential trend with a built‐in error of 0.3 percent.

If we have to achieve moderate to good economic growth we need to allocate our cheap
indigenous resource to those sectors of the economy which will produce the greatest economic
benefit; these sectors are power sector, industry and agriculture.

Energy Consumption by Sector
- Based on Current Trend
40%
30%
20%
10%
0%
Industry Agriculture Transport Domestic Commercial Other
2013-14 2024-25
Source: Pakistan Energy Yearbook & EEG

Pakistan’s current energy crisis stems from the lack of sustained policy development and continuity
in the energy policies of successive governments. The Energy Expert Group has since 2009
consistently pointed out the need for an Energy Ministry. This recommendation was even
acknowledged in the current governments published manifesto. Yet two years into its term there
has been no move to set up an Energy Ministry. This results in confused planning, lack of
coordination between the relevant ministries including the Ministry of Petroleum and Natural
Resources, Finance and Water Power. This resulted in crisis of the sort we saw in January 2015 when
there was a complete breakdown of the supply of petroleum products in the country for nearly two
weeks. This kind of crisis is self‐inflicted; thus affecting the growth prospects of the country and
creating uncertainties. In order to avoid such crisis in the future, it is critical that a National Energy
Authority is created, comprising of eminent and recognized energy professionals from the private
and public sector. Their task would be to implement the Integrated Energy Plan and the policies of
the Energy Ministry.

There is an urgent need for:
‐ Prioritization of Indigenous Resources
‐ Energy Diversity
‐ Increased Self Reliance
‐ Energy Security
‐ Affordability and
‐ Sustainability and Clean Energy


Pakistan’s leadership has sadly not taken up the opportunities and resources that the country has
been offered and blessed with.

The opportunity offered initially by cheap regional supplies of natural gas was not taken up due to
complete lack of foresight. The development of the coal and hydro potential has not been
undertaken due to poor policy planning. The prognosticated oil and gas reserves indicate that there is
a huge potential that could be developed. The greatest tragedy however is the fact that we continue
to consume energy in a most inefficient fashion. If Pakistan can reduce its inefficient consumption of
energy and become a conserver of this increasingly expensive resource, the country can reduce its
energy deficit. Energy Efficiency and Conservation are the cheapest energy resources the country has
at its disposal.

Just increasing efficiency in energy conversion and reducing energy losses by 20% could
significantly reduce energy shortages and reduce the cost of this resource to the productive
economy. The Energy Flow Diagram developed by the Group shows that of the total amount of
energy processed over 80% is considered as energy losses. Less than 20% of the total energy within
the economy is considered useful.

What this means is that of the energy lost, consumers pay through higher tariffs, industry in
production losses due to shortages and ultimately the economy suffers substantially more than the
4‐7% of GDP that the Ministry of Planning acknowledges in its Vision 2025. The tariffs are calculated
on the total energy provided into the economy which is a total of over 60 MMTOE and yet less than
11 MMTOE is considered useful energy. In effect the Pakistani consumer pays for 60 MMTOE and yet
receives only 11 MMTOE of energy. As a result of the development of the Energy Flow Diagram it
has become obvious to the Group that a lot more work needs to be done on collecting good quality
primary data and then to project it using various internationally recognized energy prediction
models to develop an Integrated Energy Model that would underpin the Integrated Energy Plan.
This major research and development effort will help develop more sophisticated future energy
models for the country.

The Pakistani nation deserves decisive actions, de‐politicization of the energy sector and a serious
effort to implement the reforms proposed in this Integrated Energy Plan. It has been now well over
a decade of energy crisis within the economy. We have had three different governments in power
and yet none of them has been able to effectively implement policies which will lead to energy
self‐sufficiency and security.



4. ENERGY FLOW DIAGRAM

4.1.ENERGY FLOW:

An energy flow diagram is an important tool for energy policy makers worldwide. It shows the flow
of energy supplies from primary energy sources (e.g. crude oil, unrefined natural gas, natural
uranium, etc.) to their conversion to secondary energy (refined or converted sources like petrol,
diesel, electricity, etc.) and then their transmission to end consumers (domestic, commercial,
industrial, transport, etc.), resulting in final energy. This is then converted through appliances like
motor cars, light bulbs, air conditioners, etc. into useful services like mobility, light, cooling, etc.,
denoted by the useful energy.

The energy flow diagram is extremely useful in highlighting the losses and inefficiencies all along this
path. It is important in quickly identifying processes and transmission routes where the largest loss of
energy is taking place.

So far, Pakistani policy makers have made little to no use of this highly informative tool. To design
a truly effective Integrated Energy Plan for Pakistan, we, the Energy Expert Group, think the
situation needs to change immediately. Based on available public data and statistics collected by
the Hydrocarbon Development Institute of Pakistan (HDIP) and NEPRA, we have compiled the first
comprehensive energy flow diagram for Pakistan in the figure below



Losses Useful Energy Hydel Electricity Natural Gas Coal Crude

The red flows show the losses at every step
Important to note the following:

.• Natural Gas production= 31.15 MMTOE i.e. 48.2% of total energy demand and Transmission Loss= 3.8 MMTOE (12.2 %)
• Total Energy Input to Power Sector= 22.84 MMTOE; Generation Loss (due to Inefficient generation) = 15.06 MMTOE i.e. 65.9% and Transmission & Distribution Loss = 1.69 MMTOE (i.e.
21.7% of electricity output of 7.78 MMTOE) Total Loss = 17.29 MMTOE
• Of the 64.59 MMTOE of energy produced through primary energy and imports, 53.63 MMTOE or 83 % was lost due to inefficient electricity conversion, line losses , and inefficient usage in
final demand.


4.2. Key Highlights
1. Pakistan imported 20.88 MMTOE of energy to fulfill the demand of its population, the majority of it
crude oil and oil products. 44.76 MMTOE of energy came from indigenous resources.
2. Natural Gas forms the backbone of Pakistan’s energy needs, providing 31.15 MMTOE out of the
entire 64.59 MMTOE of Pakistan’s energy needs.
3. 3.8 MMTOE (12.2%) of the total natural gas supplies is lost in transmission and distribution.
4. The power generation sector receives 22.84 MMTOE of energy from natural gas, hydel, nuclear, oil
and coal. It outputs only 7.78 MTMOE as electricity. 15.06 MMTOE (65.9%) is lost in generation due
to inefficient transformation processes and plant use.
5. A further 1.69 MMTOE (21.7%) of electricity is lost in Transmission and Distribution (as well as plant
use), so that in the end consumers receive 6.09 MMTOE of electricity.
6. On the final energy level, industry is the biggest consumer, using 14.49 MMTOE of energy from oil
(petroleum products), gas, coal and electricity. Transport is the next biggest consumer, using 12.71
MMTOE of energy from oil and gas followed by the domestic sector using 9.97 MMTOE of energy
from gas, petroleum products and electricity.
7. Out of the 40.2 MMTOE of final energy that trickles down the consumers, most of it is lost by the
usage of inefficient appliances, motor vehicles and industrial processes. Only 10.96 MMTOE of useful
energy is received.
8. Overall, from 64.59 MMTOE of energy that came in through primary energy and imports, 53.63
MMTOE (83%) was lost due to inefficient electricity conversion, line losses, and inefficient usage at
final demand level.
9. By following existing best practices around the world, Pakistan can reduce the energy losses down to
(as seen in the following section on Energy Efficiency), and hence put an end to the energy crisis and
reduce the import of energy.2
4.2.1. Analysis: If Effective Management of Losses:
Losses Saving if Saving if

International
FY Losses at Losses at Intl.
Benchmark * Difference
Description 2012-13 Intl. Benchmark
% (A-B)
% Benchmark ($ in bn **)
(B)
(A) (Mtoe)
Natural Gas 12.2 4 8.2 2.6 1.2

Transmission
Loss
Power Sector 65.9 50-60% 10.7 2.5 1.1
Generation Loss (55% for
calculation)
Power Sector 21.7 7 14.7 1.1 0.5

T & D Loss
*The international benchmarks are the best practice benchmarks by IEA and OECD studies
** $ conversion: at crude oil $60/ barrel as per industry practice.

2
1. The Crude Oil pathway includes not only petroleum products like diesel, gasoline, kerosene, etc., but also LPG.
2. Renewable Energy from wind and solar, a combined total of approximately 1.5 PJ, is not yet significant not included.
3. For primary energy contribution from nuclear and hydel, the conversions used by HDIP in the Pakistan Energy Yearbook
2013 adopted. Also, conversions for heat content of coal, oil, natural gas, etc. are those used by HDIP in Appendix 7.4.
4. The use of gas as a raw material in fertilizers is considered a non‐energy use. It is considered an energy use when used for
fuel.
5. Agriculture & Other includes Agriculture, Public Lighting, Government and other sectors not included in Domestic,
Commercial, Industry and Transport.
6. The final demand conversions to useful energy are the global averages reported inside the Global Energy Assessment.
(http://www.iiasa.ac.at/web/home/research/Flagship‐Projects/Global‐Energy‐Assessment/Chapters_Home.en.html)


5. ENERGY CONSERVATION AND EFFICIENCY

The energy flow diagram shows that precious energy is being lost to inefficiencies at every step, be it
power generation or the end consumer use. It is urgent that each process step is made efficient using
the latest technologies and methods available, so that supply can fully meet demand, allowing the
economy to grow at its natural pace.

5.1.INTRODUCTION

The case for energy efficiency is simple. Individuals and entities need services like light, process heat,
cooling, refrigeration, mobility, etc. They do not need energy. The same level of service can be
provided using much less energy, if consumers were to upgrade to current state‐of‐the‐art
technologies. For example:

1. Air conditioners on the market range from using 500 watts/ton of cooling to use 1500 watts/ton. The
latter option uses 3 times more electricity to provide the same amount of cooling.*
2. New cars available on the market give between 7km per litre of petrol and 26 km/l. The first option
(SUVs and large cars) uses 3.7 times more petrol than the former (hybrids and small cars) to travel
the same distance.
3. Combined cycle power generation provides 50% more electricity than simple cycle using the same
amount of fuel. Combined Heat and Power (CHP), at 80‐90% efficiency, provides 50% more service
than combined cycle and over 2 times more than simple cycle using the same amount of fuel.

3
While the above facts document the meaning of energy efficiency in the inherent technology,
another important part of energy efficiency and energy conservation is using energy wisely. In
general, buying or using a product that is significantly larger than what is needed (or will be needed
in the foreseeable future) is unwise and inefficient. Sizing a product correctly for the required need is
extremely important to reduce wastage of energy.
For example:

 Using a 1.5 ton AC in a room where a 1 ton AC is needed is unwise and inefficient.
 A single person A driving a 7‐seater to work daily versus a family B of 5 people driving in a small car to
the beach. If both travel the same distance, 2.2 litres of petrol was used to provide 20 passenger
kilometres for person A, while 1.1 litre of petrol was used to provide 100 passenger kilometres for
Family B. Family B’s trip was 10 times more efficient than Person A’s.
 Taking the above example further, public transport using energy efficient vehicles would then be the
most efficient and wise way to move people around the city and country.

3
1. Source: www.energyefficiencydatabase.com
2. 14 cft refrigerators on the market can consume between 250 kWh per year and nearly 2000 kWh per year. The latter
uses 8 times the electricity compared to the former to refrigerate the same amount of food.
3. Desktops use 3‐5 times more electricity than laptops.
4. Globally, ammonia production consumes between 28 GJ/ton and 60 GJ/ton. The latter factories consume 2.1 times
more energy than the former to produce the same amount of fertilizer.
5. Current lighting options available in the Pakistani market provide between 10 lumens of light per watt of electricity
and 150 lumens/watt. The first option uses 15 times more electricity to give the same amount of light.



5.2. ISSUES

 Compared to the 1980s, when household consumption of electricity was 31% of the nationwide
consumption, domestic consumption is now 47% of the national consumption.
 One of the biggest factors in this increase is, of course, the lower electricity prices that domestic
consumers pay compared to industrial and commercial consumers. This subsidy has removed any
incentives from consumers to adopt energy efficient practices or to reign in their demands.
 Other reasons include the increased adoption of air conditioners in the households, the growing
demands of the middle class, which often now has multiple TVs, fridges, computers, etc. in the
household, as well as the lowering average household size, and the related increase in number of
households.

5.3. RECOMMENDATIONS

The Energy Expert Group recommends the following steps to take place immediately to increase
energy efficiency on all levels, and reduce the wastage of precious fuel.

5.3.1. Power Generation

1. All existing simple cycle power plants must be upgraded to combined cycle power plants using the
latest, cost efficient technologies, and with minimum efficiencies over 50%.
2. Power plants that are located close to industrial zones, should be upgraded to CHP plants that will
provide process heat to the factories, with minimum efficiencies over 70%.
3. New power projects must be vetted diligently to ensure that old technologies and equipment are not
being used, which may prove a heavy burden on the economy.

5.3.2. End User Side (Demand Side)

1. It is imperative that an Energy Rating Labelling scheme is established immediately to rate the energy
consumption of all the appliances available on the market, especially important for domestic and
commercial sector, as well as motors and pumps. This will immediately increase consumer awareness
and lead to smarter purchasing decisions.
2. Minimum efficiency standards need to be established for all appliances being sold in the market,
whether locally produced or imported. The minimum standards should be increased every year to
keep up with latest technological advancements. In addition, on the industrial side, minimum
standards must be established by industrial sector. ENERCON has joined the “Barrier Removal to the
Cost Effective Development & Implementation of Energy Efficiency Standards and Labeling (BRESL)”
scheme in partnership with other Asian countries. However, those standards have not been
implemented yet in Pakistan.
3. Energy efficiency campaigns need to be launched to increase the awareness of domestic, commercial
and industrial consumers and help them reduce energy wastage at demand side.
4. Standards should be implemented to use High Power Factor CFL bulbs (HPF>0.9), and stop the use of
low power factor ones that increase the need for reactive power, and the load on the grid.
5. Energy Efficiency departments should be established in universities to increase available capacity and
labour on the ground.
6. Passive heating/cooling/lighting, as well as zero‐energy building designs should be introduced into
the syllabus of architecture faculties around the country


5.3.3. Industry

By adopting currently available best practices, the industry sector has the potential to reduce energy
usage by 30‐35% on average. In addition to the above‐mentioned steps, the industrial sector needs:

1. Detailed analysis of energy use and energy intensity needs to be carried out across all different
industries to get better understanding of where wastages are taking place. This will allow better
policies and focused measures to be taken.
2. Waste heat recovery should be introduced. As a first step, waste heat recovery should be used to
make processes more efficient, and reduce the use of fuel. As a second step, the remaining waste
heat can be used to cogenerate electricity for plant use and sale to the grid.
3. Introduction of voluntary energy/steam audits of factories with incentives for participation.

5.3.4. Transport

1. Clean, cheap, comfortable and efficient public transport needs to be introduced in all cities and
towns.
2. Energy rating labels showing the km per litre of petrol should be made mandatory for all vehicles on
sale.
3. Energy efficiency campaigns to increase consumer awareness about cost savings of smaller cars, and
the cost savings of regular tune‐ups.
4. Optimal fuel efficiency is between 50‐80 km/h. However, traffic flow is being hampered by lax
implementation of traffic laws, reducing average speeds of cars and wasting between 20‐30% of fuel
per trip.

5.3.5. Other Recommendations:

 National Energy Conservation Programme ‐ It is proposed that a National Energy Conservation Program
be developed through a dialogue with all stakeholders and the assistance of international
organizations viz; IEA who have a great deal of experience in the development and roll out of such
programs. This program will be undertaken by the National Energy Authority in conjunction with
ENERCON and other GoP organizations. Energy conservation and efficiency is a much cheaper and
quicker way to release energy from non‐productive waste to productive use. This can be done
without investing in a single MW of additional power.

 Energy Allocation ‐ In view of the shortage of indigenous production of hydrocarbons, all allocations
including existing allocations if not tied down due to water tight Agreements, should be based on
efficiency of fuel usage. The tariff would apply after Allocations are made

 Energy Audits ‐ The GoP should shortlist and hire companies of international repute to audit energy
efficiency of the power sector and other major energy consumers. The results of these audits should
be used to reward efficiencies in conversion. Similar audits should be carried out to assess
inefficiencies associated with major energy consuming sectors (fertilizer, textile, cement, etc.). The
GoP may develop and implement benchmarks for energy efficiency in each of these sectors based on
international standards and local conditions and entities that show improvement may be rewarded.
These rewards may be in form of tax incentives, or better utility pricing.

 Differential Tariffs ‐ Fuel and utility pricing can prove to be an important policy tool to enhance energy
conservation and efficiency as pricing has a significant effect on consumer behavior. Any pricing


strategy in this respect should aim at discouraging the wastage of resources. Progressive pricing
should be developed and implemented for both industrial and domestic consumers for gas and
electricity.

 Transport Sector ‐ On a macro scale, the mass‐transit schemes are expected to consume less energy
than consumed on aggregate basis by individual cars/ buses. The government may moderate demand
by transport sector by introducing transit schemes in the major cities.

 Improving Vehicle Fuel Efficiency ‐ Regulations to be put in place to discourage fuel inefficient cars.
Carburetor‐based vehicles should be phased out and local producers should be mandated to meet
minimum efficiency standards set by the government over the next 3‐5 years. Plan to phase out 2‐
stroke rickshaws should remain in place and reinforced more diligently. Regulation should be in place
to mandate older vehicles to get regular certification on engine efficiency.

 Building Codes ‐ Building codes should be developed and enforced as policy tools to encourage energy
efficiency in new buildings. Incentives may be introduced for carrying out energy conservation
programs in old buildings to bring them energy efficient. Examples may include installation of
efficient space/ water heating solutions, air‐conditioning units.

 Education ‐ Significant energy efficiency can also be achieved via consumer education. ENERCON’s
platform may be utilized for behavior modification through mass media. Education boards should be
included in this effort to make energy education part of the curriculum. TV/ radio campaigns can be
created to educate the consumers about efficient use of energy at homes.

 Fuel substitution using hybrid solutions ‐ Internationally a great deal of experience exists which shows
that long distance transportation of electricity makes little economic sense. For remote markets it is
often best to transport the hydrocarbon to the market and then to convert it to electricity. If this can
be coupled with an alternative renewable such as solar, wind or hydel the hydrocarbon should be
used only when the renewable source is not available. These hybrid systems have been very
successful in provision of universal access to electricity to remote communities and thereby
saving on transmission losses, reducing the carbon foot print and improving efficiency.



6. CREATION OF ENABLING ENVIRONMENT

6.1. CREDIBILITY

It is imperative that credibility at all levels be established in order for any plan or approach to be
successful. Credibility can be insured through consistent policies, their systematic and effective
implementation, efficient operating practices and most importantly the will to have an impartial
approach to all stakeholders keeping balanced socio‐economic objectives in view at all times. A
populist approach must also be avoided if Pakistan is to achieve energy security over the next 3‐5
years.

6.2. CONSISTENCY AND QUALITY OF ENERGY POLICIES

Although it is recognized that we live in a dynamic environment, consistency in policies is a must if
both investor and public confidence is to be restored. This can only happen if policies are well
thought out, look at both medium and long term effects and involve all key stakeholders and are
based on sound socio‐economic principles that have stood the test of time. There should be a single
integrated energy policy for all sectors of energy (upstream, mid‐stream, downstream, gas,
renewable, nuclear, coal etc.). Furthermore the Energy Policy should be linked to our trade,
economic, environmental, security, and foreign policies.

6.3. MINISTRY OF ENERGY AND THE NATIONAL ENERGY AUTHORITY

The formation of a single Ministry of Energy is critical. The two main ministries related to energy ‐‐‐
Water and Power and Petroleum and Natural Resources do not necessarily have a collective and
integrated country, regional or world view. Within the Ministry of Energy an implementation,
execution and regulatory body with legislative powers, authority and necessary empowerment and
resources, reporting to the Prime Minister; should be established i.e. The National Energy Authority
(NEA), at the earliest to drive Pakistan’s energy development in the right direction and in the most
optimum way possible. This body’s composition should comprise of the best possible choice of
professionals from both the public and private sector along with responsible members of consumer
groups. At present there is a serious duplication of efforts, systemic constraints and major issues
related to coordination of efforts between ministries and regulators. Serious and sincere capacity
building in all institutions is required in order for the country to catch up in the race towards energy
security.

There is also a need to understand and visit the implications of the 18th Amendment on the enabling
environment. The impact of this on the creation of a Ministry of Energy, NEA and the role of the
federal vs. provincial should be studied.

6.4. CAPACITY BUILDING

Serious and sincere capacity building in all institutions is required in order for the country to catch up
in the race towards energy security. Organizational and human resource development, are probably
the most crucial requirements of the various Government institutions. The selection and screening
process, the salary structure, recognition and reward system, behavioral issues, the organizational
structure, associated systems; all need a re‐haul. Many studies have been done on this but


implementation has been found wanting. Policy formulation capability and strategic planning are
other area needing focus and development. Equally important is the enhancement of management
of relationships between the different organizations and sectors (public, private and community).
The above needs to be coupled with institutional and legal framework development, making legal
and regulatory changes to enable organizations, institutions and agencies at all levels and in all
sectors to enhance their capacities It is also important to understand that such a program cannot be
done in isolation i.e. ministries that directly interact with MPNR, Ministry of Water and Power,
Ministry of Planning and the departments of Energy in all provincial governments should be part of a
major capacity building program.

6.5. PRICING AND TREATMENT OF SUBSIDIES

Pricing needs an in‐depth review with regard to the base philosophy. i.e indigenous Vs imports as
well as economic returns to the country of various sectors. For the oil sector and particularly finished
products, a market based formula was developed which worked well in the time of relatively low
oil/refined product prices but subsequently came under pressure when refined product prices rose
from 2005 onwards. Rather than reverting to a fixed margin concept (which Ministry of Petroleum
did), the sliding scale mechanism ‐ which factors in effects of low and high product prices ‐‐ should be
seriously considered. It is also imperative that the consumer should be able to see the effects of rise
and fall of oil prices in retail prices. Again this enhances GoP credibility. POL products should continue
to be priced at C&F import parity and end price should not contain any subsidy. Subsidy whenever
needed should be provided directly through support programs e.g. food stamps, Benazir Income
Support Program and other direct interventions.

Gas has been priced very low as compared with competing fuels resulting in high gas demand and a
consistent lack of investment, energy efficiency or conservation. Gas should be priced in parity with
international crude oil prices and ultimately with international LNG/NG prices. Furthermore, the
government should stop subsidizing the use of gas by domestic users, in transport and in the fertilizer
industry. The elimination of subsidies will render significant quantities of gas available for power
generation and industrial consumers which are otherwise using much more expensive liquid fuels.
This is logical because any gas imported should be at crude price parity. This formula is not a new one
and was the basis for pricing natural gas till the late 80’s.

In general the price across the energy value chain (producer to consumer) should be transparent and
least prone to government intervention.

6.6. INTEGRATED ENERGY PLAN AND ENERGY MIX

In our view the Planning Commission has taken a step in the right direction by initiating an Energy
Optimization model. However any model is as robust as the assumptions it is based on. It is therefore
important that key stakeholders be involved in the development of the Integrated Energy Model and
it be part of the National Energy Authority’s mandate.

6.7. ENABLERS, FACILITATORS AND POLICY MAKERS

At present the development of power, petroleum, coal and alternative and renewable policies have
been developed by relevant Ministries. This has meant that there is no coordinated effort to develop
an integrated energy plan.


The Planning Commission and the organizations noted below all have a critical role to play in the
development, facilitation, implementation and ultimately management of such policies.

The enablers and facilitators include:

 Board of Investment
 Ministry of Petroleum and Natural Resources
 Hydrocarbon Development Institute of Pakistan
 ENERCON
 Ministry of Water & Power
 Ministry of Finance
 WAPDA
 AEDB
 PPIB
 Pakistan Atomic Energy Commission
 Provincial Energy Departments

In order for them to operate to their full potential these organizations require for there to be a
coordinating, implementing and policy making Ministry which takes ownership of the Integrated
Energy Plan and then through the NEA, drives the agenda for change in the energy sector of the
country. Witness the lack of success in the development of either coal or alternative renewable
energy resources. The integration is not only required at Federal level but with the Provincial
governments and the distribution companies that operate in these provinces. This entity must be the
proposed National Energy Authority.

Some of the key issues that are faced by the energy sector include:

 Capacity building
 Technology
 Research and Development
 Coordination between different organs of the state
 Dissemination of knowledge and experience
 Continuity of policy structures.



7. PAKISTAN’S ENERGY DEMAND & SUPPLY

7.1.TOTAL ENERGY DEMAND & CONSUMPTION PATTERN

Primary commercial energy supplies in Pakistan have increased by 3% during 2013‐14 to 64.6
MMTOE from 62.86 MMTOE in 2009‐10 and 6% from 61.01 MMTOE in 2008‐09.

The share of natural gas in primary energy supplies during 2013‐14 was 48.2% followed by oil 32.5%,
hydro‐electricity 11%, coal 6%, nuclear electricity 2%, LPG 0.5% and imported electricity 0.1% as
depicted in Figure below.

Percentage of Energy Mix 2013-14
120%
100%
80%
60%
40%
20%
0%
Pakistan USA India China
Natural Gas Nuclear Renewables Hydro Coal Oil

Natural gas production during 2013‐2014 decreased from 4,259 MMSCFD in 2012‐13 to 4,126
MMSCFD a 3.12% decrease over the previous period.

Oil production increased to 95 thousand from 67 thousand BBL per day a 41.7% increase as a result
of renewed drilling cavity. Oil consumption increased by 3.83% during 2013‐14 over the preceding
year. While the Northern Region produced 13.7 thousand BBL and 4.3 thousand BBL was produced in
the Southern region of the country.

Natural gas consumption decreased by 1.6% during the current financial year as compared to the
previous year. The main increase was in the domestic sector 11.5% followed by commercial 2.8%
and power sector 1.1%. It may be noted that total demand for Natural Gas which is estimated
between 5.5 to 6 BCFD while supplies were restricted to less than 4.1 BCFD leading to shortages
and disruption of supplies.

Overall Coal consumption decreased by 10.2% in 2013‐14, due to reduced mining activity and greater
reliance on HSFO. A major part of the consumption of coal has been in the cement and other
industries for firing boilers. On the other hand, overall Electricity generation during 2013‐14
increased by 1.1%.



7.2. PAKISTAN ENERGY OUTLOOK: HIGHLIGHTS

It is the view of the Energy Expert Group that growth in energy demand would be approximately 6.0
% over the next 15 years i.e. it is expected to grow to 137.64 MMTOEs by the year 2025‐26 at an
economic growth rate of 5.0%.

The Primary Energy Mix will see a significant shift from Natural Gas to Hydel, Coal and Alternative &
Renewable resources which will diversify sources of energy. The Group wishes to see a shift from the
current reliance of 86% on hydrocarbons to be brought down to 50% and a reduced reliance on
imported energy.

If Pakistan does not move towards implementing an Integrated Energy Plan then it is certain to
face a large and growing energy deficit during the next 15 years. The major portion of this deficit
would have to be met through imports of Hydrocarbons which Pakistan’s limited foreign exchange
reserves will not be able to afford. This is why the Energy Expert Group has suggested a radical
rethink of energy policy in Pakistan by focusing on development of indigenous resources of energy
and diversifying the energy mix. Most of countries whether India or China, rely to a greater extent
on indigenous coal for their power generation.

Due to the large transmission and distribution gas grid in Pakistan, Natural Gas will continue to play a
major role in Pakistan’s energy mix. Pakistan will therefore need to encourage the increase in local
natural gas supplies from its own upstream sector and to arrange gas imports both through cross‐
border gas pipelines and in the form of liquefied natural gas (LNG) to meet any deficit.

In view of expected petroleum product supply gap, it is also expected that a number of new refining
projects will be implemented during the next decade.

It is in the country’s national interest to develop its domestic energy resources including increased
onshore/offshore oil and gas production and sustainable development of the Thar coal reserves,
Alternative & Renewable resources as well as in the nuclear sector. Despite these efforts Pakistan’s
dependence on imported energy will stay more or less at 30% of its energy supply. Other models
considered by PWC, Hagler Bailey and Petroleum Institute of Pakistan have shown a major shift to
over 70% reliance on imported energy, which the country cannot afford.

There is an urgent need to bring significant improvement in the high conversion and transmission
losses of the power sector along‐with enforcement of energy conservation and efficiency measures
in all consuming sectors. For this the Energy Expert Group proposes serious demand side
management. One of the means of controlling demand has been successfully adopted by South
Africa and Brazil and that is to insist that consumers, industrial and domestic, producers of energy
viz; power generators, utilities should voluntarily reduce energy consumption by 10% across the
board through energy conservation and improve efficiency by reducing transmission and conversion
losses across the board through clearly thought through measures.

The energy demand and supply forecast developed by the Energy Expert Group reveals that over the
period 2015‐25, the primary energy demand will grow at a higher rate as compared to the rate
achieved in the past decade despite higher energy prices. The growing energy demand will be met by
resources such as natural gas, oil, coal, hydel, nuclear and renewable energy.



Pakistan’s total primary energy demand is expected to increase to 137.64 million TOEs in 2025 at
an assumption of 5.0% economic growth rate.

Natural gas remains a dominant fuel in 2013‐14 providing 48.2% of the current energy mix it will be
reduced to 35% by 2025 out of which 10% will be through imports. The oil (i.e. petroleum products)
share in total primary energy demand is expected to decline from 32.5% in 2003‐40 to 20%. Coal’s
share in the total primary energy requirements is expected to increase from 6.0% in 2013‐14 to
around 10% by 2025.

It may be mentioned that Government as part of development of indigenous energy resource base is
aiming to increase Coal’s share significantly as the country has large reserves of coal at Lakhra (1.3
billion metric tons) ), Sonda (7.1 billion metric tons) and Thar (175.5 billion metric tons). However, on
ground progress with respect to the development of infrastructure and mining has been very slow.
This needs changing through the creation of an integrated coal policy which will encourage the
development of the mining infrastructure while simultaneously ensuring support infrastructure viz;
roads, water supply is all developed in tandem with the setup of power generation facilities. Since
the mining infrastructure and industrial scale may take longer to develop it is visualized that coal
fired power generation may commence sooner through imported and then once the infrastructure
has been built to switch to local coal. There is also an important shift that must occur. There is plenty
of coal in Sindh which has fewer problems in its mining and infrastructure. If proper industrial mining
could be developed this could provide better quality coal feedstock to local coal based power
projects.

Hydel, the cheapest source of energy after capture of energy through efficiency and conservation, is
currently contributing to the extent of 11% in country’s energy mix. Its share will increase to 15% by
2025. It may be mentioned that the increase in hydel share / growth will be primarily dependent
upon construction of dams as per considered time frame. These dams have been identified and site
studies are at various stages of development. It is imperative that financial and technical resources
be brought to bear on these projects in a prioritized fashion without allowing the development of
these projects to be politicized. In its Vision 2025 the Government of the day also recognises the
need to undertake at least two hydel power projects within the next decade.

The share of nuclear will go from 2% to 8%, provided that the project commitments by GoP are met
within given time frame. In order to ensure that Pakistan can increase the nuclear sectors modest
contribution, a great deal of effort needs to be given to indigenizing the production of fuel rods and
to power plant manufacturing. The share of Alternative and Renewable energy will be increased
aggressively to 10% of the total Energy Mix through roll out of Run of the River – Micro Hydel
projects, Wind farms Onshore and Off‐shore, Off‐line Solar and by introduction of local Bio‐Diesel
and Ethanol production. The lowest hanging fruit is Ethanol which could be blended immediately in
the local oil industry. This must be done without throwing out the existing refining sector off balance
through introduction of Ethanol blending. Through the creation of a more level playing field between
competing fuels Ethanol and Bio Diesel could be introduced and indigenous resources could be
utilised. Wind and solar energy in the midterm should be encouraged in those areas where these
resources exist.

The Energy Expert Group wishes to ensure that the Industrial sector should remain the leading
energy consumer of the energy mix, in order to have the maximum impact on the GDP of the
country. The Industrial sector has achieved an annual growth rate of 3.21% during the last five (5)
years as compared to annual growth of 3.22% achieved during 199‐00 ‐2013‐14 period.


Transport sector currently consumes 31.6% of the total primary energy requirements. This sectors’
share in primary energy requirements is expected to increase as its historical share. The Group
wishes to ensure efficient use of energy within this sector through energy efficiency and conservation
programs. It may be mentioned that during last 5 years the transport sector’s energy requirements
increased at the rate of 1.9%.

7.3.PAKISTAN ENERGY: AN OVERVIEW

According to recent studies Pakistan’s prognosticated reserves for gas and oil are noted below. We
have at present only discovered about a third of the natural gas and considerably less of oil.

The potential power generation from hydro, coal and alternative and renewable resources is
immense. The desire of the Energy Expert Group was to focus on these potentials so to create
greater self‐reliance, energy diversity and security.

During the provision and generation of final energy, significant volumes of energy are lost during
processing, generation, transmission, and as feedstock. This gross energy consumption i.e. final
energy demand plus energy consumed/lost for generating final energy is termed as primary energy
demand.

Pakistan’s historical and current energy mix if allowed to grow as in the same ad hoc and
undirected fashion will lead to unprecedented dependency on imported energy feedstock. The net
result would be that the country will lack in Energy Security, Energy Diversity and the import bill
for hydrocarbon imports assuming crude prices remain at US$ 50‐70 per BBL on average would
result in an import bill of over US$ 50 billion per annum.

The radical changes in the energy mix will require a greater emphasis on improving policy structures
and driving an investment program, and creation of a Ministry of Energy and within it a National
Energy Authority for implementation of the policies and programs; that will ultimately lead to a
different energy mix becoming possible. Fortunately Pakistan is coming into the market at a time
when it can benefit from the maturing Alternative and Renewable Technologies thereby leapfrogging
a couple of generations of wind turbines and solar energy technologies.



DETAILED SECTOR ISSUES AND RECOMMENDATIONS



8. OIL INDUSTRY

The Oil industry comprises of 3 main segregated sectors: Exploration and Production (E&P), Oil
Refining and Oil Marketing. These are commonly known as Upstream, Mid‐stream and Downstream.

8.1. EXPLORATION & PRODUCTION – OIL & GAS

8.1.1. Exploration and Production Overview

Extensive studies have been carried by geologists to determine the oil and gas potential of the land
mass comprising Pakistan and its offshore economic zone. In the 1970s a study placed the potential
at 40 billion barrel oil and 200 trillion cubic feet of gas. However with the advancement in technology
and availability of more data from drilling and seismic activity across the country these estimates
have been scaled down.

The current reserves are estimated at:

Oil/ Condensate Million Barrels of oil MBBL) ^
Recoverable Reserves 353
Gas Reserves (Trillion Cubic Feet TCF)^
Conventional Potential 67
Conventional explored so far 55.8
Remaining Reserves* 23.64
Unconventional^
Tight Gas (TCF) 41
Shale Gas (TCF) 105
CBM (TCF) 21
Total 167

^M/O PNR further informed that the above figures about Potential Reserves both Conventional and Unconventional are
subject to further drilling data for verification and confirmation.
*M/O PNR clarified that Conventional Potential of 67 TCF is a tentative assessment while original recoverable reserves
are 55.6 TCF against which 32.16 TCF has been explored leaving balance of 23.64 TCF.

At the current levels of production, the Pakistan Petroleum Information Services (PPIS)
estimates remaining reserve life of approximately 16 years for gas and 10 years for oil.

8.1.2. Outlook

The sector is expected to move away from conventional exploration plays as a result of a lack of new
sizeable discoveries within the current active basins.

The emergence of tight gas may be in progress and discoveries could begin to show results by 2025.



8.1.3. Issues

 The falling production and lack of further exploration investments in natural gas have seen a fall in
gas production from 4.4 BCFD in 2012 to only 4.0 BCFD in 2014. Decline in fields like Sui, Zamzama
and others have had a bigger impact on overall production than the discovery of new fields like
Mehar, Kunar and Pasakhi and Gambat etc.
 This decrease in production has changed policy dynamics to look towards import of gas to meet the
growing needs of the country. However, the import of natural gas results in decreased dependency
on indigenous resources and also adds to the risk of energy security.
 The ongoing security situation has made it difficult for investment to enter the market and for new
development of discoveries. This has resulted in reluctance by foreign investors and companies to
enter or remain in the country and has left many potential blocks unexplored as shown in the map
below.
 While the 2012 policy offers better incentives, there has been a substantial delay in its
implementation and the complexity of its application have made it difficult to maintain a level playing
field in the sector.

 Lack of capacity in the relevant office of the Ministry has made it difficult for the E&P sector to grow
and expand.
 Major concessions in blocks have been given to companies who have made neither investment nor
development in the area. Thus full potential of the wells/blocks has not been realized



8.1.4. Recommendations

In order to encourage more investment, development and expansion of the E&P sector in Pakistan
for indigenous resources the following recommendations are made:

 Concessions awarded to companies be reviewed under a strict timeline of 5 years for seismic
geological and production activity and if targets are not met within the timeline, the government
should consider rebidding for the concession

 Privatization of the state‐owned exploration companies within the next 2‐3 years.

 The model by United Energy Pakistan Ltd. (UEP), which has doubled its gas reserves, drilling and
increased production, must be followed as a way forward by the State Owned Enterprises.
Diversification is required into frontier projects such as Offshore, Shale/Tight Gas, CBM/ underground
coal Gasification and exploration.

UEP CASE STUDY
Activity Comparison – UEP vs Rest of the Industry
Onshore 3D Seismic in KM2 Exploration Wells
4000 35
BP/UEP BP/UEP
3500 30
Rest of the Industry Rest of the Industry
3000
25
2500
20
2000
15
Over the last two 1500
10
1000
years, UEP has
500 5
performed the bulk
0 0
of the upstream 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013
activity in Pakistan
when compared 40
Development Wells
12
Oil and Gas Discoveries
with the rest of the 35
BP/UEP
BP/UEP
Rest of the Industry 10
industry (17 foreign 30
Rest of the Industry
8
and 11 local 25
upstream 20 6
15
operators) 4
10
2
5
0 0
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013
Source: PPIS & UEP internal Data – 2013 numbers are as per best available estimates

 The current policy implementation needs to be fast‐tracked to promote and encourage investment.
The government must remove the reduction of oil prices by means of a wind fall levy, which is
counterproductive and hinders marginal oil projects.
 A Shale gas policy needs to be announced after a detailed study of the Shale Potential has been
undertaken by the Government.
 Existing tight policy relating to old fields needs to be rationalized to allow for additional investment
to be made for extract of maximum resources by allowing them same prices on incremental quantity.
 There is a need for rationalization of the existing pricing policy as an incentive to the E&P companies.
 The tight gas policy should be revised to allow 2012 price+40% which would be about $8.5 /MMBTU
as opposed to the 2009 price + 40% of $6 /MMBTU. The formula which is still under consideration


must be fixed soon so as to encourage production. This revision in the tight gas policy could result in
increased production of Tight Gas (four discoveries of 0.5 TCF each are awaiting policy decisions from
the Government to bring them into production).
 The additional potential of old fields must be covered under the new policy prices as well as
amendment to include mining lease must be added to encourage deeper exploration of existing/ old
fields and to increase production from wells.
 Political and bureaucratic interference must be minimized and the sector must be allowed
independence by hiring of professionals in management.
 A process should be streamlined to avoid delays in award of concessions and agreements, approval
of extensions and well commencement notices to avoid additional costs to companies and investors.
 10% of free equity of revenue from production should be given to local population / stakeholders.


9. GAS SECTOR

9.1.Overview of the Gas Sector in Pakistan

Gas occupies a very prominent place in the Energy Mix of Pakistan, contributing almost 50% of the
total Energy consumed in the country.

9.2.TRANSMISSION AND DISTRIBUTION INFRASTRUCTURE

Pakistan Natural Gas Infrastructure
Peshawar
Consumers: 6.7 Million (1.6 million)

Islamabad
Transmission Network: 11,045 Km (879Km)
Distribution Network: 128,758 Km (38,828 Km)
No. of Cities/Towns on gas: 307
No. of Villages on gas: 4,989 Lahore
Indigenous Supplies: Faisalabad
Quetta
Multan
Sui
AC 1X-S UI
GAS FIELD (156)

Sukkur
SSGC LINES (44,887)
SNGPL LINES (94,915)
COMPRESSOR
Karachi STATIONS (11)
5

The Gas transmission and distribution in Pakistan comprises of two companies Sui Northern Gas
Pipelines Ltd. (SNGPL) and Sui Southern Gas Company Ltd. (SSGCL). Both companies have been issued
licenses by the regulator of the sector (Oil and Gas Regulatory Authority, OGRA) and are thus
responsible for the transmission and distribution of gas. The provinces of Punjab, Khyber‐
Pakhtunkhwa, Gilgit‐Baltistan and AJK are the franchise areas of SNGPL while Sindh and Baluchistan
fall under SSGCL.

The country has a well‐developed gas transmission and distribution pipeline network. The network of
over 11,000 kilometers of transmission lines and over 139,000 kilometers of distribution lines
connects the north of the country to the south.

The industry also includes various gas producers that sell gas to the two companies at well‐head
prices as defined in the provisions of the concession agreements granted by the Ministry of
Petroleum and Natural Resources and notified by the Regulatory Authority.



Pakistan Downstream Gas Infrastructure
SNGPL SSGCL Total

Transmission –KM 7,733 3,551 11,284

Transmission Capacity (MMCFD) 1,770 1,704 3,474

Distribution‐KM 96,589 43,090 139,679

Towns and Villages 3,029 4,008 7,037

Gas Sources 38 32 70

Gas Offtake (MMCFD) 1,608 1,161 2,769
Customer Nos.

Industrial 6,687 23,740 30,427

Domestic 4,734,387 2,618,806 7,353,193

Commercial 57,941 4,156 62,097

9.3.GAS PRICE

The price of gas charged to the consumers is determined by the regulator with consent of the federal
government and then notified to the companies. The price is based on the uniform Weighted‐
average cost of gas (WACOG) and consequent revenue shortfall against the guaranteed return to the
company (17.5% to SNGPL and 17% for SSGCL). The WACOG is the cost of gas which in Pakistan is
between the ranges of US $4‐$6 per MMBTU.

9.4.POLICY HIGHLIGHTS

Unaccounted for Gas (UFG)
UFG is the "lost" gas or the difference between the volume of gas purchased by the Company and the
volume of gas received by the gas consumers and is essentially an inevitable phenomenon for any gas
transmission/distribution company across the world dependent on a variety of factors.

Components of UFG include the following break‐up:

 Above Ground Leakage
 Underground Leakage
 Measurement Errors
 Theft
 Losses in Law and Order affected Areas

Historical UFG trends of both companies have been between 5‐12% with claimed UFG at 6‐7%. In
2003‐04, OGRA introduced a gradual decrease in un‐accounted for gas benchmark (UFG) which
allowed a certain part of the UFG to be treated as part of the revenue requirements ; passed on to


consumers in the tariff, while the UFG above this benchmark is not allowed. A study was conducted
by an independent firm that set benchmark to be between 4‐5.5%. However, in FY 2009‐10 a UFG
benchmark of 7% was allowed against the 5% for the preceding years.

9.5.INTERNATIONAL BEST PRACTICES

Company Location UFG%
DOMINION HOPE USA 7.20%
GREENLIGHT GAS USA 7.08%

BLUEBONNET
USA 11.38%
NATURAL GAS
STAMFORD 15.96
USA
BUFFALO GAP 10.2
ENVESTRA Australia 13.20%
ALLGAS Australia 5.50%
OKATO (POWERCO) New Zealand 9.35%
PAEKAKARIKI New Zealand 8.83%

9.6. PROJECTS IN PIPELINE

9.6.1. Liquefied Natural Gas (LNG) Imports:

A Fast track project has been initiated whereby LNG import “Tolling” terminal will be set‐up.
Phase‐1 will cater for transmission of 400 MMCFD RLNG while Phase‐2 envisages transmission of
1,200 MMCFD RLNG within SSGC’s franchise area.

For LNG import pricing, the international model in place is currently based on spot and long term
contract. The ratios vary between 25‐30% of supply on spot and 70‐75% supply on long‐term
contract. There is thus a need for the government and importers to examine the existing models and
to determine the appropriate model for Pakistan.

9.6.2. Staged development of Iran‐Pakistan pipeline project:

The Iran‐Pakistan gas pipeline is on hold due to international sanctions on Iran. The Iran gas project is
very significant for Pakistan as it can add 25% to Pakistan’s gas supply at much lower price than LNG
imports, which are also being developed. The government should embark on a staged development
and construction of this pipeline project by initiating construction of 750 km of the pipeline up to the
Port of Gwadar, for import of LNG. Subsequently, when sanctions on Iran are lifted, the short
distance of pipeline from Gwadar can be extended to Iran for import of cheaper Iranian gas. As the
government is already collecting GIDC (Gas Infrastructure Development Cess) for construction of the
Iran‐Pakistan pipeline, staged development of Iran Pakistan pipeline should be started immediately,
as it will take 2 years to construct the Pakistan portion of the pipeline to Gwadar.



9.7. PAKISTAN GAS SUPPLY AND DEMAND

To sustain GOP’s target economic growth rate, Pakistan requires an adequate supply of energy to be
made available to industrial and commercial consumers. The Government of Pakistan’s objective is to
secure a long‐term, diverse energy supply for Pakistan. Current projections for Pakistan indicate that
the gap between gas demand and supply will grow.

Economic growth coupled with the attractiveness of natural gas as a fuel for both new and existing
power generation capacity, is expected to result in demand growth for natural gas in excess of 6%
p.a. However, Pakistan’s domestic gas production capacity is expected to peak and then rapidly
decline, led by the giant Sui field that has dominated domestic production for 50 years. This
combination of growing demand and declining supply is expected to open a “demand gap” for
natural gas in Pakistan.



Pakistan Natural Gas Supply Demand Forecast

12000
10000
8000
(2nd LNG in 2017/18: 3.5 MMTPA (500 MMCFD)
1st LNG in 2014/15: 3.3 MMTPA (400MMCFD)

MMCFD
IPI 2018 & TAPI 2020

6000
4000 Anticipated from

Tight and Shale
Gas
2000
From existing
reserves
0 Years 2007 2015 2017 2018 2024

Years 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

9.8. ISSUES

 High UFG losses that are passed onto consumers
 Decreasing supply and pressures from wells
 Policy and tariff structure does not encourage efficient utilization and consumption (domestic)
 Constant political interference which has stifled the growth of the industry
 Load management policy which encourages losses and inefficiency


9.9.1. Right price residential natural gas for equity and conservation

Urban homes generally have access to natural gas and accounts for quarter of the gas consumed in
Pakistan. Whereas, small towns and rural areas where the majority of Pakistanis reside have to burn
wood, dung, or use fuel such as LPG or kerosene which is 10 times more expensive than subsidized
natural gas provided for residential use. The price differential between natural gas and petroleum
based fuels is exacerbating ‘socio‐economic’ disparity between urban middle class and rural poor.

Although gas utility companies charge progressively higher price through ‘slab rates’ for higher
consumption of gas, the pricing mechanism and slab rates are ‘generous’. Thus, a typical gas bill for a
middle class house is about Rs 500 ($ 5) per month for cooking and water heating, whereas LPG users
spend over Rs 2000 ($ 20) per month just for cooking purposes. If the gas price for residential use is
progressively increased or ‘slab volumes’ are reduced, there is potential to save about a quarter of
the natural gas consumed in homes. This would be due to installation of solar water heaters, which
only cost Rs 30,000 ($ 300) but are currently not viable at low natural gas prices in residential sector.


The government should initiate increase in gas price and revision in ‘slab volume’ for gas
conservation in homes, and also to reduce the disparity with the population who do not have access
to natural gas. Gas consumption in residential sector is also growing fast because of installation of
small gas generators, which have only a third of the efficiency of large power plants in the country.

9.9.2. Increasing efficiency and reducing UFG

 Loss of UFG (Cost of 1% UFG)

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 *2013
SNGPL 526 712 921 992 1,089 1,587 1,776 1,705 1,959 2,042
Rs. In
SSGCL Million 385 469 597 632 704 1,013 983 1,021 1,176 1,346

The table shows the cost of 1% of UFG which is then built into the revenue requirement of the
companies and passed to the consumers in the tariff.

In order to incentivize distribution companies to work on commercial considerations pricing
mechanism should permit fair margins on gas selling price and be fined if UFG’s are greater than
acceptable. Reduce UFG’s by at least 50% from current levels.

 Reducing line losses
One of the arguments for high UFG has been that the bulk to retail ratio has changed with increase in
the retail ratio on account of growing CNG and domestic demand. The utility companies argue that
the bulk to retail ratio of 55:45 based on the FY 2003‐04 model should be applicable i.e. ratio of gas
supply to retail (55%) in comparison to bulk (45%). With increasing supply to retail under the load
management policy and subsequent decreased supplies to bulk sector (power, industry etc), the UFG
losses are also greater. This results in increased inefficiency. The table below captures the increased
UFG losses in line with the increasing supply to retail (CNG, Commercial etc.).



Weighted UFG on the
FINANCIAL YEAR Actual UFG Loss Basis of Retail/Bulk Bulk / Retail ratio
Ratio of F.Y 2003‐04
Volumetric %Age Volumetric %Age Retail Bulk
(MMCF) (MMCF)
F.Y 2003‐04 32,719 6.75% 32,221 6.65% 54.91% 45.09%
F.Y 2004‐05 39,529 6.86% 38,716 6.84% 55.07% 44.93%
F.Y 2005‐06 40,580 6.61% 36,876 6.03% 60.18% 39.82%
F.Y 2006‐07 48,571 7.77% 39,145 6.26% 68.13% 31.87%
F.Y 2007‐08 52,288 8.04% 40,129 6.24% 70.73% 29.27%
F.Y 2008‐09 52,539 8.05% 37,946 5.81% 76.04% 23.96%
F.Y 2009‐10 62,217 9.57% 44,220 6.80% 77.21% 22.79%
F.Y 2010‐11 74,591 11.21% 54,150 8.14% 75.63% 24.37%
F.Y 2011‐12 68,837 10.20% 49,265 7.30% 76.68% 23.32%
F.Y 2012‐13* 59,531 9.33% 42,688 6.69% 78.94% 21.06%

 Political interference in the running of the companies and their business must be removed.
 Monopoly distributors‐ privatization of the distribution network must ensure competition and the
provision of choice to consumers, by unbundling of the distribution network into multiple companies
(moving to multi‐seller distribution model).
 To move cheap gas for sectors with high contribution to economic growth‐ switching from gas
geysers to alternates.
 Transnational pipelines‐ diversity of supply: delays in TAPI and IPI must be reduced and progress
must be made to allow for imports of the transnational pipelines.
 Price parity with competing fuels must be achieved.
 Phased reduction of cross subsidies‐ domestic and fertilizer over 5 year time period
 RLNG to replace liquid fuel in power sector. LNG Policy 2012 to be revised accordingly. In the short‐
term till imports flow and infrastructure is developed, all new Power Plants to be dual fuel CCGT
plants.
 Proper unaccounted for gas (UFG) control system should be introduced in both the Sui companies
as 1% reduction nearly equals to 40 MMCFD.
 Gas Utility companies to work on margin based system as commercial organizations.
 Gas subsidies or cross subsidies to be eliminated. Instead, the government should provide direct
support to segment of population below the poverty line.
 No Gas supply to be allowed for water heating. Solar water heaters to be used for all water heating
requirements.
 No expansion of Gas Distribution System till further discoveries.
 Review of Load Management & Gas Allocation Policy and propose following changes in the priority
list:
i. Power Generation
ii. Industry
iii. Commercial
iv. Domestic
v. CNG


 All New Thermal Power Plants to be coal based or Combined Cycle Gas Turbine (CCGT) Plants to use
LNG as this fuel has advantages over liquid fuel.
 CNG should only be used for buses in major cities for mass transit programs

 If the gas priority list is used, the expected GAS savings are calculated below:

Gas Saving:
CNG = 200 MMSCFD
Domestic = 200 MMSCFD
Unaccounted For Gas (UFGs) = 160 MMSCFD

 This saving in Gas would result in additional power generation of approximately 3000 MW.
 An additional 1000 MW can be generated by converting or prioritizing gas supply to CCGT power
plants, resulting in an overall additional capacity of approximately 4000 MW.
 This will result in savings of approximately US$ 2.0 Billion Dollars per annum import bill at $60/bbl
crude and $350/ Mt Furnace Oil.



10. LPG SECTOR

Liquefied Petroleum Gas (LPG) has seen phenomenal growth year in year out over the past two
decades. Its consumption and supply have doubled nearly every seven years. The growth of LPG
consumption however has been supply constrained. As LPG supplies become available it has been
consumed. Yet LPG still constitutes just around 1% of the total energy mix. A country at Pakistan’s
stage of growth should be consuming about 5% as a percentage of the energy pie. Over the next
decade the consumption of LPG will be driven by several factors the major factors will be the honest
implementation of announced policy structures. LPG Rules were announced in 2001 and then a policy
in 2006. The policy has also seen unilateral decisions taken by the Ministry which have affected the
supply of LPG to the market. Once again a new policy was announced in 2012 which has been held
hostage to legal challenges and a further one in 2014 has been proposed which rolls back the entire
deregulation policy and is yet to be approved in the ECC.

LPG like all hydrocarbons should be treated as a commodity and not a premium product. As supplies
remained constrained the pricing of LPG remains a volatile and emotive subject.

LPG at present provides under a percentage of the total energy mix. In countries of Pakistan’s stage
in industrial development LPG contributes closer to 5% of the total energy pie. Consumption of LPG is
a good indicator of a country’s social and economic development. India which used to consume less
than 1.5 Kg per capita in 1999 now consumes over 8 Kilograms per capita while Pakistan which
consumed 1.8 Kilograms per capita consumes 3 Kilograms per capita.

10.1. SIGNIFICANCE OF LPG IN PAKISTAN’S ENERGY MIX

LPG though a small part of the overall energy mix needs to be recognized as an important bridge fuel.
As shortages of Natural Gas will remain in the system and availability of natural gas to the domestic
sector will be restricted, LPG should be encouraged as a substitute fuel. Internationally in Chile and
the USA, LPG is the stand by fuel when there are NG shortages. In fact there are models of Chilean
NG utilities using Synthetic gas (made from LPG) to provide gas for their reticulation system. During
the last few years, LPG is increasingly being used as an automotive fuel; however this has been
through the informal sector.

LPG due to its very transportable and clean nature is a perfect fuel for domestic consumption thereby
reducing indoor pollution and acting as a bridge fuel for consumers to graduate from biomass and
kerosene to LPG and then to Electricity.



*The above chart does not show consumption by source from extraction plants and gas fields, due to lack of accurate
data.

LPG consumption is expected to rise from the current 650,000 Mt per annum to over 2.5 Million
Metric Tonnes per annum by 2025 should it reach 2% of the energy mix.

LPG production within Pakistan is expected would rise if new refining capacity increases. But unless
new significant gas finds occur production of LPG from gas extraction plants is expected to remain
stagnant. It is expected that local production from both refining sector and gas extraction plants will


not rise above the 1 million MT mark therefore imports of approximately 1.5 Million MT per annum
will be needed.

10.1.1. Future

 In the supply of LPG to the domestic sector, GoP should consider providing ONLY direct subsidies
specifically on LPG to households for reasons of health and environment and to reduce pressure on
demand for Natural Gas. This will result in a move away from pricing distortions in the LPG market. At
present the Government has been attempting to moderate end user prices by capping produced LPG
hoping this will benefit consumers. This has only enriched middle men and created cartels.
 Potential of converting 5% population will be additional LPG sales of 243,000 Tons per annum
assuming 15 Kg per household per month over the next 5 years. Potentially conversion of 10%
additional population over 10 years would mean another 729,000 Tons/Annum of sale and 20%
additional population over 20 years would mean another 1.22 Million Tons / Annum.
In the automotive sector the potential is also huge if GoP can level the playing field through proper
deregulation and removal of pricing advantages to CNG. Presently we estimate about 700,000 Tons
per annum in 5 years. In 10 years the consumption would be 1.14 Million Tons per Annum and in 20
years the consumption would be 2.15 Million Tons per Annum.

10.2. ISSUES

 LPG storage in the country is no more than 10 days base stock. This means that every time there is a
heavy draw on LPG because of extreme weather conditions or emergencies, LPG prices jump and
regional shortages occur.
 As a result of a two tier pricing mechanism, supply constraints have meant imports were not viable
and only domestic production could be marketed. This has lead to serious problems in the LPG
market. Reregulation is not the answer. But proper and complete deregulation is the way forward.
LPG base‐stock price for local produce has been capped at lower levels for most part of the past
several years. This has resulted in making imports unviable and resulted in shortage of this critical
fuel especially during winters. Capping the cylinder price by the Regulator has also had the same
effect on product availability.
 Policy structures are not implemented properly and on an ad hoc basis.


 There is no proper focus on Health and Safety issues by the Regulator or the Ministry
 Under filling, cross filling and decanting of LPG cylinders is rampant and yet these issues are not being
addressed sufficiently. There is a continual focus on pricing of the commodity.
 OGRA is tasked to routinely determine LPG consumer prices. This action of OGRA is
counterproductive as it reduces supplies to market and causes price volatility which cannot be
contained.
 Lack of storage and transport infrastructure in the northern and rural areas has meant that price
volatility is evident when there are heavy draws on supplies.
 As natural gas shortages occur in urban and peri‐urban areas LPG supplies to northern and rural
customers dry up.
 Demand / Supply out of balance. Large latent demand exists which cannot be supplied from local or
imports due to pricing anomalies created by the Ministry and the Regulator.
 Price volatility due to pricing anomalies and resulting shortages discourage customers.
 Low NG price is a disincentive in marketing any fuel. This fuel only reaches 25% of the market and
benefits the urban elite. The rural and the peri‐urban poor do not benefit from the lower priced fuel.
 Taxation and pricing regime of more polluting fossil fuels has not allowed LPG to grow.
 Low cost CNG has stunted the growth of the LPG auto segment market.
 GoP / OGRA Rules are more stringent than international Auto‐gas standards and have lead to a
complete stoppage of legal LPG usage in the automotive sector, while encouraging decanting. Auto
gas installation standards have got arbitrary rules that are not internationally used which cause
additional cost like price of land, location on a double carriage road etc.
 The LPG Market is highly fragmented with over 70 players. This has lead to unsafe practices. While
competition is good it has lead to unsafe HSE and poor regulatory oversight. Fragmentation of the
LPG market due to low barriers to entry. The fragmented market in Pakistan does not operate in the
consumer interest.
 GoP policy encourages allocations in small lots causing low cost and unsafe operators to proliferate &
flourish.
 Regulator is unable to enforce standards which results in unsafe practices and not providing level
playing field for ethical operators.
 Weak implementation of policies and regulators has lead to cartelization. This allows outliers to
benefit from the free for all.
 GoP policies have encouraged distortions and non‐commercial practices like forcing companies to
build filling plants in areas where there are no markets.
 High exit barriers discourage consolidation and lead to cylinder filling overcapacity and underutilized
LPG filling plants.
 The GoP taxation and pricing have also contributed to market distortions by subsidizing natural gas.
This resulted in rapid growth of CNG as well as NG as fuel of choice for industry & other segments
encouraging higher UFG and other unhealthy practices.
 Branding is not possible to enforce due to weak regulatory mechanism.
 Customers do not get quality product because they have no real recourse if they do not get proper
weight and quality of product.
 Refilling into small cylinders (decanting) in the market place for Auto and domestic customers has
become entrenched and is difficult to control.
 Distributors are multi‐brand and have disproportionate clout in promoting various companies and
this is totally price driven.
 Lot of substandard / unsafe cylinders & equipment is freely available and used by customers /
decanters who are unaware of safety / quality and driven only by price.



 LPG marketing companies collectively should be required to maintain at least 2 weeks cover of their
sales.
 LPG pricing should be market‐driven and based on import parity pricing as stated in the LPG Rules
2001 and LPG Policy 2006. Similarly determination of price reasonableness should be avoided to
ensure that market is completely deregulated.
 OGRA intervention on determination of consumer prices should be in exceptional circumstances and
take place when obvious cartelization is taking place in the market. In that situation price
determination should be based on individual cost structures of companies rather then imposing one
price across the board for all marketing companies as is clearly stated in the LPG Rules 2001.
 OGRA focus should be on increased supplies to the market mainly through imports so that price
volatility and shortages are contained. This requires it to ensure investment not only in increased
storage but also in transportation of LPG by tankers to move product from Karachi ports to the
shortages in the north of the country.
 PDL or a Royalty should be imposed on LPG production on low cost local gas extraction plants due to
low cost of indigenous gas. This PDL/ Royalty collected should be used to provide a means to assist
those poorest in society who need help to graduate to modern fuels and delivery of this subsidy
could be undertaken using the poverty scorecard developed by the Pakistan Poverty Alleviation Fund.
 In addition to assistance to the poorest of society, from an environmental perspective in mountain
areas; to curtail deforestation, targeted subsidy in such areas should also be considered.
 A policy for a transparent and level playing field be developed for the setup of LPG extraction plants.
 More applications of LPG, in power generation, Synthetic Natural Gas as a peak load shaving fuel be
evaluated so LPG can replace other fuels. This would help overcome overall fuel shortages in the
country by utilizing LPG in place of other fuels (such as natural gas in winter season).
 GoP must improve the regulatory environment and increase focus on quality of service to customers
and HSE standards.
 There is an overlap in the regulatory envelope of OGRA & Explosive department which increases cost,
causes confusion in the enforcement of conflicting standards in the complete LPG distribution.
 Discretionary powers of Chief Inspector of Explosives (CIE) as per their MIG rules 2010 leads to
corruption and arbitrariness.
 Policy structures must be stable and not subjected to changes frequently.
 The Regulator and Ministry require capacity building.
 There must be greater coordination and communication between policy makers, regulators,
consumers, marketing companies and LPG producers.
 Distributors and transporters need to be licensed by the Regulator. The Regulator must then ensure
all HSE rules, quality of LPG supply be enforced rigorously. A proper complaint and complain
resolution procedure must be put in place.
 Governance within the Regulator must be strengthened through transparent processes and honest
implementation of GoP policies.
 The policy of the past governments, to give quota to LPG as a political bribe to their favorites has
resulted in large number of LPG marketing companies appearing license with small volume of
business or in many cases they sell their quotas at premium to other larger marketing companies.
This has led to malpractices, low safety standards and development of sector on unhealthy and
unprofessional grounds. Hence, there is a need for intervention by OGRA and all licenses granted on
political or patronage should be withdrawn. One of the major culprits apart from the Governments in
the past has been the monopolization of the licenses by one group in the sector.
 Greater efficiency within the market through consolidation is necessary. This can be undertaken in a
deregulated market.


11. REFINING SECTOR

11.1. OVERVIEW OF REFINERIES IN PAKISTAN

Oil Refineries being in the business of manufacturing petroleum products, play a very vital role in the
Energy sector and contribution towards sustaining economic growth. The Refining industry has its
own dynamics, which should not be misunderstood with a normal business.

Essentially, Oil Refineries are one of the strategic assets of our country (whether privately owned or
otherwise); ensuring security of supply and storage of reserves. Above all, the refineries ensure
supply of petroleum products for Defense needs and any untoward incidents. Thus, Government
support in expansion and sustainability of the Refining Sector is critical. This may typically be in the
form of consistent investor friendly policy preferably with a one window Facilitation Cell within the
Ministry of Petroleum and Natural Resources in order to attract investment in the Sector (including
new viable projects).

They are fundamentally one of the key support structures upon which a nation is built and an
economy is run. Oil Refineries have a direct impact on the expansion and development of
infrastructure, transport system, employment and pipeline networks for smooth supply of petroleum
products.

Apart from their contribution to economic growth in the country, refineries also improve Foreign
Exchange Reserves for our nation. It is estimated that the five refineries together provide an
Annual Saving during FY 2013‐14 of over US$ 310 million to the National Exchequer.

The five big refineries constituted a total of 19.6 Million Metric Tons of refining capacity of Pakistan
in the financial year ending FY 2014.

During 2013‐14, these refineries processed about 10.91 Million Metric Tons of crude oil at 56%0. of
the total designed capacity of 19.6 Million Metric Tons thus supplying approximately 57% of the
Nation’s Total Petroleum Demand; the remaining 43% being largely imported as Fuel Oil (FO), Diesel
(HSD) and Motor Spirit (MS).

The recent Government Ad hoc Revision in the Refinery Pricing Formula has seriously hampered
future investment in the Refining Sector, may it be in the form of new refineries or up‐gradation of
older ones.



The Five Major Refineries in Pakistan and their capacity.

Refinery Capacity 2013-14
Others, 2%
ARL, 10%
PARCO, 24%
PRL, 11% BYCO, 38%
NRL, 14%
Source: Pakistan Energy Year book

During 2009‐10, these refineries processed 9.77 million tons of crude oil at 73.6% of the total
designed capacity of 13.27 million tons thus supplying approximately 64% of nation’s total petroleum
demand. Remaining 36% being largely imported as Fuel oil (FO) and Diesel (HSD).

Most refineries in the country are hydro skimming refineries and thus do not fully exploit the crude
by deep‐conversion leading to production of more value added products. At present BYCO is working
on adding 120,000 BPD, and two additional refineries namely TransAsia 100,000 BPD, Indus Refinery
90,000 BPD are also in the pipeline which would add significant refining capacity in the country.
Another deep conversion export refinery is the PARCO Khalifa Coastal Refinery (KCR) with an
expected capacity of 250,000 BPD is currently under design phase.

Refiners are of the opinion that future investment in new and current refineries has been seriously
compromised by recent government ad hoc revision in the refinery pricing formula. Refiners consider
that the reversal of the refining policy has seriously jeopardized the viability of the existing assets and
is a threat to future investment. Unpredictability of crude and international product prices is forcing
the margins to stay negative in the foreseeable in the near future and is likely that this may lead to
the closure of the existing refineries.

11.2. DEMAND AND SUPPLY

The Country’s Total Demand for FY 2013‐14 was 21.1 Million Metric Tons as against the refining
capacity of 19.6 Million Metric Tons. Three major deficit products are High Speed Diesel (HSD), Fuel
Oil (FO) and Motor Spirit (MS). The supply/demand gap is covered with the import of these three
products. The following graphs provide details on the alarming gap between the supply and demand
of HSD, FO and MS based on domestic refinery production.


The deficit between the demand for diesel and Furnace Oil as opposed to the local supply is met with
imports. While the deficit for diesel has seen a declining trend the deficit for furnace oil has been
wider. Thus, resulting in greater import of furnace oil.

DIESEL (HSD) SUPPLY AND DEMAND

FUEL OIL (FO) SUPPLY AND DEMAND



11.2.1. International trend and forecast

The global trend of increasing prices resulted in excess supply in the global market. However,
surprisingly the supply shock of increased production was seen in non‐OPEC countries. This excess
supply and the OPEC’s decision to maintain its current supply resulted in fall in prices from over a
$100/bbl to $50/ bbl.

Most economists, including the chief economist of IEA, OPEC and BP, believe that the falling prices
and the market forces will play out till the end of the year when equilibrium will be restored in the
market as shown below.



11.3. PROJECTS IN PIPELINE

Currently, there are a number of projects being undertaken by Pakistan Refinery Limited (PRL),
National Refinery Limited (NRL) and Attock Refinery Limited (ARL); each is in the execution phase.
PRL is in the process of installing an Isomerization Project which is expected to increase the motor
gasoline production two times and substantially reduce imports; thus adding value to the locally
produced Naphtha which is currently exported at disadvantageous prices. The Hydro
Desulphurization Projects after completion will produce EURO‐II (HSD production having sulfur
contents as 0.05% max. by weight) grade HSD against current 1.0% by weight specifications.

11.4. ISSUES

11.4.1. Is the Refinery sector an economic and strategic necessity?

The Energy Expert Group has critically reviewed the option to provide refineries sustainability versus
opting to import in case these refineries were to be closed down. The Group evaluated this possibility
and also consulted the Ministry of Petroleum and Natural Resources in this regard.

In case of the option to completely close refining operations, the Country would need to import at
least ten separate products instead of importing just three commodities (Crude, HSFO and HSD), to
meet its existing petroleum requirements. Under these circumstances, availability of the product
would always be a problem and the Country would be vulnerable to the volatility of market forces,
with any snag disrupting the entire Nation’s Supply Chain. This would result in an impact on the
overall economy and availability of Petroleum Products to the common man.

11.4.2. Hydro‐skimming Units Limitations

Refineries in Pakistan are of comparatively smaller capacity; PARCO with 100,000 BPCD being the
largest and equipped with mild cracking facility when compared to similar refineries in the Region.
Over recent years complex refineries (those with the ability to crack fuel oil and convert heavy
residue) have achieved consistently higher refining margins when compared to simple hydro‐
skimming refineries.

They also produce a high yield of loss making products such as Fuel Oil. This means that refinery
margins are much lower than those in the Region and major products usually have a negative price
differential against Crude. Refining margins will thus vary from refinery to refinery and depend on the
price and characteristics of the crude used.

At present the refining sector suffers from Turnover Tax, High Mark‐up on confirmed Letters of
Credit, Huge Inventory and Foreign Exchange Losses. All of the above has eroded Gross Refining
Margins and Reserves built up for Up‐gradation and Equity of the Refineries.

11.4.3. Product Specification Vis‐à‐vis Sulfur contents

Local refinery products are of higher sulfur content compared to regional availability. The
Government has set a target of bringing down sulfur content to Euro‐II standard. Most of the
refineries have already been awarded EPC Contracts.



11.4.4. Consideration of Refineries as a Strategic Asset

Refineries are a strategic asset for the country to effectively meet the growing energy requirements
and to save precious foreign exchange. New projects like Isomerization units and Diesel Hydro‐
treater units are in the pipeline that would enable the sector to produce cleaner fuels.



11.5. SCENARIO BASED ANALYSIS
The Energy Expert Group has analyzed three scenarios to question the need for refineries themselves and for technological up gradation of the
existing refineries outlined below:
Scenario 1: Scenario 2: Scenario 3:
The first scenario analyses the hypothesis of “No Need To continue with the Status of quo Moving away from Hydro‐skimming to
for Refineries in the Country” with the alternate and continue to have Refineries in the Complex Refineries
option to instead build storage for the purpose of Country
import from Middle East  To compete in the international market.
Logistic Issues:  Foreign Exchange Saving by existing  State of the art Technology.
 The country will have to import 7 products instead of 3. refineries of US$ 310 million per  In line with latest Refineries’ Configuration
annum (FY 2013‐14) across the Globe.
Current Import Future Imports
 Generation of Employment  Better Profitability Prospects.
1. HSFO 1. HSFO Opportunities.  Cost of a new complex refinery is
2. HSFO 2. HSFO  Contribution of Rs. 312.5 Billion in the approximately US$ 2 Billion (100,000
3.Motor Gasoline 3. Motor Gasoline form of Taxes to the National barrels)
4. JP‐1 (for Aviation) Exchequer.  Existing 4 refineries will require minimum
5. JP‐8 (for Defence)  Minimal Reliance on Import of of the US$ 2‐2.5 Billion to convert into
6. Kerosene Petroleum Products. conversion refineries.
7. LPG  Foundation of Strong Infrastructure.  Phase‐wise deregulation of the refinery
 Reliance on Foreign Countries for Supply of Petroleum  Least Logistic Hassles. sector in a stipulated time frame.
Products, which are critical in nature.
 Cost of Storage Capacity. Rs. 150 Billion (1.5 Billion
USD) would be needed to build one consumption
storage.
 Saving of 7.5% Subsidy (Deemed Duty), resulting in
Decrease in Price ‐ Rs. 22 Billion in FY 2013‐14 can be
off loaded to the Consumer at US$100.
 Inventory losses –not covered, no cushion.




 A comprehensive Refining Policy is needed to provide clarity and long term Vision to the stakeholders
and cover all key segments of oil refining sector; covering domestic oil refining and downstream
sector. In particular, we would like to recommend the deregulation of the downstream sector.
 Implementation of Policy Framework must be governed by separate rules.
 Long Term Commercial Incentives to promote growth of capacity and infrastructure to be uniformly
applicable to public and private sector in an equitable manner.
 Security concerns to be addressed with safe conducive environment to Investors.
 Protection to Foreign Investors under Economic Reform Act 1992.
 Tax Holidays and Duty Structure must be well defined with clarity to avoid ambiguity.
 No Duty on Import of Crude Oil, Condensates and Feed Stock by Refineries.
 Capacity Building of Regulators (OGRA) and Ministry of Petroleum with regards to the Refining
Industry and its impact on the overall economy and the Energy sector.’

11.7. STRATEGIC RESERVES

Strategic Storages are permanent petroleum reserves which safeguard against:
 External blockades or interruption in supply of imports ( e.g. in times of war or natural disasters )
 Internal impediments to product movement (e.g. floods, disasters etc)
 Oil Industry Disruptions (e.g. Refinery Outages, pipeline break down etc)

The Strategic Reserves are separate from Commercial Stocks and can be utilized by Oil Industry at
times of need. These can be in above ground storages, salt caverns or even under ground and under
sea bed reserves. In countries across the globe, strategic Stocks / Storages are managed as per the
Government’s Strategic Stock Policy. This Policy would vary from Country to Country depending upon
their Strategic requirements. Different countries have different sourcing of crude, finished product
and supply chain complexities.

The Strategic Stocks in terms of Crude oil and Finished products for Pakistan can only be determined
once the Country’s Strategic Stock Policy has been developed while keeping in view the above
requirements in consultation with the stakeholders (including the Oil Industry). The recent incident of
Motor Gasoline shortage which was experienced in January 2015 would have been avoided in case of
availability of strategic stocks.

Following country wise strategic stock information is being shared for ready reference please:

 US: 60 days
 Germany: 90 Days
 Netherlands: 90 Days
 China has initiated program for development of Strategic Reserves in 2007 and is expected to acquire
90 days
 India maintains 45 Days of Defense requirement as Strategic stock
 Switzerland: 4.5 months of consumption
 Denmark: 81 days



Most countries have strategic reserves managed through different means, which include:
 Government Bodies
 Semi‐Government Agencies (e.g. France & Netherlands)
 Private Sector

11.7.1. Pakistan: Current Stock Cover

 While GoP requires 45 Days and more of stock cover to meet country requirements, however, the
maximum cover stock holding capacity in the country is only 30 Days.
 Stocks are currently maintained by Oil Industry and these Commercial stocks are counted as Strategic
Reserves
 Commercial Stocks fluctuate according to requirements of oil industry and have reduced to a low of
14 Days in the last 3 years

11.7.2. Pakistan: Oil Product Consumption

Punjab & KPK
Annual Demand
13.7 mn MT
Sindh & Baluchistan
Annual Demand
6.3 mn MT

11.7.3. Pakistan: Main Product Storage

 In order to meet 45 Days stock requirement for the country, there is a need to build additional 60
Days of strategic storage to cater to emergencies.
 These storages should be built across the country
o Sindh & Baluchistan
 Storage of 500,000 MT to be built
 Locations to be determined from strategic and defense point of view.
o Punjab & NWFP
 Storage of 1,100,000 MT to be built
 Location to be split between
 Southern Punjab 50 % as it is the main Demand Centre
 Northern Punjab – Salt Caverns and old rock salt mines viz; Khewra in the salt range to be considered
for strategic reasons and a detailed survey is required to evaluate the possible storage construction
capacity



11.7.4. Pakistan: Estimates of Storage Cost

 Estimated Costs for development of Infrastructure will be Rs. 12 billion
 Additional bi‐annual costs of logistics will be incurred to recycle reserves
 Product quality of stocks is susceptible after 6 months
 Transport capability will be needed, therefore
 Proximity of strategic storages to demand centers will minimize these costs
 At present oil prices, the cost of strategic stock will be $ 1.2 billion, however this cost could be
reduced by sharing these reserves for meeting commercial requirements

11.7.5. Additional Storage Requirements for building 3 months reserve

PRODUCTS OMCs + Additional Storage Approximate
WOP Requirements for C&F Cost to
as of July Building 3 Month Topup Storages
2014 Reserves (M.Tons) (US$)

(M.Tons)
MS 185,935 852,841 426,420,500 Calculated at USD 500 / MTs
JP‐1/JP‐8 56,460 106,769 58,722,950 Calculated at USD 550 / MTs
HSD 867,772 874,904 481,197,200 Calculated at USD 550 / MTs
FO 1,762,890 521,896 182,663,425 Calculated at USD 350 / MTs
TOTAL 2,873,057 2,356,409 1,149,004,075
OMC ‐ Oil Marketing Companies
WOPP ‐ White Oil Pipeline

11.7.6. Recommendation

The Energy Expert Group is of the view that Strategic Storage to meet the country’s need during
emergency should be the responsibility of the State and should be developed within 3 years to avoid
any unforeseen supply disruption / emergency.

The current decline in oil prices makes it an ideal time to invest in development of infrastructure for
strategic reserves and recovery through petroleum product price build‐up.



12. OIL – DISTRIBUTION & MARKETING SECTOR

12.1. SUPPLY DEMAND SCENARIO AND COUNTRY DEFICIT

In 2012‐13 around 27.8 million barrels or 3.75 million TOE’s of crude oil was produced in the country.

While consumption of petroleum products especially HSD (Diesel) and Petrol Motor Gasoline (PMG)
was 6.82 million tones and 3.34 million tons, the production was only 1.5 million tons of PMG and
3.87 million tons of HSD. The deficit was made up through import of 1.8 million tons and 2.96 million
tons of PMG and HSD.

With oil prices at just over US$ 100/bbl at the time, the strain on the balance of payment as a result
of the rising import bill increased the trade deficit.

The deficit is thus expected to increase to 26.25 million TOE. To bridge this deficit,
Pakistan will have to continue importing large quantities of hydrocarbons.

12.2. DOMESTIC CRUDE OIL RESERVES AND POTENTIAL

Pakistan’s local crude production was around 76.28 thousand barrels per day which can be increased
by approximately 20% if the latest technology for enhanced recovery is employed. Pakistan’s
exploration production has proved to have shown better prospects for gas than crude oil.

As of June 2008, E&P activity has resulted in original recoverable reserves of 935.9 million barrels out
of which 326.7 million barrels remained as recoverable reserves in 2009. Since large areas of
Baluchistan and off‐shore have not been explored, there is every likely hood that the proven reserves


figure would increase considerably. The reserves and production of oil through E&P activity is already
discussed in the Exploration and Production Section.

12.3. DISTRIBUTION AND MARKETING INFRASTRUCTURE

Pakistan current Supply chain model is flawed and requires to be addressed on a priority basis. At
present 87% of the total oil movement is by road, 11.5% through pipeline and 1.5% by rail. The most
expensive mode of transportation is road and most economical for long distance is by pipeline
followed by rail.

In Pakistan supply and logistics model is seriously flawed to the detriment of consumers who end up
paying high transportation cost because of complete indifference on the part of government and Oil
Marketing Companies.

The IFEM (Inland Freight Equalization Margin) needs to be disbanded and replaced by a de‐regulated
model on oil movement and distribution, where competition between oil companies would bring in
efficiencies and lower cost in the movement of oil products. Current freight pool bill for FY 2013‐14 is
Rs. 28 billion per annum.

12.3.1. Import Receiving Facilities

Pakistan currently has oil import receiving facilities at Keamari and Port Qasim (PQA). These facilities
are sufficient to meet current import requirements but may not be able to support increasing
imports in the medium and long term unless KPT potential is fully utilized. Below table gives the
capacity of these ports at a glance.

KPT FOTCO(PQA
‐ DESIGN MTA 24 9
‐ ACTUAL MTA 11 9
‐ % UTILIZATION 46 100

The Import receiving facility for Motor Gasoline is only at Kemari and no new tankage can be put up
because of defense requirements. Only three companies have infrastructure to receive imports.

It is important that FOTCO should develop infrastructure and capacity to receive Motor Gasoline
cargoes. The demand for Motor Gasoline is increasing and modifications are required in the white oil
pipeline to meet future demands and to move the product through the pipelines.

FOTCO’s capacity can be significantly enhanced by improving operational practices. However in the
long run, if greater use of PQA is required, increased import facilities to support the increased
projected import requirements of crude and petroleum products. At PQA, FOTCO utilization can be
improved by increasing the draft to enable import of larger cargoes, and through provision of night‐
time navigation. Once existing jetty capacities have been fully utilized more jetties should be planned
and built to ease traffic at current facilities and to avoid unnecessary foreign exchange expenditure
due to demurrages.



A thorough study needs to be carried out to assess current infrastructure and future requirements.
Current infrastructure should be optimized by improving import facilities at KPT and also having more
optimum operating scheduling/ procedures.

In the medium term Gwadar port should be developed for oil imports which can subsequently be
connected to main consuming regions through pipeline which can be connected with WOP (White Oil
Pipeline), MFM and appropriate extensions.

12.4. PIPELINES

Pakistan currently has two cross –country pipeline systems. Korangi‐ Mahmoodkot (KMK) pipeline is
used to transport crude oil from Karachi to Mahmoodkot for PARCO’s Mid‐Country Refinery. White‐
Oil Pipeline (WOP) commissioned in 2005 is used to transport diesel from Port Qasim (Karachi) to
Mahmoodkot. Another pipeline known as MFM which starts from Mahmoodkot is used to further
transport diesel to Faisalabad and Machike (Sheikhupura).

To maximize the use of pipelines, the new marketing companies which do not have equity stake in
the pipeline should be encouraged to use the pipeline by providing access on commercial terms.

It is recommended that the requirement of pipeline infrastructure for transportation of liquid fuels
across the country be laid to meet future demands and to ensure energy supply security.

12.5. LEVEL PLAYING FIELD

Currently, certain OMC’s due to historic advantage in storage, pipeline and airfield infrastructure
have an unfair advantage over the new marketing companies which do not have access to this
infrastructure and thereby prevents a level‐playing field in their marketing and distribution models.

It is recommended, that an infrastructure company should be set up through a Public/Private
partnership, which should own and manage storage facilities, pipelines and Airport Hydrant systems
and should provide access to all OMC’s on payment of a throughput charge.

12.6. RAILWAY

Pakistan has a large railway network spread all over the country. However, the role of railway in
transportation of petroleum products, despite its low cost, has been limited to only about 1.5 % due
to fewer product receiving facilities through this mode and operational inefficiencies. It is the
recommendation of the Energy Expert Group that Railways receiving facilities need to be developed
especially for Fuel Oil which is mostly being transported by road at this time.

12.7. DOWNSTREAM MARKETING

12.7.1. OMC Margin & Pricing Policies
A well thought out pricing policy needs to be developed that protects all stakeholders’ and provides
clear cut incentives to investors. The policy once promulgated should be adhered to and not subject
to ad‐hoc changes due to volatility in oil prices. It is our recommendation that the OMC’s/Dealers
margin should be fixed at a level that provides reasonable return to encourage investment in


infrastructure. In view of the volatility in international prices, it would be prudent to have a floor and
a ceiling on the margin.

The Energy Expert Group is also of the opinion that Government should seriously consider further de‐
regulation of the industry by discarding the current policy of having one price throughout the
Country. Prices should be de‐regulated and in each city it should be based on ex‐refinery prices plus
freight. This will eliminate abuse of IFEM which leads to huge loss of revenue to GOP which was Rs.
28 billion in FY 2013‐14 alone.

The argument presented against deregulation has been that it will allow the companies to exploit
the prices. The Energy Expert Group feels that in the presence of a large and well‐managed State
oil company, competition can be ensured in the sector company. The regulator should only have an
oversight role.

One of the benefits of deregulation of the OMCs will be the reduction in distribution costs which
will benefit the consumer.

The Group believes that deregulation should take place in phases. In the first phase, margins of
dealers and OMCs should be deregulated through the study of the independent consultant. This is
because the dealer has the space to disrupt the market prices through the association that exists.

12.7.2. Liquidity and Financial issues

Due to the inability of GOP to pay its receivable on time whether directly or through PEPCO/WAPDA
has resulted in OMC’s being short of funds to import diesel and furnace oil. Moreover, GOP decision
not to pay interest charges on delayed payments has considerably impacted OMC margins.

12.7.3. Supply Security
The government needs to take full responsibility for building strategic stocks which normally would
be for a minimum of 60 days.

 Criteria of Granting License to OMCs ‐The current criteria for establishment of a new OMC by OGRA
must be revisited.
This current practice is damaging for the oil industry as there would be a growth in the number of
OMCs and no. of retail outlets. This increase would result in a reduction of averages amongst the
OMCs and lead to malpractice like:
 Short‐measuring
 Adulteration etc.
 In the case of Brazil, where very large numbers of licenses were given, the government also suffered
losses with regards to revenue collection from the industry as many companies that sprung up as a
result of the easy set‐up criteria would operate for a term of 11 months and then declare bankruptcy
without paying taxes to the Government. This ultimately led to huge losses of revenue to the
government and taxpayers.

12.7.4. Product Specifications

During winter months Pakistan consumes 125 CST fuel oil. All the refineries in Middle East which are
the source of supply of fuel oil to Pakistan do not produce the 125 CST product. Pakistan is paying a
premium on having 180 CST product blended primarily at Fujaira (UAE) to meet this special


specification for Pakistani market. It is recommended that future imports of fuel oil be based on 180
CST product specs. This will require the OMC’s and the consumers to provide appropriate facility to
receive such products. With this decision, the Country will save approximately US$ 15‐20 million
dollars per annum based on current consumption and current prices.

Pakistan has been very late in implementing strict guidelines on the amount of sulfur in the diesel
which is sold in the market. As a result, we are the only country in the region which is selling 1%
sulfur diesel, which is contributing to the degradation of the environment as well as creating health
problem for vulnerable section of society. In case of Motor Gasoline, the western world has
implemented Euro IV specs for engines to reduce harmful emissions. Pakistan is still struggling on
meeting Euro I specification for vehicles engine specs. Similarly for fuel oil, Pakistan continues to
market 3.5% sulfur which is extremely harmful for the environment. Beside this specifications like
CCR make the Pakistani product unique in the region and no refinery in the Middle East produces
similar specification thus requiring blending at Fujairah and adding at least $3 per million tons to the
acquisition cost.

12.7.5. Ethanol

Ethanol is used extensively in Brazil as a fuel for cars. Significant volumes of ethanol are also used in
USA and other parts of the world. Because ethanol is easy to manufacture and process and can be
made from very common crops such as sugar cane and corn, it is an increasingly common alternative
to motor gasoline. Ethanol can be blended with gasoline in varying quantities up to pure ethanol
(E100), and most gasoline engines operate well with mixtures of 10% ethanol (E10) without any
modification to the engine.

Pakistan is an agrarian country with sugarcane one of the major crops. Pakistan stands fifth among
the countries having a large tract of area under sugarcane crop. About 53.5 million tons of sugarcane
is produced every year in the country. The potential of ethanol production from molasses has been
estimated at about 500 million liters or 0.42 million tons per annum, which is about 36% of the
present gasoline consumption in the transport sector in Pakistan. During the last 25 years, the
production of sugarcane and beet increased at an average growth rate of 2.7% per annum. Assuming
the same growth rate of sugarcane and beet production for the future, the potential of ethanol
production has been projected to be about 1,017 million liters for the year 2030.

The above scenario presents ethanol as a good supplement to Pakistan’s energy mix however there
are a number of challenges that need to be addressed before making it a significant part of our
energy mix. In order to show continuity in supply of ethanol the government will have to control
exports and prioritize supply to industry for ethanol blending.

12.8. OTHER ISSUES AND CHALLENGES

 The government should provide a clear timeline sufficient for development of storage and blending
facilities in the country. It should also develop a realistic timeline in consultation with the industry for
the commissioning of the facilities.
 The recent crisis showed lack of planning and coordination within the government.




 It is recommended that the downstream sector should be deregulated in order to create
competition, reduce inefficiencies and mal practices. An international consultant of repute should be
engaged to develop a deregulation model for the country which protects the interest of the
consumers and promotes healthy competition in the industry. This will also reduce the cost to the
sector, with specific reference to the oil movement and its distribution.
 The Energy Expert Group is recommending an alternate criteria for establishing a new OMC given as
below:
1. Upfront Equity be revised from Rs. 100 million to Rs. 1 billion
2. The minimum investment program should be no less than Rs. 1.5 billion over a period of
three years
3. The paid up capital should also be revised to Rs. 1 billion with loan for infrastructure storage
and retail outlets to be of about Rs. 2 billion.
 The government should create barriers to entry for fly‐by night operators from entering the market.
 Bureaucratic and political interference in the sector must be minimized and professionals should be
hired and given independence in decision making.
 In order to ensure supply of Ethanol, it is recommended that the government should place export
volume controls and prioritize supply to the oil sector for Ethanol blending.



13. POWER SECTOR

13.1. GENERATION

13.1.1. Introduction

Pakistan faces chronic electricity shortage due to demand growth and no addition in generation
capacity. High system losses and seasonal reductions in the availability of hydropower, circular debt
and ever increasing load shedding are common.

The power sector in Pakistan is a mixed industry of thermal, hydro and nuclear power plants. At
present, hydel to thermal installed generation capacity ratio is about 30/65. Country’s power
production is dominated by private sector thermal power plants running on oil and gas.

The increasing share of thermal electricity generation over the years has increased the Country’s
financial burden particularly in foreign exchange. Use of indigenous coal and renewable energy
resources for electricity generation should to be expedited. It is also a strong need of the time to
increase the hydel generation by building large storage dams.

As evident from the figure below, besides energy conservation, improvement in energy efficiency is
still the cheapest source of new power in Pakistan.



13.1.2. Generation Status

Total installed generation capacity of the Country in 2014 was 24,375MW. The utility‐wise split given
in NEPRA State of Industry Report 2014 is as under:

No. Utility Installed Max.Generation PeakDemand
(MW) (MW) (MW)
1 NTDC Sys. 21,424 16,170 23,557
2 KE 2,951 1,951* 2,929
24,375 18,121 26,486
Note: Since there are no spinning reserves, it is highly unlikely that maximum generation capacity is
available at the time of peak demand, resulting in unprecedented load shedding.
* excluding 650MW from NTDC

The peak demand of the Country in 2014 was 26,486MW. The total generation of the above utilities
was 105,996 GWh.

Based on an average per year GDP growth of 5%, the 5 yearly peak demand forecasts for the
combined NTDC and KE systems are as follows:

2015 (base year) 2020 2025 2030
27,000MW 35,000MW 40,000MW 50,000MW

Considering a history of delays in various generation projects, a shift of 5 years is evident in
generation projects proposed to have come on line in 2010.
Pakistan Power Demand and Supply Projections
MW
PEAK DEMAND
50000 Scenario (low level) 2030 Peak Demand
GoP E Plan (5% GDP): 50,000MW
(5% GDP GROWTH)
47500
45000 SUPPLY
Diamer Bhasha II -
42500 Diamer Bhasha I -
40000 Dasu III -
37500 Nuclear - 1100
Wind 800 MW
35000 Conserve Energy, Dasu II -
32500 Improve Energy Efficiency Nuclear 1100
Dasu I - 1440
30000 Tarbela 5th 900
27500 Thar Coal
25000 Wind 700 MW

Tarbela 4th 1410 MW
22500 Solar 500 MW
Gadani
20000
Neelum Jhelum
17500 ADD Solar, Wind
15000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030


A realistic peak demand and supply situation is shown in figure above. The figure shows only major
new projects and includes timely retirement of old power plants.

The above Projections consider that the average annual growth of peak demand of the country over
the 2015 to 2030 period is 7.5%.

The figure above shows that even if all the generation projects in the pipeline come on the system
timely, a certain supply demand gap (load shedding) would still exist even by 2030.

This gap can be reduced by increasing energy efficiency on the supply side and applying energy
conservation measures on the demand side. Further, the renewable energy projects (Wind & Solar)
which can be installed relatively quickly to improve the supply situation till hydro power projects
come on line.

It should also be kept in mind that the peak supply and peak demand do not occur at the same time
due to seasonal nature of hydel and renewable power, therefore at least a 30% spinning reserve is
required to avoid unplanned load shedding.

13.1.3. Recommendations:

 Improvement in energy efficiency of the base load plants (by converting to combined cycle power
plants instead of open cycle) and utilizing cheaper resources of primary energy like indigenous
natural gas and coal should be the main stay of strategic planning.
 Conventional generation for base load requirement suitably hybridized with a renewable energy
resource in the proximity should be the first priority of the current generation plans. E.g. Solar Power
Plants can be hybridized with conventional power plants running on diesel to provide affordable and
reliable power to the industry in Punjab.
 Similarly Renewable and Alternative Energy power plants can be easily hybridized to create
synergies.

Hybridizing Wind, Solar & Biomass Power Plants in coastal areas of Gharo to produce Synergy


Each Wind Power Project (WPP) should install a suitable size of PV Solar Plant (10MW to 50MW) on
its land, using existing grid connection. An intelligent fleet control system can provide the most
economical and reliable dispatch.

13.1.4. The Advantages:

1. Minimum cost input
2. Immediate installation possible.
3. No power evacuation issues.
4. PV Solar Plant to provide grid stability.
5. More than 50% local value addition possible.
6. Synergy between Wind & Solar will provide improved plant factor at reduced LCOE

 Indigenous manufacturing of RE equipment (Solar Cells, Wind Turbine Towers and Blades) should be
encouraged progressively to achieve a much lower levelized cost of electricity (LCoE) from renewable
generation matching any conventional power plant. Sustainability of Renewable Generation can only
be ensured if at least 70% of the equipment is manufactured locally.
 Transmission and distribution networks should be strengthened for off take of sizeable renewable
power.
 A fair competitive environment to be provided to the local manufacturers by providing and enforcing
protection against duty free imports.

13.2. TRANSMISSION (500KV, 220KV, 132KV)


In Pakistan only two companies are presently engaged in the business of electric power transmission.
One is National Transmission and Dispatch Company Limited (NTDC) and the other is Karachi Electric
(KE, former KESC).

NTDC, the National Grid Company of Pakistan is exclusively responsible for electric power
transmission in whole Country except for the area served by KE. NTDC is a public sector company and
came into existence as a result of restructuring of WAPDA in1998.

NTDC is responsible for overall reliability, planning and coordination of the electricity in Pakistan
except for the area under KE. At present, NTDC owns a network of 500kV, 220kV and some 132kV
{links) transmission lines and grid stations in its network.

Besides NTDC, KE is also engaged in electric power transmission business of Pakistan. KE is a vertically
integrated company operating in private sector. At present, KE has three separate licenses; each for
their generation, transmission and distribution businesses. KE SC is connected to the national grid of
the Country by 220 kV and 132 kV links.

13.2.2. Transmission System (500kV, 220kV)

NEPRA’s latest report1 gives the following status of Country’s Transmission & Distribution System.

The total existing transmission capacity of 220kV NTDC system is 21,030 MVA. About 30% of 220kV
lines and 50% of Power Transformers are overloaded. [1]


System Duration of Interruption and system Frequency of Interruption data is not available for 2014.

NTDC transmission system losses of 0.54% in 2014 are not a correct figure. With 50% of Power
Transformers overloaded, alone the transformation losses should exceed 1%.

The method of calculating losses by subtracting units received from units delivered used by electrical
utilities is quite unprofessional.

Increasing generation capacity will not have any effect on the power deficit unless the transmission
and distribution capacities are enhanced and bottlenecks accordingly removed.


 It has been observed that extensive and expensive studies are carried out based on un‐reliable and
un‐verified data. Usually a disclaimer as regards data is considered enough and the business is
carried out as usual.2

Proper load flow studies need to be carried out by third party professional engineers. The losses of
more than 10 year old power transformers, especially those which are overloaded, should be
measured at site.

It is therefore recommended that for any further studies or review of current studies, the following
minimum requirements should be fulfilled:

o The responsibility of data collection and verification should be the responsibility of the
Consultants carrying out the study. If data is being provided by the public sector Utility, a
proportionate measure of accountability for giving bad data should be included in the service
rules.

o The assumptions considered by any econometric model should be clearly spelt out. It should also
be explained that why a particular model or software has been chosen to carry out a particular
study.

o The field experience of the responsible consultant in the relevant field is a must.

 Extended Energy Audit (Audit proposing implementable solutions in real time) of the existing
Transmission System by professionals in their related field is recommended. This audit should have
the following targets:

o Increase in system reliability
o Reduction of transmission losses.

 The recommendations of the studies and audits should be religiously implemented.

 Since the required increase in the transmission capacity would require an overall investment of more
than USD 30 billion by 2030 [2] private public partnerships should be encouraged. A policy to set up
private transmission networks with public utilities as quasi equity partners should be worked out.



13.3. DISTRIBUTION (132KV, 66KV, 33KV, 11KV, 0.4KV)


There are ten distribution companies in the public sector, which are distributing electric power to
end‐ consumers in Pakistan except the area served by KE.

In addition to the ten public sector Distribution Companies and two private sector Distribution
Companies, NEPRA so far has granted nine distribution licenses to Small Power Producers and one
distribution license to a Captive Power Producer for supply of electric power to designated Bulk
Power Consumers.

Distribution network is in the worst condition ever. The network is weak, not balanced and highly un‐
reliable. NEPRA targets of SAIFI^ & SAIDI^^ indices as 13 [No.] and 14 [min.] respectively have been
exceeded excessively and speak volumes about the dismal condition of the 132kV network.

SAIFI was in the range of 0.05 – 316 [Nos.] in 2014, with IESCO at 0.05. SAIDI ranged between 1.66 ‐
27946 [min.]. IESCO was the best here also with 1.66.

Further, during the peak hours, all the DISCOs tend to operate even below the allowable limits of
voltage and frequency of the NEPRA Distribution Code. This results in adverse impact not only on
their own equipment but on the consumer’s equipment as well. Such impacts are regularly
experienced by industrial consumers connected to the MV network and the domestic/commercial
consumers at the LV network.

Due to the network behavior, the design life of the equipment and also the maintenance intervals are
drastically shortened.

Since the DISCOs do not have a regular maintenance budget, they cannot come out of the spiraling
system unreliability which results into embarrassing SAIFI/SAIDI indices given above.

SAIFI^: System Average Interruption Frequency Index
SAIDI^^: System Average Interruption Duration Index


 Monopoly distributors ‐ privatization of the distribution network must ensure competition and the
provision of choice to consumers, by unbundling of the distribution network into multiple
 Extended Energy Audit (Audit proposing implementable solutions in real time) for all the DISCOs with
participation of DISCO Panning Department having due share of responsibility.

The DISCOs should be trained on data collection and software use. Local universities should
participate in the program as a part of their curricula. The external professional auditor should only
vet and interpret the results. The main targets would be:

o Increase in of distribution system reliability
o Reduction of distribution losses.
o Capacity building


 DISCO networks should be strengthened to evacuate Renewable Energy up to at least 15% of their
total capacity.
 Wheeling should be made possible between dedicated private buyers and private suppliers through a
DISCO network.
 A policy to set up private 132kV distribution network with suitable wheeling tariff should be
implemented.
 Private sector distribution companies should be asked to share Renewable Energy Integration in their
systems.
 Legislative cover should be provided to DISCOs so that net metering can be made possible at MV
level.

13.4. TRANSMISSION & DISTRIBUTION LOSSES

The Energy Flow Diagram shows that the T&D losses are around 21.7%. This seems to be more
accurate figure than the total average T&D losses of about 19% given in NEPRA State of Industry
Report 2014.The reasons are:
 NEPRA has not included certain losses (example. auxiliary losses) in its figures.
 The transmission losses of 0.54% stated by NEPRA are extremely low by any standards, especially for
a system where 30% of transmission lines and more than 50% of Power Transformers are
overloaded.
 The determination of losses has been done by subtracting units generated from units billed,
therefore billing errors and free supplies have not been considered.

Determining electrical energy losses of a utility using simulation software

The correct method of determining the T&D losses accurately is to carry out a load flow study using a
good “simulation software” to determine power losses. These power losses are then converted to
energy losses by using a utility specific factor determined mathematically on the basis of load pattern


of the utility. Such determinations are fairly accurate and can be verified by actual measurements at
site.

T&D Losses determined at 3 different utilities in Pakistan using simulation software are close to the
electrical energy losses shown in the Energy Flow Diagram. The results also show that the technical
losses are about 30% of the total losses.

13.5. CIRCULAR DEBT

One of the most critical issue hindering growth and investment in the energy sector and particularly
the power sector is the circular debt. The issue has caused severe liquidity problems and stifled the
potential for investment by private sector.

The circular debt build‐up can be attributed to the following:

a) Difference in determined & notified tariff
b) Shortfall in collection of billed amounts
c) Higher losses than allowed by NEPRA in tariff
d) Delay in tariff determination by NEPRA
e) GST paid by power sector to FBR but not collected
f) Delay in recovery of Fuel Price Adjustment
g) Payment of late payment surcharge
h) Interest (Mark‐up cost) not allowed by NEPRA
i) Price differential between gas and diesel
j) Inadequate allocation and delay in payment of subsidy by GoP

Large amounts of money have been spent by the past and the present governments for the
elimination of the debt. However, the problems listed above still plague the sector and are
contributing to an ever growing problem.

13.5.1. Past Resolution of stock and flow of circular debt

 GoP has made the following interventions since 2009;
i. Power tariff differential subsidy (TDS) (Rs. 312.77 billion including interest) until 30 June 2009
picked up by GoP from Power Holding Company.
ii. TDS of Rs 120 billion of outstanding TDS for 2010 picked up by GoP in May 2011.
 Transfer on the books of DISCOs (markup and principle being serviced by DISCOs) :
i. Rs. 136 billion and Rs.15 billion under a Term Finance Facility in 2012;
ii. Privately Placed Term Finance Certificates (PPTFC) of Rs.82 billion in 2013;
 Rs. 6 billion bridge finance facility in 2013;
 Rs. 480 billion injected in July 2013;
 Till 2009, the government had spent a total of Rs. 235.65 billion.



 The circular debt has increased once again despite the huge injection in July 2013 and the latest
available figure in November 2014 was reported at Rs. 301 billion.

In Order to resolve the issue of Circular Debt, it is recommended that the government must:

 Determine the accurate number of Transmission and Distribution Losses and ensure full recovery of
generation and distribution cost.
 Independence of the Central Power Purchasing Authority and the establishment of an ESCROW
Account to implement effective collection of bills.
 Enforce bill recovery through improved monitoring and control systems which should be put into
place by distribution companies.
 Privatization and unbundling of those distribution companies incurring the heaviest losses and
with the lowest collection, on priority basis.

1
NEPRA State of Industry Report 2014
2
National Power Systems Expansion Plan 2011‐2030 by NESPAK & SNC‐Lavalin


14. COAL SECTOR

14.1. OVERVIEW

Over the past decade the fuel mix shifted from Natural Gas to Furnace Oil (FO), the price of FO has
increased by over four times in the last five years. This has increased the FO bill by 461%, whereas
power generation on FO has increased by only 79%.

The disparity between the prices of imported FO versus locally produced natural gas has increased
significantly. This has meant that the disproportionate increase in power tariff is tied to the heavy
dependency on FO. Hence the economics of power generation are heavily stacked in favor of coal
which, being a locally produced commodity is expected to be significantly cheaper than imported
hydrocarbons including LNG.

Thar Coal will provide Pakistan Long term energy security
Thar Coal, being indigenous & cost effective can reduce Circular Debt & energy Import Bill
Thar Desert contains the world’s 7th largest coal reserves:
175 Billion Ton = 50 Billion TOE = 2000 TCF
Total Thar Coal Reserve More than Saudi Arabia 68 times higher than
& Iranian Oil Reserves Pakistan’s total gas reserves
1% = 25%
Thar Coal Reserve Pakistan’s Power
Generation Capacity in
2010
PAKISTAN
Development of Block II alone
would bring in investment of
USD 12 Billion
Entire Thar Coal Reserves can be Thar
used to generate 100,000 MW
of electricity for over 200 years
Location of Thar Coal Field
Source:: GSP data/report – Energy equivalent is based on Shenhua report/RWE
Slide 31

 Globally, coal remains the fuel of choice for power generation despite hue and cry over its
environmental impact
 More importantly, Coal based power generation is driven by Indigenous Coal


 More than 80% of coal used by China, USA, India and Germany is indigenous assuring their
energy security

 The compelling case for coal mining and coal power generation has been well accepted but
requires political will to insure successful and timely implementation.
 Bankable Feasibility Study (BFS) for Thar Block II Coal Mining Project has been completed
 Technical, environmental and social viability of the Project has been confirmed meeting all
International Standards
 Phase 1: 6.5 Mt/a Coal Mine and 1200 MW Power Plant
 Total exploitable Lignite reserve of 1.57 Bn tons that can support 5,000 MW for 50 years
 Lignite quality better than being used in Greece & Germany for Power Generation
 GoS & GoP should develop & ensure timely availability of infrastructure projects
 Thar Coal can give Pakistan Energy Security vs. Imported Fuel
 Thar coal can be an effective hedge vs. international price fluctuations: Thar coal price
can be accurately predicted on a long‐term basis (as it is based on a fixed return) while
imported coal remains unpredictable;
 A 1200 MW Power Plant will yield a tariff of 8 ‐ 10 USc/Kwh @ 80% utilization vs.
national average of 12 USc/Kwh (in dotted lines in the Levelized Tariff Comparison chart
given below Tariff range for RFO is btw 18 ‐ 20 USc/Kwh

 Tariff of Thar Coal is about half of RFO/ HSFO and close to gas and hence can contribute to
elimination of Circular Debt
 A 1200 MW Coal Power Plant @ 80% utilization can yield tariff saving of ~ USD 900m / annum
against RFO
 Total Gross Capacity that can be converted to lignite is ~5500MW, with a total investment
requirement of ~USD 4 Billion (includes investment for conversion & infrastructure)
 Additional investment of USD5 Billion will be required for Mine development; total lignite
Required: 35 Million ton/annum



By a total investment in mining & power of ~USD 10 billion will result in annual savings of USD 4 billion,
equivalent to the current total annual increase in circular debt.

14.2. THAR COAL

Thar Coal in particular is the most viable and cheapest source of thermal energy in Pakistan at around $2
per MMBTU (Million British Thermal Units) compared with LNG @ $8‐10 per MMBTU and Furnace Oil @
$10‐12 per MMBTU.

The total reserves of Thar Coalfields are estimated at 175 Billion Tons and the quality of lignite at Thar,
with a heating/calorific value of 13,000 Btu/lb (dry basis) with sulphur content below 2%,is suitable for
power generation by installing mine mouth IPP’s.

In total, three blocks of around 2 Billion Tons of exploitable coal reserves each have been granted leases.

An expansion of infrastructure from 14,000 MW sustainable supply source to that of more than 48,000 *
4
MW by 2025 is required to meet projected growth in demand for electricity. Among indigenous energy
options, Thar is the most reliable choice of fuel.

Thar can play a significant role in helping Pakistan increase its reliance on indigenous resource. Coal is
one of the most suitable long term solutions to bridge the supply‐demand gap for energy and to ensure
energy security for the country. While the short term needs could be fulfilled through imported coal,
only Thar can provide a sustainable solution with the potential for generating 100,000 MWs for 200
years.

Currently, Thar Block‐II is the leading development. This block is undergoing Financial Close for a3.8/7.6
MTPA mine for generating 1,200 MWs that can quickly be scaled up to 27 MTPA mine sufficient to
generate around 5,000 MWs.

Government of Pakistan’s initiative of providing sovereign guarantee to secure financing for coal mining
project of Sindh Engro Coal Mining Company (SECMC) has been a step in the right direction. National

4
Vision 2025 (Planning Commission of Pakistan)


Electric Power Regulatory Authority (NEPRA) has also announced an attractive Upfront tariff for Thar
IPPs.
With the recently formed consortium involving Engro, HUBCO and House of Habib as well as the progress
of the Pakistan‐China Economic Corridor to implement Thar mining project, the likelihood for
materialization of the project has become bright. However, in order to achieve expeditious development,
a strong and long term support from Government of Pakistan and the provincial government will be
required.

Thar Coal is easily transportable to Karachi and upcountry via Hyderabad/Kotri by a rail link between
coalfield and existing Mirpurkhas – Munabao broad gauge line at Chhor which will enable coal to be
shipped to the entire country for power generation throughout Pakistan and will generate revenue for
Pakistan Railways. However, with the required cost of infrastructure required for railways, it is preferable
to undertake mine mouth power projects to obviate the need for large logistics infrastructure.

Developing Thar Coalfield is a first of its kind endeavor and there are a number of challenges. It is a
complex mega project involving multiple technical, social and environmental aspects requiring a clear
wide vision, comprehensive understanding and integrated approach that has been missing all along. A
sophisticated project of this magnitude, technical complexities and national importance should be
managed by technically competent civil servants from various departments including excise taxation,
education and with provincial and federal cooperation. Policy decisions with serious long term
ramifications should be made by persons with understanding of the relevant subject.

Open pit mining, a tried and tested method being used throughout the world for more than 150 years is
the most viable option for coal in Thar; it is basically a large scale earth moving operation which entails
removing the soil and rock material that sits atop the coal seams (“Overburden”) in order to gain access
to coal, accomplished by heavy earth moving machinery.


14.3. ISSUES

 There is a lack of an integrated lignite / coal mining and power generation policy. Especially for
the indigenous coal resources of Pakistan.
 Due to the current Circular Debt issue in the country, foreign lenders are reluctant to invest in
Thar Mining & Power Projects.
 Thar coal reserves are Lignite with thick seams at the depth of 145 meters that requires
additional equipment for open cast mining and handling ground water over and below the Coal
seams. This will be a challenging undertaking requiring huge capital cost.
 Open‐cast mines similar to Thar Coal which are lying at depths of more than 140 meters would
require about 40‐48 months, to achieve commercial production.
 Construction time for a coal fired plant is considerably longer than other technologies i.e. 48‐54
months.
 Land Acquisition Plan & Resettlement Framework is not available for Thar Coal fields
 There is no comprehensive Environmental Impact Assessment (EIA) for Thar Coal fields or the
related Infrastructure development work.
 Requires heavy infrastructure costs in transportation, especially rail network, which can help
transport coal to other parts of country as and when Thar mine scales up The economic cost of
transmitting from the mine mouth IPPs will result in high transmission losses thus compromising
efficiency
 With greater provincial autonomy, each province is compelled to have a reliable base load power
generation capacity to meet its need. This requires that appropriate capacity power plants will
need to be constructed near the load centers. Thar will need to be developed as an effective low
cost choice of fuel to all upcoming power plants.
 The infrastructure also requires transmission lines by NTDC to be set up to transmit. This is added
cost.
 Financial close is still awaited so that the projects are developed; time between start‐up and
financial close is long (28‐42 months).
 Lack of capacity, planning or research on the project by government.



14.3.1 Water Management

Thar Coal seams are surrounded by treatable quality groundwater, dewatering of particular areas will be
required to achieve safe mining conditions. Groundwater and coal are inextricably linked, neither one
can be viewed in isolation; development of coal resource in Thar will affect the groundwater both
quantitatively and qualitatively.

Water in the parched Desert is as precious a natural resource as the coal itself. With proper strategic
planning both resources can be individually developed in order to provide optimal benefits in terms of
energy production from coal and creating food self‐sufficiency for the people of Thar and their livestock
particularly during droughts. Groundwater will be used as one of the main water sources for Mine Mouth
power plants. However during the initial period of Mining when there is no power plant, this water will
be transported to a natural depression.

The GOS is undertaking a detailed study led by international consultants to develop a Water Master Plan
for the Thar coalfields. Phase 1 work is ongoing and the results of this study will help develop a long
term strategy for water use plan for coal based power projects in Thar. However, the cost of the project
at present does not include the cost of removing the underground water.

Given scarcity of water and consequences for the people of Thar, this water resource needs to be
protected from contamination from residuals from any Underground Coal Gasification (UCG) projects.
Misguided experiments due to lack of understanding of relevant technical issues and flawed planning has
already resulted in substantial waste of financial resources and inordinate UCG’s environmental impact
can be judged from an experimental UCG test burn at Hoe Creek, Wyoming and field tested by Lawrence
Livermore National Laboratory, the premier R&D institution for science and technology in the United
States. UCG burn increased concentrations of every chemical category leading to degradation in water
quality including a 287 fold jump in Sulphate concentration, 6.5 times increase in Salt, 20 times increase
in Hydrogen Sulphide which dissolved in water is Hydro‐sulphuric acid, while reducing valuable CBM
(Natural Gas) content by 62% and so on. Most alarming findings noted in this study were 200 times
increase in Phenol and 600,000 (Six hundred thousand) times increase of Benzene concentrations in
groundwater, Benzene and Phenol are proven carcinogens which cause leukaemia and other cancers.
Thar groundwater could be similarly impacted by poorly planned projects.

14.3.2 Coal Bed Methane

Natural gas in coal is a source of unrealized energy, Coal Bed Methane (CBM) is natural gas in its purest
form (pipeline quality gas) and occurs in all coal deposits, with technical planning Methane gas released


upon depressurization of coal seams can be harvested and utilized. United States Geologic Survey (USGS)
sources quoted by Cathy Oil and Gas (a Canadian E&P Company) estimate that Thar Coal deposits may
contain 21 Trillion cubic feet (TCF) of recoverable natural gas with a production potential of one Billion
Cubic feet/day. Government needs to undertake confirmatory studies. Coal deposits of Thar are the
western extension of coal found in Cambay and Barmer coal basins in neighboring India where a robust
natural gas recovery program has been initiated. In the United States over 4 billion cubic feet per day
(BCFD) are recovered from just 2 coal basins. (BP) United Energy (formerly BP) which has a sizable
presence in Pakistan, operating the Badin oil and gas field also have 30 years’ experience of harvesting
650 MMCFD of CBM from San Juan coal basin (USA). BP can assist in transfer of technology regarding
CBM.

Initially according to experts who carried out Geological investigations in Thar (Sinocoal & Northeast Coal
Bureau, China);

 There was no CBM recorded in the 04 boreholes tested in Thar Block‐II area by Sinocoal‐ China
 It was their view that since the Coal in Thar is Lignite chances of occurrence of CBM due to the low
maturity of coal is low.

To date, the only desorption measurements made for Pakistani coals are those done by GSP/USGS on
two boreholes drilled for the U.S. Agency for International Development (USAID) COALREAP program in
1992.

One hole was in the central Thar field and the other was in the south Lakhra field.

 Very little gas was desorbed, but this was to be expected given the hydrologic setting of these two
areas.
 Owing to low gas yield, such experimental data was never corrected neither for lost gas nor
converted to yield per ton (a rough approximation indicates a maximum yield of about 4 to 5
scf/ton).

The dual concepts of harnessing coal energy by (a) Recovering/harvesting Coal Bed Methane (CBM) and
(b) Mining out the coal to serve as a thermal energy resource for power generation are mutually
inclusive. Technical processes involved in both of these concepts compliment and support each other, for
example, recovery of natural gas requires dewatering and depressurizing of coal seams, which
complements the mining process and results in cost savings for both.

The UCG process on the other hand, works at cross purposes with both CBM as well as conventional coal
mining in Thar. For example, the same water pressure needed to be removed by dewatering for CBM
recovery and coal mining is necessarily needed to be retained in the coal seams in order to contain and
control the UCG’s coal burn from spreading into adjacent mining and power generating operations. This
technical conflict can force a complete shutdown of the entire mining and power production activity in
Thar coalfield. UCG is an untried experimental concept with no commercial application anywhere in the
world. Without any technical evaluation of fire hazard UCG poses for other open pit mines or an
environmental assessment of destructive consequences upon groundwater, a UCG project in block 5 is
being pursued and funded by the Federal Government in conjunction with Government of Sindh
organizations responsible for developing Thar coal.



14.4. CONCLUSION AND RECOMMENDATIONS

 Expedite conversion of existing RFO based power plants to Imported / Thar Coal, by providing an
attractive Upfront Power Tariff to encourage IPPs & foreign investors to undertake these projects.
Amongst IPP’s, HUBCO is a prime candidate for coal conversion. Planned conversions are undertaken
from furnace oil plants to coal (AES Lalpir 362 MW, AES Packgen 365 MW, Hubco 1292 MW and Saba
Power 134 MW) as well as from Gas plants (Assuming 2100 MW KESC, JTPS, and textile based CPPs )
to coal an additional 29 M tons will have to be imported. It is still a questions mark if the existing
infrastructure is adequate for such a volume of imports.
 It is our view that the coal based power projects should be planned in stages i.e. short, medium and
long term. In the short term (18‐24 months) coal conversion of 440 MW GENCO Jamshoro and
Muzzafargarh TPS should be done, Lakhra coal plant should be rehabilitated to bring the capacity at a
level of 125 MW, the second part of consolidated Lakhra coal block may also be simultaneously
developed for a new 150 MW power plant in the same area.
 Mining at Thar should be developed through public/private partnership. For the initial mining
project, Government should own at least 60‐80% of equity whereas private sector with 20‐40%
equity partnership should take up Project Development and Operations & Maintenance of the mine.
 Construction of open‐cast mining & mine‐mouth power plant projects at Thar should be initiated
simultaneously.
 No private entity has come up to develop an integrated coal based project. Therefore, the
government must support & encourage joint Private‐Public Sector investment in development of
mining and coal based power plants by providing requisite Financial Guarantees so that foreign
lending may be arranged.
 Exclusive agency for coal mining for power generation should be established to facilitate a one‐
window operation for potential investors.
 Strengthen technical capacity of Thar Coal Energy Board (TCEB) and NEPRA in the areas of Coal
Mining and Coal based Power Plants to support Coal projects.
 Indicative, reasonable and affordable tariff on coal projects should be developed to attract potential
investors and may be based on already carried out feasibility study on Thar coal.


 To exploit the vast coal reserves of Thar, GoP should provide incentives for investors, both financial
and in the form of infrastructure development. In the medium and long‐term, Thar Coal reserves
may be exploited through large‐scale open cast mining and development of mine mouth power
generation plant in stages to generate up to 10,000 MW.
 The Federal Government should actively support the Provincial governments in the development of
Infrastructure projects required for Thar Coal fields development viz; roads, water supply etc.
 Development of a dedicated coal jetty along with inland transport network preferably through rail
link should be established to support imported coal based power plants.
 For the success of the Thar Coal project and coal in general, the entire sector needs capacity building,
with technically qualified personnel selected on merit at market emoluments. A merit based culture
needs to be put in place, with no political appointments at any level.
 The UCG issue must be resolved. This can be accomplished by seeking a definitive professional
opinion from the international consultants of record involved in preparing the Bankable Feasibility
for Sindh Engro JV project in block 2 of Thar coalfield at a cost of US $5 million. Since UCG could
potentially impact this block as well the very same consultants could address both the fire hazard and
environmental issues emanating from the UCG operations in block 5 as additional work that the GOS
should request. The Coal deposits in Thar are Pakistan’s largest indigenous hydrocarbon energy
resource upon which the country’s energy future depends; it is irresponsible to be experimenting
with this asset with UCG like whimsical and untried concepts. The GOS must ensure that UCG
operators undertake a fully‐fledged EIA technical study to prove environmental acceptability.
 Potential for natural gas recovery and realizing additional energy from Thar Coal deposits needs to be
evaluated. The CBM technology is a sophisticated process requiring professional skills which are not
available within the current Thar Coal project management. It is therefore necessary to study in
greater depth international experience and identify the most appropriate technologies and resources
that need to be deployed for the Thar coal resource.
 The impact of such large scale mining and power projects will have on the people and culture of Thar
area needs to be studied and impact mitigated. The local people must not be neglected. This is why
an elaborate CSR plan has to be developed for the residents of Thar who would be relocated
including model villages provided with clean water, health, education and various livelihood
interventions. A fund of 2% profit will be earmarked each year as part of Thar Coal Mining and Power
Projects of Block II as they come into operation to support such CSR Projects & initiatives for the poor
people of Thar.



15. NUCLEAR SECTOR
15.1. ROLE OF NUCLEAR POWER IN ELECTRICITY GENERATION

Currently, nuclear power is contributing 4‐5% to total electricity production of the country. Three
nuclear power plants, KANUPP (K‐1), CHASNUPP Unit‐1 (C‐1) and CHASNUPP Unit‐2 (C‐2) are in
operation. CHASNUPP Unit‐3 & 4 (C‐3/C‐4) are under construction while Karachi Nuclear Power
Projects (K‐2/K‐3) are in the pre‐construction stage.

Fuel for K‐1 is produced indigenously, whereas fuel for C‐1 and C‐2 is acquired from China. Table
below provides a summary of present status of the country’s nuclear power generation capacity.

Current Status of Nuclear Power in the Country

Plant Technolo Gross Construction Commercial
gy Capacity Started Operation
(MW) (First Concrete
Pour)
K‐1 PHWR5 100 1966 1972
C‐1 PWR6 325 1993 2000
C‐2 PWR 330 2005 2011
C‐3/C‐4 PWR 2x340 2011 2016/2017
K‐2/K‐3 PWR 2x1100 2015 (Expected) 2020/2021
Total 755 MW Operating and 2880 MW under construction

Pakistan Atomic Energy Commission (PAEC) is responsible for nuclear power development in the
country. With more than five decades of experience in dealing with nuclear power technology and
operation and maintenance of nuclear power plants, PAEC is now ready to expand its activities and
make even more substantial contribution towards meeting the energy requirements of the country.
Based on this experience and capability, PAEC has drawn a pathway to achieve a target of 8,800 MW
by 2030, set in Energy Security Plan (2005), and 40,000 MW by 2050, envisioned in Nuclear Vision
2050 approved by National Command Authority. Ground breaking of K‐2/K‐3, inaugurated by the
Prime Minister on 26 November 2013, is an important milestone on that path to achieve future
nuclear power expansion goals. Table below presents projection of nuclear power growth in the
country by 2025.

5
Pressurized Heavy‐Water‐Moderated and Cooled Reactor.
6
Pressurized Light‐Water‐Moderated and Cooled Reactor.


Projection of Nuclear Power Growth in the Country by 2025
Gross Cumulative
Year Plant Capacity Gross Capacity
(MW) (MW)
2014 Already operating (K‐1*, C‐1, C‐2) 755 755
2016 Under construction (C‐3) 340 1095
2017 Under construction (C‐4) 340 1435
2020 K‐2 1100 2435
2021 K‐3 1100 3535
2023 Planned NPP 1100 4635
2024 Planned NPP 1100 5735
2025 Planned NPP 1100 6835
* K‐1 will retire in 2019.

15.2. ISSUES
 China is presently the only supplier of nuclear technology and equipment for Pakistan.
 State‐of‐the‐art equipment manufacturing capability is required to enhance self‐reliance.
 Nuclear power plants require about 2 years for pre‐project work and 6‐7 years for construction
phase.
 Identified uranium resources of Pakistan are limited.
 Fuel fabrication facility for PWR fuel is needed to reduce dependence on imported fabricated fuel.
 The cost of decommissioning is often not included in the tariff of nuclear power plants. This has been
ignored when calculating the levelized tariff as well as environmental cost and contingencies.

 The China link needs to be kept engaged and strengthened – as currently planned. Additional nuclear
power plant suppliers should be explored and approached. Waiver of Nuclear Supplier Group
embargoes may eventually be sought through political strategies.
 A technology vendor partnership will be needed for nuclear power plants.
 The pre‐project construction time needs to be decreased as experience in construction of nuclear
power plant builds up and local capability in design, engineering and manufacturing increases.
 Uranium exploration activities need to be enhanced in the country through improved security and
infrastructure.
 Nuclear power plants are almost zero greenhouse gas (GHG) emission technologies as opposed to its
counterpart fossil fuel fired power plants that cause global warming. A continued nuclear capacity
addition and nuclear infrastructure development is necessary to mitigate GHG emissions in the
longer term.
 The ability to handle nuclear waste is an essential part of the strategy in order to mitigate the
potential for environmental hazards. The costs of such activities need to be well understood before
commitments are made for the set‐up of new nuclear power plants. In this connection, best
international practices need to be identified and adopted.
There is need to educate the general public on the cost‐benefit analysis, usefulness and safety of
nuclear power plants.


16. ALTERNATIVE AND RENEWABLE ENERGY (ARE) SECTOR
16.1. INTRODUCTION

Renewable Energy (RE) implies all forms of energy that are potentially inexhaustible, either because
they have infinite resources, or because they get renewed as they are used. Out of the known
sources of renewable energy at the moment, Pakistan is blessed with abundant resources in solar,
wind and biomass/biogas with potential in geothermal energy as well. Although a renewable form of
energy, we have not included hydro (hydel) energy in this chapter, since it is a very important form of
energy in Pakistan and therefore has its own chapter.

Natural Gas has become the backbone of Pakistan’s energy supply over the last couple of decades,
fueling the power sector, transport, industry and domestic needs. As Pakistan’s Natural gas supply is
tested increasingly with demand outpacing supply, renewable sources of energy, especially the
abundantly available hydro, solar, biomass/biogas and wind, need to be deployed rapidly across the
country to reduce this gap and remove the need to import additional hydrocarbons instead.

Renewable energy plants can be set up relatively quickly (in 1‐2 years) compared to thermal power
plants (3‐5 years) and requires either no fuel or indigenously available recurring fuel, therefore they
need to be developed with some level of urgency to ease the current energy crisis.

The creation of the Alternate Energy Development Board in 2003, with the subsequent introduction
of the Renewable Energy Policy 2006, was the start in developing renewable energies in Pakistan to
introduce these technologies to help in alleviating the energy crisis its faces due to its dependency on
hydrocarbon. Pakistan’s renewable energy industry faces some common challenges which have
stymied the growth of the alternative and renewable energy sector.

16.2. POTENTIAL AND CURRENT STATUS

16.2.1. Wind

A USAID‐funded study by National Renewable Energy Laboratory (NREL) in 2007 estimated Pakistan’s
potential for wind power to be nearly 132 GW (346 GW of nameplate capacity as reported by AEDB)
[2]. Using an exploitable fraction of 25%, as used by the Pakistan Meteorological Department (PMD),
means Pakistan has an exploitable potential for wind power of 33GW [3, 4]. PMD built further on the
work done by NREL, estimating the potential of wind power in Sindh to be nearly 44 GW in an area
spanning 9749km2, with an exploitable potential for wind power of 11 GW. The plant sector in Gharo
corridor is around 30% and the wind regime is IEC Class IIB. The wind resource is therefore
considered to be very good. Another major reason for all the large wind projects currently being set
up in the Gharo Wind Corridor is the availability of electrical infra‐structure for the evacuation of
power.


The Renewable Energy Section of the Energy Department of the Government of Sindh has become
quite active. Instead of allotting the entire block as per previous practice, it has started giving foot
prints for Wind Turbine Generators (WTGs). This step would make some of the agricultural land also
available for the Wind Power Projects (WPPs) as normally done in other countries. Approximately a
1000 acres block of land is required in the Gharo Corridor for producing 50MW at the maximum
available wind speed. By giving out foot print land, only 10% i.e. 100 acres will be required for a
50MW project. The rest of the land (90%) will be available for agriculture use.

PMD’s studies to further analyse other pockets of potential wind resources in Pakistan, as identified
in NREL’s reports, have not seen much success yet. PMD has rated the pockets seen in Southern
Baluchistan much lower than those seen in Sindh, with only the areas of Gaddani and Aghore
showing capacity factors higher than 20% (at 21% and 20.1% respectively) [5]. The wind corridors in
the FATA areas have been rated even lower [6]. No further analysis has been made of the large wind
belt identified in north‐western Baluchistan in the NREL report.

The World Bank and Alternative Energy Development Board (AEDB) are implementing a Renewable
Energy Resource Mapping activity covering all of Pakistan. The project is funded by World Bank’s
Energy Sector Management Assistance Program (ESMAP) and is focusing on assessment of wind,
solar and biomass resources, mapping and spatial planning, including ground‐based data collection,
data analysis and GIS mapping.

Assessment of national renewable energy resources is a crucial step in providing governments with
information to support the expansion of renewable power generation. AEDB and the World Bank are
working for fast track implementation of the project to assist in ensuring availability of bankable
resource data thereby attracting investment in the renewable energy sector and helping Government
in resolving the current energy crisis.


Despite optimistic statements from AEDB, the progress on Wind Power Projects is slow. The first
commercial wind power project to start selling to the national grid was FFC Energy’s 50MW plant in
December 2012, followed by Zorlu Energy’s 56.4MW plant in 2013. An additional 100 MW have come
online in 2014, and only 50 MW more is expected in 2015 [1], despite public AEDB claims that’s the
cumulative wind installed capacity to reach 1000MW by the end of the year. In total 29 wind power
projects with a cumulative capacity of 1669.5 MW are in different stages of development at the
moment. It is to be seen how many of these will come to fruition.

16.2.2. Solar

The solar power potential in Pakistan is as high as 2000 KWh/m2
annually; with a total land area of approximately 770 billion square
meters, this equates to 1,540 trillion KWh annually or nearly 175 million
MW worth of power plants working 24/7 at peak capacity. If we assume
an industry standard of 17.5% efficiency with today’s technology and
use only 1% of available space, the amount of electricity that can be
generated from solar power is equivalent to over 300,000 MW of
electricity production capacity. The solar power currently being utilized
in Pakistan is analyzed below but is nonetheless insignificant in terms of
available potential. In 2014, Pakistan’s solar industry continued its stop‐
start growth with success stories interspersed with ambiguity in policy
implementation and gaps in delivery, technology and manpower.

The local solar industry may be broken up into 4 sectors of analysis:

1. Off‐grid solar power (for rural and off‐grid application such as village electrification and solar
water pumping for agriculture)
2. On‐grid solar power (for urban area projects such as standalone/grid‐tied homes, commercial and
industrial projects)


3. Utility scale projects (IPP level projects)
4. Solar thermal/heating (mainly for use as domestic water heaters)

Since the inception of the Renewable Energy Policy in 2006, the successful achievement of targets
may be measured using available public data:

 The AEDB website says that in 2005 there were 40,000 un‐electrified villages in Pakistan of which
7,876 were not feasible for grid connection, and would have to be electrified by solar power.
Assuming 1% of 7,876 villages have been electrified each year for the past 10 years means
approximately 800 villages are electrified so far with nearly 7,000 remaining. If we include the
32,000 that are supposed to be on the grid but may not be, the number is much higher and the
percentage covered is much lower. Even if we increase our assumption of percentage of village
electrified up to 4% per year, this still leaves a significant shortfall.
 In 2014, around 300MW of solar panels were imported and installed according to various vendors
and suppliers. Pakistan’s electricity demand is 23,200 MW of production annually ‐ how much of
this is supplemented by solar is not clear, but it cannot be more than 1 GWH (500MW of installed
solar generating for 6 hours per day throughout the year.
 No utility scale plants are running.
 AEDB figures indicate fewer than 70,000 solar geysers have been imported and installed in
Pakistan so far.

16.2.3. Biogas/biomass

As an agrarian society and emerging economy, Pakistan generates a significant amount of waste
through crop residue, urban and rural municipal solid waste and sewage. Biomass power generation
and biogas production using this waste can significantly reduce problems of trash disposal, while
providing a renewable source of energy for the country.

Using an average of 0.5kg per capita of waste per day (compared to 2kg per capita in the US), we see
that Pakistan produces at least 92.5 million kilograms (92,500 metric tons) of MSW (Municipal Solid
Waste) per day, or 33,762,500 tons per year. Approximately 60% of that is organic waste, which can
be used to produce biogas.

Agricultural waste or crop residues may be more challenging to collect compared to urban MSW,
because of the larger distances involved. However, agricultural waste is purely organic waste and
reduces the need to separate organic and inorganic waste. The large quantities involved also make
them potentially interesting. Table 1 shows estimates of waste generated in Pakistan.

Biomass waste type Tons produced / Year
Municipal Solid Waste 33,762,500
Rice Straw 7,300,000
Bagasse (sugar mill waste) 12,000,000
Sugar cane trash (crop residue) 5,752,800
Cotton Sticks 1,474,693
Wheat straw 36,700,000
Maize straw 6,700,000
Animal manure 368,434,650
Source: Bioenergyconsult.com, PIDE



In the rural areas of Pakistan, part of the agricultural waste is used to feed animals, or burnt as fuel
for heating and cooking. In addition, animal manure is used for fertilizer and also dried and used as a
fuel for heating and cooking. Still a significant portion of crop residue is left to decompose or burnt in
the fields as a fast way of clearing the fields for the next crop. This wasted crop residue, as well as the
animal manure, could be better used as a means of production of power or biogas. The quantities
available for use in waste‐to‐energy solutions are shown in Table.

The biomass power estimates assumed a levelized use of the resource for year‐round power
production. If the waste is diverted to provide power and biogas to the people, much of it will not
need to be diverted as alternate fuel for the farmers. Biogas and power sectors will compete with soil
fertility for the crop residue in this scenario, as well as for animal feed. It is indeed the case that the
integration of crop residue such as cotton sticks, cane trash, etc. back into the soil increases the soil
fertility significantly and leads to higher yields. Hence, with better farmer education about good
agricultural practices, biomass feedstock and the maximum biomass potential will also increase.

Biomass waste type (not Tons Biomass potential Biomass Power Bio‐CNG
used as animal feed or produced/year (GWh/year) Capacity (MW) potential (tons
fuel) of CNG/year)
Municipal Solid Waste 20,257,500 ‐ ‐ 547500
Rice Straw (burnt) 4,159,000 1434 396 ‐
Bagasse (sugar mill waste) 12,000,000 11300 (incl. 1300 ‐
captive use)
Sugar cane trash (crop 5,752,800 9475 1050 ‐
residue)
Cotton Sticks 368673 768 ‐
Wheat straw (burnt) 20,462,000 12600 3478 ‐
Animal manure 368,434,650 ‐
Source: Bioenergyconsult.com, PIDE

Current projects that have been issued a letter of intent by the AEDB include

Project Size Fuel Tariff/kWh
(MW) ($cents) over
30 years
Lumen Energia, Jhang, Punjab 12 Agricultural waste, with 13.3573
coal as backup
SSJD, Mirpurkhas, Sindh 12 Agricultural waste, with 13.05
coal as backup
Pak Ethanol, Matli, Sindh 9 Sugar molasses spent ‐
wash
Masood Textile Mills, 12 ‐ ‐
Faisalabad, Punjab
Greensure, Mardan 12 Municipal Solid Waste ‐

Some success is seen in private, NGO and government sponsored projects to provide biogas to rural
areas. Expanding slowly but surely, these projects are currently providing 50‐100,000 m3 (43‐86 tons)
of biogas for cooking and heating, and 2‐4MW of electricity.

Also, Pakistani sugar mills already use the 12 million tons of bagasse generated to produce and to
generate steam for their processes, about 700MW by some estimates. About 16 mills already sell
about 120 MW power to the national grid. By upgrading their setup the 84 sugar mills can produce


up to 50% more power, which can all be exported to the national grid. Overall the sugar mills will be
able to add up to 300‐500MW to the grid.

In this regards, Government of Pakistan introduced the Frame Work for Power Co‐Generation 2013
(Bagasse / Biomass). This Framework is an Addendum to the Renewable Energy Policy 2006, and
extends all financial incentives from that policy to the Bagasse projects. NEPRA has introduced an
upfront tariff for bagasse power generation to sugar mills. These plants are allowed to cogenerate
using a variety of biomass in the 6‐8 months that bagasse is not available, enabling the mills to add
up to 2GW to the national grid using cogeneration options like cotton sticks, rice straw, etc. Coal is
not allowed as an alternate fuel. 6 sugar mills have already applied for generation licenses accepting
the upfront tariff. The deadline to apply is 28th May 2015. No upfront tariff has been introduced yet
for other biomass based projects.

16.2.4. Geothermal

Geothermal energy is tapped by making use of the temperature difference found as one goes deeper
into the earth, or a body of water. This temperature difference can be used to generate steam and
run a steam turbine to produce electricity. The temperature difference can also be used to heat
water, and provide heating and hot water for a building. Using reverse cycle, geothermal energy can
also be used for cooling or air conditioning a building.

Geothermal energy fulfills over 50% of Kenya’s power needs and 27% of that of Philippines. In terms
of installed capacity, the US has the largest installed capacity, with 3450MW of geothermal power
plants. In addition to power needs, geothermal is also an important source of water and building
heating in Europe. Iceland, as an example, fulfills 90% of this heating need with geothermal energy.

Although many countries around the world are fulfilling part of their energy needs in a financially
viable way with geothermal energy, Pakistan is yet to wake up to the potential significance of this
resource in its own energy scenario.

Source: AEDB website


Common Issues

Inter‐agency coordination and one window facilitation: One of the challenges faced by RE
developers has been the bureaucratic hassle of having to deal with multiple agencies including AEDB,
provincial power boards, NEPRA, NTDC, PPIB, etc. The agencies lack coordination amongst each
other, further delaying decision making, while lacking personnel at each organization at the senior
capacity who can facilitate developers.

For medium to small scale projects the lack of coordination between FBR, customs, AEDB, rural
development boards, utilities and other organizations has greatly hampered the development of the
RE industry. AEDB’s role as a one‐window facilitator has recently weakened too. This may be due to
the lack of clear designated leadership within that organization and the 18th amendment. This has
significantly increased the transaction costs and timelines of the renewable energy projects. While it
is understandable to issue more LOIs than the total project size, as developers drop out of projects, a
clear cut procedure and system must be established to define the process by which projects will be
integrated into the grid. This must involve better coordination between federal and provincial
agencies including the power off taker (NTDC) and the regulator (NEPRA).
For rural electrification and non‐IPP level development, there are no concrete roadmaps besides
policy statements.

The state of the current national grid: is a major technical hurdle to the integration of renewable
energy into the national mix. There is a lack of capacity, lack of clarity on roles and responsibilities as
well as obsolete equipment and budgetary constraints. Just recently the government has initiated a
study of how much renewables can be integrated into the grid; years after starting the process of
issuing LOI to developers.

Major Disconnect – 3
NEPRA has conventional mindset for technologically advanced renewables
Grid Code:
Requirements per NTDC but Wind Power
Integration in a DISCO
Cost plus tariff:
Intrinsically high – major sufferer is the
end consumer
O&M Costs:
NEPRA calculations are based on Thermal
Units with 2 or 3 generators at ground level.
A Wind Farm has 20 to 30 generators
installed at 80 meter from the ground level.
Contract Act of 1872: Due diligence remains the responsibility of the buyer
INMIC
E4
Page 3

IRFAN AHMAD

Financing for projects: Financing, of RE projects on all scales; including local or international
financing, is a challenge. The interest terms, availability of non‐recourse based debt; loan tenure as
well as hedging of forex risk raise the cost of capital and make renewable energy projects and their


tariff much more expensive than in other countries. KIBOR based debt has a double digit interest
figure, while LIBOR based debt is sourced internationally with limited number of players who have an
appetite for projects in Pakistan. Hence, funding sources are few and require very strict safeguards.

Local content and manpower: A concentrated effort is lacking in developing local engineering and
business knowhow to indigenize and localize the production of RE equipment, ancillary products and
services as well as develop SME and large organizational capabilities for companies to be in the
business in an effective and competitive way. Until this is made a priority, sustainable growth of the
industry at competitive pricing will be hard to achieve. All successful renewable energy implementing
countries have a great deal of local content and expertise which they have developed over time
including cutting edge R&D facilities. Trained manpower for all aspects of the industry from design,
EPC, O&M, sales, customer support and other functions is sorely lacking and academic institutions
are not providing the necessary graduates to fill the available positions and grow the industry.

Tariff regime: Tariff regime for each renewable energy segment is also a challenge. The wind tariff is
high compared to global standard ($0.13‐0.15 compared to $0.08‐0.05) and it expires in March 2015
but no new tariff has been announced yet. Current solar tariff is applicable for only six months after
which it is expected to change again, biomass (except bagasse) has no upfront tariff and geothermal
hasn’t been explored at all. There is also an issue of reduced tariff for production over the capacity
factor of the plant both for solar and wind which forces developer to use less than optimum
equipment to keep over production to a minimum.

Data: There is an extreme lack of on‐ground data that can be utilized to firm up project numbers and
raise financing. These cover all four renewable segments; whether this is on ground wind data for
nationwide sites, solar irradiation numbers, waste composition details, geothermal sites and much
more details in each segment.
16.3. SECTOR SPECIFIC CHALLENGES

16.3.1. Wind

Major Disconnect – 2
WTG Suppliers shun EPC but Lenders want Single Point Responsibility
Utility Network
690 V /
50Hz
20 kV
20 kV WTG 132 kV Wind
Substation Farm Substation
Major WTG Suppliers are product suppliers:

 They have little EPC experience
 They only want to sell their products while remaining off-shore.
 Network conditions and success of project are not their responsibility
 The Cost plus tariff helps them to sell their outdated designs
Failure of WTG can create a big dent in WTG supplier reputation world-wide
INMIC
E4
Page 2 IRFAN AHMAD



Evacuation: There has been a significant delay in evacuating the electricity being generated from the
wind farms, often adding months to the schedule of a project. The weak utility network of HESCO is
the main hurdle. The 132kV HESCO network in its present condition will not be able to integrate
more than 5 to 6 WPPs. An upgrade of the 132kV lines to 220kV will allow the evacuation of up to
1000MW. NTDC does not have the capacity and financial strength to build the new transmission lines
and substations on its own.

Since HESCO did not have the capacity to evacuate more than 5‐6 WPPs, the others in the pipeline
were delayed at the Energy Purchase Agreement (EPA) stage. CPPA will only sign the EPA once NTDC
issues a certificate that it will have made the necessary power evacuation arrangements by the time
the WPP will be ready to deliver the power. This new requirement was introduced by NEPRA at the
time of notifying the upfront tariff for WPPs in 2013, contrary to GoP’s clear policy to evacuate all
wind power plants as soon as they are ready to deliver.

Wind to Wire
45% Local Value Addition is possible now, upto 70% within the next 5 years
HV Transmission
Engineering & Design
• Site data verification
• Micro-siting Foundation & EBoP
• WTG Selection Roads
Wind Turbines WTG S/S Collection System Main Substation

PLC
n
Aux.-Power
Feeder 1
Gear ASG T3
X
PAX Coupling
. Capacitor
WTG 1 Busbar A: 20kV / 132kV

40/50 MVA
WTG 5
. x x
Feeder 4
n
• 20kV cables 60km
Gear • FO cable 20km
X
ASG
• Earth conductor Surge Arrester
10km
Feeder 5
Aux.-Power
. T3
20kV / 132kV
. 40/50 MVA
x x
Feeder 8
Civil Works Surge Arrester
Foundations: 01/turbine Roads: 10 - 15km/50MW Project
Page
Page 6 6 E4 Irfan Ahmad 26.03.14

Technology: The outdated wind turbine technology being used at the moment in Pakistan provides
only a very limited support to the network which is not adequate to keep local utility (HESCO)
network stable during a transition state.

Tariff: Although an upfront wind tariff has been introduced, NEPRA still allows project developers to
apply for a tariff on EPC or cost plus basis. This means that developers are guaranteed
reimbursement of all costs, and then a set margin of profit on that total cost. This system completely
removes any incentives from developers to reduce the project costs, and ultimately the levelized cost
for electricity which the consumers would have to pay. Hence, the existing capital costs of wind
power projects in Pakistan are much higher than global averages of $1000‐2000/MW.

16.3.2. Solar

Taxation: The government, from day one of the RE Policy, has mandated that solar imports and
projects be exempt from sales tax, custom duty and withholding tax. Yet a number of times this


policy has been rescinded by the FBR and taxes up to 32.5% imposed on the sector. This step has
been taken a few times over the past years and it greatly dents confidence in the sector, delays or
stops projects and causes losses to businesses and consumers.

Incentives/support: Besides the policy of tax/duty exemption there are very few incentives/support
for solar available to the consumer. Although utility projects are guaranteed return of equity of 17%,
for non‐utility scale projects there aren’t many support mechanisms available to allow quick adoption
of solar power at the consumer level, especially for rural electrification, commercial projects and
solar geysers. Support mechanisms would include potential tax rebates, renewable energy targets
that mandate solar power consumption, training and skills development for human resources to
grow the market, business financing for entrepreneurs to setup RE related business to help drive
growth etc.

Equipment: There is a lack of consistency in the available equipment. A multitude of vendors are
selling solar panels, batteries, inverters, charge controllers, cabling and other associated equipment
without adequate quality control or oversight. As a result, customers are not educated on their
choices and are often stuck with sub‐standard equipment.

Financial: Project financing is covered in the earlier section on power project development. However,
moving away from utility scale projects, funding is needed for all other types of projects including
small scale/micro level funding for village electrification for individual buyers, consumer financing for
larger projects such as solar irrigation systems, rooftop systems for homes/offices/shops, and
factory/industry electrification as well as for solar geysers to replace gas geysers.

Sun to Wire
40% LVA is possible now, upto 100% within the next 5 years
Apni hasti se ho jo kutch ho – agahi gar naheen ghaflat hi sahee
Automation:
Engineering & Design 1 MV Transmission 8 HV Trans. 10
•• Control
Site datasystem equipment
collection LOCAL CAPABILITY
• Data Bus
•Yield Calculations
Communication systems 1) 100%
• Component monitoring
• Hardware Design – Solar Plant 2) Not competitive
• Hardware Design – Substation due to economy of
• Grid Interconnection (Mostly MV) scale
3) 100%
Solar Panels 2 Inverters 5 MV 7 HV 9
4) 100%
Substation Substation
5) Limited, <10kW
6) Only automotive
LV MV
7) 100%, however
MV HV
major SwG comp.
imported
8) 100%
9) Trafos 100%
Structures 3 Civil Works 4 Battery Buffer 6 11
Ancillary
BoP Equipment:
Hydraulic 10) 132kV 100%
• Protection
11) 100% apart from
•Foundations
• DB‘s
components
•Substation Building
•Fire Fighting
• Security
Installation: 100%
•Monitoring
Commissioning: 100%
• Remote operation & diagnostics
O&M: 100%
Page 7 E4 Irfan
IrfanAhmad
Ahmad26.03.14
06.02.15



16.3.3. Biogas/Biomass

Waste collection: is the biggest challenge for waste‐to‐energy projects. There is a lack of contractual
frameworks for waste collection and handling, which allows a high amount of scavenging from
informal waste dumps. Although scavenging reduces the amount of trash left in these dumps, the
scavenged material often ends up as RDF for coal and cement plants, increasing the pollution of
these industries. In addition, scavengers often burn the waste to easily sort out the glass, metal and
other recyclables, polluting the air with toxins.

Contract enforcement: For areas under contracts, there is weak enforcement of contractual and
regulatory obligations, leading to a collect and dump methodology seen in many parts of Pakistan.
This creates unofficial and informal trash dumps and landfills in and near residential areas, near
water supplies and other sensitive areas.

Project location constraint: Since biomass has higher moisture content than fossil fuels and a lower
energy content per kg, transportation beyond 50 miles would make it energetically and financially
unfeasible to use as an energy source. This will be a big constraint in planning biomass power
generation projects in agricultural zones and will limit the size of such projects.

Awareness: There is a lack of awareness about biomass, the difference between biomass and
biogas, or the difference between energy and electricity within the planning bodies and bureaucracy.
The processes inherent in biomass and biogas projects are biological and chemical, rather than
mechanical. The current interest in biomass projects by the government has created the impression
that all trash is valuable. However, that is not true. Biogas projects use organic waste (about 60% of
trash), which needs to be separated out from inorganic waste. Within organic waste, food and
agricultural residue have higher energy content than animal manure. In addition, different types of
crop residue may have higher contents of silica, or other minerals that may need to be handled
during biomass power production.

Pricing of waste: The collection and separation of trash is a service and requires effort and money.
However, many municipal corporations, or industrial bodies have started charging for their waste,
which makes many biogas/biomass projects unfeasible. A much better approach would be for the
municipal corporation to have a share in equity of such projects.

16.3.4. Common Recommendations

1. Integrated strategy for increasing renewables in the energy mix needs to be developed
immediately with aggressive targets for short, medium and long term and definitive task list,
timelines and budget needed to accomplish this including grid upgrades, financing, policy,
education/awareness etc.
2. Planning and financing of the evacuation network for RE projects should start from the
Planning Commission and become a part of its newly proposed Energy Reforms Agenda.
3. A private‐public partnership is necessary to enhance and expand the transmission networks
to evacuate electricity produced through renewable energy. A set of new (PPRA) rules are
required to attract investors for the transmission networks. Attention should be paid to
wheeling and net metering for all RE as well.
4. Upfront feed‐in tariffs should now be the only method of tariff determination, completely
removing the option of the Cost Plus method. Renewable energy has become one of the most
economically feasible options around the world, falling below the rates of electricity produced


using fossil fuels in many areas. By introducing feed‐in tariffs, all profits by reducing costs
would go to the developers and owners of the projects. This will encourage developers to
create the most efficient power projects that would reduce the costs and increase long‐term
viability.
5. Financing models with back‐up support from international monetary institutions should be
worked out to reduce costs. This should cover both IPP level projects as well as consumers‐
targeted solutions.
6. Feed‐in tariffs should be paid in full for all electricity that is produced. Project owners should
be encouraged to choose sites with the highest capacity factors. Consequently, they should
then be rewarded for this due diligence. On the other hand, future feed‐in tariffs should very
quickly match world and regional averages to encourage project developers to bring cheap
electricity to the consumers.
7. Detailed studies and data gathering for all RE sources are still needed
8. The current process for developing a RE projects in Pakistan needs to be greatly simplified.
9. Energy is now a provincial subject. Accordingly the responsibility of RE development with
adequate functional authority should now be passed on to the Energy Departments of
individual provinces. Post 18th amendment AEDB role needs to be redefined. It should again
become a non‐profit Sponsor of RE Projects in the Country.
10. Rationalize taxation policy to provide tax exemptions for imports for as long as needed to
either develop a local industry capable of managing local demand or for the sector to reach
tangible scale.
11. Provide for quality control in the industry and ensure that substandard equipment is not
allowed to be deployed by having a stringent process for testing and monitoring the
equipment that is sold and installed. Further the EPC cost can be substantially reduced if a
substantial increase in local value addition can be made.
16.4. SECTOR SPECIFIC RECOMMENDATIONS

16.4.1. Wind
i. KE should be asked to integrate RE of at least 10% (250MW) of its installed capacity into its
system to fulfill its obligations to the environment while it is converting its Bin Qasim Power
Plants from oil/gas fired to coal fired. It is recommended that the new NTDC‐KE contract
should include Renewables integration into KE network as a part of the deal.
ii. HESCO network should be strengthened by integrating more base load generation in the
network.
iii. Wind Projects should be hybridized with PV Solar Projects. This would lead to:
a. A stable utility network as a properly sized PV Solar project can provide the much needed
reactive power to the system.
b. A better plant factor with Solar during the day time and Wind mostly in the evening due to
geography of the Gharo Wind Corridor
iv. Wind turbine technology has developed to such an extent that the wind turbines can now
behave like a conventional power plant to keep the active/reactive power balance in the
network. Investors should be encouraged to bring in the state of the art technology for future
projects.
v. Evacuation at 220kV level
vi. A substantial reduction in Electrical Balance of Plant (EBoP) cost can be made. EBoP has more
than 99% availability. By making the basic EBoP design simpler and removing equipment
redundancy not required for non‐base load Power Projects, a saving of 4% to 5% in EPC cost
can be achieved.


16.4.2. Solar
i. Provide further incentives to develop the sector such a tax rebates and allowances for
business/homes that install solar power and compulsory solar powering/heating components
requirement amongst others. All utilities should have viable renewable energy targets to
meet.
ii. Education and training in all aspects of the solar industry will help the sector by providing
technicians, engineers, salespeople and entrepreneurs who will build the businesses that will
drive this sector. This can be done through technical and vocational institutes and
colleges/universities, both in the government and private sector.
iii. To incentivize conversion of domestic sector to solar net metering guidelines should be
approved by NEPRA and put into place with immediate effect.
iv. The State Bank of Pakistan should have an intervention to facilitate low interest loans from
the banking sector for conversion of domestic, commercial and industrial sectors to solar.
v. If the requisite encouragement is provided in the solar sector target of achieving 5000 MW
of solar generation in the next 5 years could be achievable.
16.4.3. Biogas/biomass

1. Urban areas have a high concentration of waste per km, making it easier to collect and be
managed by a single government sponsored entity. Municipal Solid Waste should be used to
generate biogas that can then be used to run public transport. At conservative estimates,
the MSW across the country could produce 1400 tons of CNG per day. 38% of Pakistan’s
population lives in cities, producing enough trash to power at least 400,000 cars. If the biogas
sourced CNG is provided to public transport buses, the benefit of this renewable energy
would be extended to a larger segment of urban society. Such initiatives are already seen in
many European towns and cities.
2. Such projects can be easily set up in 24 months, with equity shared between city
governments, project developers and private investors. City Governments can expect
payback on their project within 5 years, if they were to adopt this policy. In addition, they
would be provided with compost and plant nutrients to keep parks and government offices
green. The biggest advantage is that the trash collection and disposal of the growing city
population would be handled in a pseudo‐sustainable way, such that only a limited portion of
the trash would then need to be housed in a landfill.
3. On a private venture basis, waste generated in specific industries or zones like furniture
making could also be used to produce power for captive use by those industries.
4. Rural areas, which have limited access to electricity, will benefit more from the production of
power from crop residue on a regional level, and biogas from kitchen, animal and human
waste on an individual farmer level.
5. Bio‐CNG should be priced the same as CNG rates.
6. Provide frame work for public private partnerships between municipalities and project
developers that ensures security of feed stock availability on a long term basis. In addition,
there should be clear demarcation of feedstock by project developer, so that there is no
competition and uncertainty for said feedstock.

16.4.4. Geothermal
i. Further studies of the geothermal potential of Pakistan are urgently required. These studies
should identify viable sites for geothermal power plants.


ii. These studies should also determine temperature differentials around the country, especially
in densely populated areas, to consider the viability of promoting geothermal heating systems
across the country to reduce natural gas consumption. Similarly, areas with high and
moderate temperature differentials could also provide reverse cycle air conditioning systems
to reduce the peak load in the summer.
16.5. GROWTH POTENTIAL AND OUTCOMES OVER THE NEXT 10‐15 YEARS

The growth potential of renewable energy is limited by all the challenges listed. If they are not
addressed, and RE is considered a burden to the grid rather than a benefit, then clean energy will not
reach its potential. Furthermore, a USAID study is ongoing to study the impacts of renewable energy
on the national grid. If this study imposes a 5% or 10% limit on renewable energy as a fraction of the
national capacity, than this will further restrict renewable energy potential growth in Pakistan in the
next ten years.

On the other hand, with no grid hold, if the evacuation of RE based power is handled smoothly and
all the policy measures recommended above are implemented, we could see clean energy power
projects quickly becoming important contributors to the electricity needs of Pakistan.

16.5.1. Wind
The decreasing prices of wind energy over time will only accelerate the investments in wind power in
Pakistan, easily surpassing 10GW of installed capacity in 2030.

16.5.2. Solar
 Complete rural electrification driven by small to medium local companies that also provide
support and services.
 Large scale replacement of gas‐based water heaters by solar heaters in urban/semi urban areas.
 5000+ MW of rooftop solar which is net metered/standalone in most cities/towns.
 5000+ MW of utility scale solar providing electricity to NTDC and being a significant part of the
national energy mix as it expands in the next ten years and beyond.

16.5.3. Biomass/Biogas
Biomass based power generation can exceed 4000 MW in 2025 and 6000 MW in 2030.
Biogas maximum potentials of 1500 tons per day today and 2000 tons per day in 2030 may seem
small compared to the nearly 20,000 tons of natural gas produced today to meet national demand.
However, with proper policies in place, biogas and biomass will be significant in meeting the demand
of a growing population, as well as to raise the quality of life of the rural population that is far from
the national distribution of gas and electricity.

16.5.4. Geothermal

Geothermal used for both power generation and heating/cooling as per the maximum viable
potential measured as a result of studies conducted today.
16.6. CONCLUSION

Our hope was to highlight some of the main issues being faced by clean energy entrepreneurs,
developers and consumers in Pakistan today and to suggest tangible steps that need to be taken and
funded for this sector to achieve its rightful place in the overall energy mix. Renewable energy is one


of the fastest growing sectors in the global power industry, not only at the commercial level but also
at the research level. Prices are falling constantly and issues such as intermittency and plant factor
are being removed by new developments in technology, storage systems and grid management.

In several countries with similar RE resources as Pakistan, the cost of clean energy is at par with the
cheapest generation sources available without the need for subsidies. The direct benefits of power
generation are clear to see but there are other additional benefits too. Job creation, not only at the
SME level but also when the industry is incentivized to make in‐country equipment manufacturing a
priority is a great added benefit of developing the renewable energy industry. This can be
implemented by policies that illustrate significant growth potential over the long term, thus
attracting manufacturers to partner with local firms to develop production capability for far reaching
and sustainable growth. Factoring in the environmental benefits that are accrued by the
development of renewable energy sources as well as the international balance of payment advantage
that is gained by moving away from expensive imported fuels to a free indigenous sources illustrates
that renewable energy based power needs to get policy, structural and financial support immediately
for the benefit of Pakistan.



17. GOVERNANCE AND REGULATORY AUTHORITIES
17.1. GOVERNANCE

The issues of governance in the energy sector contribute to the lack of growth and expansion in the
sector. The Energy Export Group is of the view that without addressing issues relating to the
governance and regulatory framework of the energy sector it will not be possible to ensure the
recommendations made in the individual industries.

Therefore, we propose the following steps:
1. A centralized and effective Planning Cell within the proposed Ministry of Energy should be created to
improve integrated power sector planning for efficient and timely investments, production and
evacuation of power.
2. Create Ministry of Energy and the executing Arm as National Energy Authority for effective
coordination of the whole Energy Sector.
3. NEPRA and OGRA to be constitutionally empowered to function as a proper independent and
forceful regulators.
4. All GENCOs, DISCOS (in the power sector) and Gas Distribution companies should be privatized
through a transparent process. It has been seen that by merely privatizing the management of these
companies could lead to significantly better results. Witness the experience of KAPCO and K‐Electric
in the power sector.
5. The Planning cell can be created as an independent entity as part of the unbundled structure to be
funded by power sector stakeholders through an annual fee.
6. Announce a road map and time line for full deregulation of the power distribution network and the
oil and gas downstream section. In the interim empower CPPA in the power sector for more efficient
management of energy sale and purchase.
7. Governance infrastructure is not sufficient to support new mega coal / hydro projects. Therefore
major investment required for up‐gradation of capacity at policy making and implementation stage.
8. Security Issues need to be resolved through political measures and safety to be provided to plant,
E&P, well operators and gas transmission personnel.
9. Difficulties in transmission of power – frequent tripping of Transmission Lines. The entire network
and national grid needs investment and up‐gradation. This will be needed to be able to successfully
integrate new import, wind, coal and hydel power projects.
10. UFG and Energy Theft – in order to bring the amount of energy lost through theft and lack of energy
conservation there needs to be effective governance and stiff penalties need to be imposed on gas
and power theft. The theft and loss of energy must be brought in line with international best
practices.
11. National Energy Efficiency and Conservation Program – This program needs to be operated centrally
for which international assistance and expertise can be brought to bear. This expertise is necessary
for the sector to fall in line with best international practices. There must be a carrot and stick
approach whereby demand management would force profligate energy consumers to be penalized,
pricing of energy must be rationalized and all subsidies to be provided directly rather than indirectly.
While those who become efficient consumers of energy should be rewarded and such case studies
showcased.
12. Monopoly distributors‐ privatization of the distribution network must ensure competition and the
provision of choice to consumers, by unbundling of the distribution network into multiple



17.2. REGULATORY ISSUES AND RECOMMENDATIONS:

In Pakistan there are two Regulators that are directly involved in the regulation of the Energy sector.
The first is the National Electric Power Regulatory Authority (NEPRA) which takes care of regulation
of all power generation while the second regulatory authority that is hydrocarbon specific is the Oil
and Gas Regulatory Authority (OGRA). These Regulatory authorities were set up as part of the
deregulation of Pakistan’s energy markets. This was also done in order to separate policy making
from the task of regulation. The Government of Pakistan created these bodies through various
Ordinances and Acts of parliament.

The creation of these Regulators, while an important step in the deregulation of the energy markets,
has resulted in serious issues faced by investors and consumers. In order to rectify these problems
the Expert Energy Group through a process of consultation and research has articulated these issues
and come up with recommendations to resolve these issues.

1. The regulatory role of NEPRA and OGRA need to be empowered & enhanced for more effectiveness.
2. Appointment of the chairman, members and professionals should be transparent and strictly in
accordance with the law.
3. NEPRA and OGRA should be activated as proper Regulators along the lines of the State Bank so that
these regulators can:
i. Actively regulate sector governance to control costs.
ii. Monitor losses and thefts and financial status of distribution networks/ companies.
iii. Allow legitimate losses and bad debts as part of business expenses.
iv. Ensure a competitive market; enforce safety standards and customer services.
v. Be responsible for sector issues such as investments, management, load shedding, load
management etc.
4. The amendment of the NEPRA Act and OGRA ordinance should be expedited to empower both
regulators to notify all determined tariffs.
5. Uniform tariff for each class of consumer across the country with no tariff differential across the
Discos in power sector, and no cross subsidisation in the gas sector; maintaining the following
principles:
i. Change will not result in adverse impact on efficient units against inefficient units;
ii. Protecting the Independence of the regulator;
iii. Only prudently incurred costs to be accounted for;
iv. Transparency in rewards and penalties of good versus bad practices.
6. Both regulators should set up a tariff research cell in conjunction with educational centres of
excellence to evaluate tariff restructuring to minimize subsidies. This tariff research center must also
work with similar international institutions and benefit from their expertise and modeling capability.
The comparison of tariffs by fuel type in the power sector indicates the reliability and energy input
cost of each type of fuel‐based power produced. It is therefore necessary to push for greater reliance
on indigenous fuels which will provide greater sustainability and competitiveness for the economy.



30 Comparative Tariffs by Fuel Type (in Rs. per kWh)
Capacity Charge Energy / Variable Charge
25
20
15
10
0
New Captive Imported Gas (LNG) Wind Furnace Furnace Solar
Hydro Bagasse Coal Oil ‐ IPP Oil ‐
Source:
GENCO
Crosby Capital

7. The actual cost of power generation and gas purchases should be passed on to the consumer and any
support to lifeline consumers should be in the form of direct disbursements which should be
managed by the regulatory authorities and funded independently through a surcharge on all energy
consumption.
8. The regulators should advise the ECC of the sector operational status (monthly) and future outlook
on (quarterly). These reports should be published on a regular basis and made available in the public
domain.
9. Provided that capacity and expertise can be developed in both NEPRA and OGRA to the extent of
merging the two regulators and a single Ministry of Energy can be created, the option of a single
energy regulator can be examined in the future.



18. SECURITY OF ENERGY SUPPLY AND GEO‐POLITICAL SCENARIO

18.1. SECURITY OF SUPPLY

18.1.1. Developing strategic relationships with buyer

The government should partner with the private sector in developing relationships with the regional
suppliers to secure future supplies of hydrocarbons. The government may also use its influence to
ensure that such supplies are not disturbed in changing geopolitical scenario.

18.1.2. National Contingency Plan

This plan is required to meet supply constraints arising in the event of the closure of Strait of Hormuz
due to war or natural calamity. This plan should include management of strategic stocks mentioned
above and should also include clear commitments from Gulf countries for provision of fuel from
alternate routes such as the East‐West Saudi Arabian pipeline and the upcoming Abu Dhabi crude
pipeline.

18.1.3. Setting up of refineries

The government should also encourage development of large deep conversion export‐oriented
refineries in the country. Such refineries shall also act as safety cushion in the country in days of
short‐term refined‐product supply shortages in the region. However these refineries should be
strictly based on commercial viability of the projects and no sovereign guarantees should be provided
for return on investment.

18.1.4. Alternate sources of diesel supply

The government should facilitate import of diesel and other products from India which is emerging as
an important supply hub in the region. This is expected to introduce significant savings on account of
freight as compared to the Arabian Gulf. This will also provide the counter assurance India would
need for any interruption of NG supplies by Pakistan from the IPI pipeline.

18.1.5. Prudent Financial Management

Lack of it is one of the key reasons for energy shortages for all energy requirements. Inability of GoP
to pay its receivables on time whether directly or through PEPCO/WAPDA has resulted in refineries
and oil marketing companies being short of funds to import crude oil diesel and furnace oil. Until this
issue is resolved the danger to supply constraints and therefore energy security will persist.

18.1.6. Hedging

A policy is also required where the companies can book oil supplies based on a forward view
(hedging).



18.1.7. National companies to venture overseas to secure hydrocarbon supply

To date this has not been possible. We would propose an SPV in which OGDCL, PPL could be
shareholders along with specialist international companies. OGDCL and PPL do not have specialist
access to technology therefore the GOP should consider working with companies in specific countries
with these specialist technology providers to ensure that Pakistan gets the best return on its
investment.

18.1.8. National Strategic Storage

Petroleum stocks play a critical role in the country’s energy security during supply shocks. Currently
the OMCs are required by the government to maintain 21 days cover of regulated products but the
actual days cover fluctuates and may be as low as 10 days in periods of short supply. Further, these
stocks are managed by business entities that will naturally adjust stock level commercially, with
respect to price trend, cash flow and their own demand management.

National strategic stocks should be maintained at 60 days cover. The strategic stocks should
preferably be built and managed by the government. In case the government needs the industry’s
involvement in development of these stocks, the same should be arranged between the government
and the individual OMCs based on commercial terms.

The storages should be spread across the country in view of security and for ready supply to different
parts of the country in case of an emergent requirement. The storages may also be utilized to acquire
and store additional supplies during days of lower oil prices.



19. REGIONAL GEO‐POLITICAL STRATEGY

The focus of this section is to discuss the geo‐strategic perspective of the region and its possible
impact on the availability of external energy resources for the future. Pakistan must utilize its
internal energy resources efficiently. This perspective provides the backdrop to the current
Integrated Energy Plan.

Before reviewing the external environment it is important to touch upon the domestic scene.
Pakistan continues to face serious a multidimensional crisis. A political crisis caused by weak
leadership and a strong challenge to the legitimacy of the 2013 elections, poor governance effecting
the day to day performance of the Government, a weak and shallow economy, a continuing law and
order crisis, an endless energy crisis and above all a murderous insurgency highlighted by the recent
attack on innocent children in Peshawar.

Nature has bestowed on Pakistan an enviable geo‐strategic location wherein Pakistan is the core of a
geographic region encompassing the energy rich Middle East and Iran on our West, the equally
energy rich Central Asian States and Russia on our North, our friendly neighbour China on our North
East and India on the East. We are also fortunate to enjoy a ringside seat on the Indian Ocean, which
is the major East West maritime corridor. While we have energy surplus countries on our West and
North West, the countries on our North East and East have a growing demand for energy. Pakistan
forms a natural land bridge between the fuel rich region on our West and North West and the energy
deficient India on our East and China on our North East. A major hurdle to this natural flow of energy
to and through Pakistan is the poor security environment within Pakistan and Afghanistan.

An enviable geo‐strategic environment can be a major asset but it can also turn out to be a liability,
depending on how we manage our domestic scene and how well we are able to exploit our strategic
location. A review of our relations with our neighbours will give us an idea on how well we have
exploited our strategic location. In a nutshell, Pakistan could have done much better. Our current
relationship with the sole super power, which has huge interests in this region is barely satisfactory
and laced with mistrust. However the recent visit of our Army Chief to the US is seen as a ray of hope.
The good news is that our relationship with Afghanistan seems to be improving with the change of
the leadership there but it will take time and political wisdom in both countries to overcome the
decades of mistrust. Stability within Afghanistan and good working relations between our two
countries is essential before TAPI can become a reality.

The acquisition of energy from the rich fields of Qatar, Iran and Central Asia has been evaluated and
is very possible. The current available options for import of energy from abroad are, the import of
LNG from the Middle East through the sea route and secondly through the two possible land‐based
pipelines. The import of LNG is almost a reality with the construction of the Engro Elengy Terminal at
Port Qasim. The two gas pipelines, TAPI and IP are discussed below:

19.1. (TURKMENISTAN AFGHANISTAN, PAKISTAN AND INDIA)

This most talked about and a popular project is significant, with great prospects but it also faces
major challenges. A framework agreement was signed in April 2008 between the four countries and
it was estimated to cost around $ 7.6 billion at that time. Once a decision has been made it will take a
minimum of four to five years to operationalize TAPI. The main obstacle in the implementation of this
project is the security environment in Western and Southern Afghanistan and partially in Baluchistan.


Currently the area of Herat, Helmand and Kandahar in Afghanistan remains unstable and today the
Kabul Government is not in a position to ensure the security of this pipeline, as it passes through
their country. This insecurity is also likely to discourage investors.
Speaking most optimistically, it may take two to three years for the security environment to improve
in Afghanistan. Therefore practically for the TAPI to operationalize it will needs at least 6 to 7 years.
This is a long‐term project and in will have no impact on our immediate term energy needs.

19.2. IP (IRAN PAKISTAN)

Though Pakistan and Iran signed an initial agreement in May 2009 and like the TAPI India has also
been a part of this project but the project has not moved forward. It is once again in the headlines,
and according to media reports Iran is eager to move forward and seem to have established the
pipeline infrastructure on their side of the border. The primary hurdle for this project is the US policy;
they have consistently insisted that this pipeline would be in violation of the UN sanctions against
Iran. In spite of all the bravado so far we have not been able to go against US pressure. However of
late there appears to be a thaw in the US Iran relationship. Once UN sanctions are removed, this
pipeline can be made operational in two to three years. Therefore the IP pipeline will remain a long
and medium term project and will not be able to help us in meeting our immediate fuel shortfall.

19.3. CHINA PAKISTAN ECONOMIC CORRIDOR (CPEC)

This project has a great potential for mutual trade, development and flow of energy. China being an
energy deficient country may need Pakistan’s help in the transportation of energy through this
corridor from the energy rich countries. China can and has shown willingness to provide the much‐
needed capital and technology for our power plants and power infrastructure.
Import of LNG offer a partial solution to our immediate energy needs when combined with optimum
and efficient use of our domestic resources like hydel, coal and gas.
Pakistan needs to use the current global slowdown and resulting correction in prices of hydrocarbons
to reset its energy sector through mid and long term supply contracts with regional natural gas and
oil producers like Qatar, Saudia, Kuwait and Abu Dhabi. At the same time a vigorous engagement
with Iraq and Iran needs to be undertaken as they will be the new producers who once their political
troubles are alleviated as counterweights to ensure fairness in dealings with our regular suppliers of
energy.

Pakistan must use its strategic location to act as an energy corridor and to also benefit by becoming a
regional energy hub for storage, bulk breaking and processing of oil and natural gas hydrocarbons.
The PARCO refinery is a model to be followed with Kuwait, Saudia, Iraq and Iran while the Emirate of
Fujairah a regional energy hub to be emulated.

19.4. CONCLUSION

Both the transnational natural gas pipelines are very important for our medium and long term
energy requirement and greater energy security, however to resolve the current energy crisis
(2015‐2016), our Government cannot rely on either of these gas pipelines and needs to focus on
other immediate options, including the optimum and efficient utilization of our existing energy
resources. Improving the security situation by stricter governance and through participation of
communities where natural resources exist viz; oil, natural gas and coal.



20. ANNEXURES


ANNEXURE 1
LIST OF ABBREVIATIONS
ARL Attock Refinery Limited
BPCD Barrels per Calculated Day
BP BP Pakistan Exploration & Production Inc.
BTU British Thermal Unit
CCGT Combined Cycle Gas Turbine
CFT Cubic Feet
CHP Combined Heat and Power
CNG Compressed Natural
ENERCON National Energy Conservation Center
Gas FO Furnace oil
GHG Green House Gas
GSP Geological Survey of Pakistan
GTPS Gas Turbine Power Statio
GWh Giga Watt Hour
HDIP Hydrocarbon Development Institute of Pakistan
HOBC High Octane Blending Component
HSD High Speed Diesel Oil
HSFO High Sulphur Furnace Oil
HUBCO The Hub Power Company
JP‐1, JP‐4 Aviation Fuels
KANUPP Karachi Nuclear Power Plant
KAPCO Kot Addu Power Company
KESC Karachi Electric Supply Corporation
LASMO Lasmo Oil Pakistan Limited
LDO Light Diesel Oil
LHFO Low Sulphur Furnace Oil
LPG Liquefied Petroleum Gas
MGCL Mari Gas Company Limited
MW MegaWatt
MWh Mega Watt Hour

NGPS Natural Gas Power Station
NRL National Refinery Limited
KPK Khyber Pakhtoonkhua (North Western Frontier Province)
OCAC Oil Companies Advisory Committee
OGDC Oil & Gas Development Company
OTPS Oil Thermal Power Station
OXY Occidental of Pakistan Inc.
PAEC Pakistan Atomic Energy Commission
PARCO Pak‐Arab Refinery Company Limited
PASMIC Pakistan Steel Mills Corporation
T & D Transmission & Distribution
TCF Trillion Cubic Feet
TEL Tapal Energy Limited
TOE Ton of Oil Equivalent
Ton Metric Ton
TPS Thermal Power Stations
UFG Unaccounted for Gas
WAPDA Pakistan Water & Power Development Authority, Lahore.


ANNEXURE 2
VISION 2025 THE OBJECTIVES
“an energy policy, resolution of the circular debt issue, rationalization of subsidies, and introduction of
incentives for the private sector.”
EXTRACTED FROM THE INTRODUCTION TO VISION 2025 –
Sufficient, reliable, clean and cost‐effective availability of energy, water and food – for now and the
future – is indispensable to ensure sustainable economic growth and development. These key sectors
have suffered historically from severe failings of policy and execution. Meeting this challenge has been
further complicated by the severe impact of climate change. A renewed national consensus exists to
commit major new investment through unprecedented public and private sector collaboration to bridge
very large gaps that threaten the wellbeing and progress of the country. While investments to ensure the
needed additional supply are being made, the country is equally committed to creating and encouraging
a culture of conservation and efficiency in the usage of energy and water. Two major water and energy
related projects Diamer‐Bhasha Dam (4500 MW), Dasu Hydro Power Project (2160 MW) are already
included in the PSDP. Key goals under this pillar are;
 Energy: double power generation to 45,000 MW and provide uninterrupted, affordable and clean
‘energy for all’ – electricity access from 67% to 100%.)
EXTRACTS FROM THE CHAPTER ON
ENERGY WATER & FOOD SECURITY – VISION 2025
Pakistan Vision 2025 recognizes that sufficient, Reliable, clean and cost‐effective availability of energy,
water and food – for now and the future – is indispensable in ensuring sustainable economic growth and
development. These key sectors have suffered historically from severe failings of integrated policy and
execution. Meeting this challenge has been further complicated due to the severe impact of ongoing
climate change.
However, we are proud to have a renewed national consensus on committing major new investments,
through unprecedented public and private sector collaboration, to bridge very large gaps that threaten
the wellbeing and progress of our country. While investments to ensure the needed additional supply
are being made, we are equally committed to creating and encouraging a culture of conservation and
efficiency in the usage of energy and water.
ENERGY
Pakistan Vision 2025 aims at ensuring uninterrupted access to affordable and clean energy for all
sections of the population. We have identified the following top 10 goals in this respect:
1. Eliminate current electricity supply‐demand gap by 2018, and cater to growing future demand by
addition of 25,000 MW by 2025
2. Optimize energy generation mix between oil, gas, hydro, coal, nuclear, solar, wind and biomass– with
reference to its indigenousness, economic feasibility, scalability, risk assessment and environmental
impact
3. Complete two major hydel projects: DiamerBhasha and Dasu dams
4. Operationalize the immense potential of Thar coal and complete Gaddani Energy Park with 6600 MW
capacity.
5. Tap Pakistan’s huge potential for alternative energy
6. Complete new Nuclear power generation plants
7. Maximize distribution efficiency and cut wasteful losses through investment in transmission and
distribution infrastructure and effective enforcement of controls
8. Address institutional fragmentation and decay of the sector due to poor capacity.
9. Focus on demand management and conservation to ensure prioritization in allocation, elimination
of wasteful use, incentives to use more energy efficient equipment and appliances and achieve better
balance between peak and off‐peak hours
10. Introduce institutional reform and strengthen regulatory frameworks to improve transparency and
efficiency.
The current shortfall in supply of energy has resulted in a massive negative impact both on societal as
well as economic wellbeing (reflected by an estimated 4‐7% loss to the country’s GDP). Pertinent factors
causing adverse impact include: (a) Excessive reliance on expensive, imported oil; (b) Almost 30 % of the
population without electricity – contributing to depletion of vital forest land; (c) Aging power plants and
distribution infrastructure – causing up to a third of national power generation capacity loss through
power leakages; (d) Weak governance leading to power wastage and theft; (e) Minimal investment in
development of indigenous, inexpensive and scalable sources of power generation: specifically
Hydropower and Coal; (f) A lack of focus and investment towards conservation, demand management –
each of which will have a significant and quick impact.
Meeting the economic growth requirements to realize Pakistan Vision 2025 will demand enormous
amounts of additional, reliable and cost‐effective energy.
Transmission and distribution (T&D) losses due to technical issues and electricity theft pose a very
serious challenge. T&D losses in Pakistan (over 25%) are much higher than in OECD countries (7%),
Korea (3.6%) and China (8%). This offers an enormous opportunity to both make additional energy
available to the national grid and proportionately reduce the cost per unit.
At present, out of the total installed generating capacity about two thirds is thermal, making electricity
expensive. Rebalancing the generation mix therefore provides an important channel to reduce our
cost per unit. In this regard, major programs are being launched – notably: building of the 9,500 MW
Bhasha and Dasu Dams, Gaddani Energy Park 6600MW and major increase in power generation from
alternative energy sources. China‐ Pakistan Economic Corridor energy projects will serve as a backbone
of the energy strategy to overcome power crisis in Pakistan.
Pakistan has great potential for energy savings through use of more power efficient equipment, with
expected savings of 15‐20% of total energy consumption in the country. This corresponds to a significant
reduction in net oil imports. Private investments in hydel and other renewable sources will be
encouraged. Based on estimates the private sector has invested over PKR700b (approx. $7b) in small
scale thermal generation capacity.
Concerted programs are being launched to tap Pakistan’s immense potential for developing ShaleOil and
Gas. Shale gas reserves are estimated by the Asian Development Bank (ADB) at 5346 Million tonnes oil
equivalent (MTOE), 1323 of which are technically recoverable presently. In view of its enormous
potential, and the well‐recognized need to maximize energy availability for our rapid development
needs, in depth technical and investment feasibility studies, with a view to making a substantial impact in
closing the projected supply‐demand gap, have been initiated as a strategic priority. In addition other
opportunities for oil and gas exploration will also be explored.
Coal is a cost efficient source of fuel; the country has an enormous amount of untapped coal reserves
(around 186 billion tons). Accordingly, we plan to increase domestic coal production from 4.5 to 60
million tonnes per year. This requires huge capital investments in addition to transmission networks.
Moreover, there are concerns about resulting CO2 emissions associated with coal based thermal power
projects. Accordingly, we are committed to adoption of clean coal combustion technologies, along with
strong policies to make its use eco‐friendly, to conform to international standards.
Energy Conservation & Demand Management
The energy saving potential of Pakistan is estimated to be over 11 MTOE (million tons of oil
equivalents). As far as energy conservation is concerned, no legislative framework is in place,
institutional structure has remained weak and codes and standards have not been launched. A
national initiative towards the conservation of energy will be taken to use the available capacity more
effectively.
Further, considering the organizational and technical complexity inherent in deriving a balance of energy
related targets we will expedite and utilize the work already started in developing an “Integrated Energy
Development Model” that offers a highly structured framework to simulate results and analyze strategic
options such as: (i) Least‐cost energy systems and compositions; (ii) Cost‐effective responses to
restrictions on emissions; (iii) Long‐term energy balances under different scenarios; (iv) Impact of new
technologies; (v) Benefits of regional cooperation; (vi) Effects of regulations, taxes and subsidies.
Accordingly, we will accelerate the development and deployment of an “Integrated Energy Development
Model” to enable our energy sector (that includes separate ministries of Petroleum and Natural
Resources; Water and Power; Planning and Development; Environment, Transport and Communications;
and also the Pakistan Atomic Energy Commission – as well as separate regulatory bodies for oil and gas,
and electric power) to benefit from a single overarching model across the related ministries or regulatory
bodies.
This view is consistent with the approach of other developing and developed countries where least‐cost
energy plans are developed through a rigorous integrated process
Integrated Energy Development Model
In view of the above, there is an urgent need to develop an integrated energy development plan that
addresses the merits of our energy imports, the development of indigenous energy resources, a more
diversified energy mix, and initiatives to achieve better energy efficiency (including assessing investment
in efficiency improvements versus additional capacity) and management.
Similarly, to allow an integrated examination the varying technology options, resource supply constraints
and opportunities, supply and demand‐side (including improved conservation) investment trade‐offs,
economic development goals and policy impacts, requires an integrated analytical framework that
represents the national energy, economic and environmental systems.
Energy efficiency
One of the key aspects of our current energy strategy is to focus on ensuring efficient power
generation. There is more than 1200 MW energy that is lost due to inefficiencies. Minimum baseline
efficiency standards will be developed and monitored in assessing all new investments – i.e. in
efficiency improvements versus building additional capacity.
APPENDIX 3
EXTRACTS FROM INDIAN INTEGRATED ENERGY
POLICY AUGUST 2006
Outline of Indian Energy Policy 1974, 1979
THE FUEL POLICY COMMITTEE (1974)
The Fuel Policy Committee was appointed by the Ministry of Petroleum and Chemicals, Government of
India on 12th October, 1970. The terms of reference of committee were as follows:
(a) Undertake a survey of fuel resources and the regional pattern of their distribution;
(b) Study the present trends in exploitation and use of fuels;
(c) Estimate perspective of demand by sectors (in particular the transport, industry, power
generation industry and domestic fuel) and by regions;
(d) Study the efficiency in the use of fuel and recommend:
(i) The outline of a national fuel policy for the next fifteen years;
(ii) A pattern of consumption and measures, fiscal and otherwise, which would help the best use of
available resources; and
(iii) The measures and agencies, to promote the optimum efficiency in use of fuel.
RECOMMENDATIONS
(i) General
1. If the energy plans and policies are to be operationally meaningful, there is a need for periodic review
of the energy policy. The review may be taken at least once in three years and the planning horizon
extended at each time to 15 years.
2. To set‐up an Energy Board consisting of the ministers of concerned energy related ministries
supported by a suitably structured Secretariat to assist this board. The board may initiate or undertake
any analysis relevant for the review or revision of the fuel policy.
(ii) Coal Sector
1. Coal should be considered as the primary source of energy in the country for the next few decades and
the energy policy of the country should be designed on this basic premise.
2. The need for developing an efficient and adequate transport system, which would ensure the flow of
coal from the points of availability to the demand centers should be noted.
3. The coal industry should accept the responsibility to supply the required grade of coal on a long‐term
basis, if necessary, by changing the source of coal supply from time to time or by blending different
grades of coal to make up the required grades.
4. To increase the productivity of coalmines, studies should be initiated immediately to determine
the optimal use and maintenance of machines, and for training coal mines workers in the use and
maintenance of the same.
5. R&D work should be continued on techno economic aspects of coal gasification and specific
possibilities should be investigated for using poor quality coal for gasification.
6. Railways constitute the most economical way of moving coal for most of the consuming classes and
consumer locations in India. Adequate attention should be paid to rail transport planning in regard to
development of additional line capacity, yard capacity and signaling and communication which would
facilitate a speedier turnaround time for wagons. The augmentation of the wagons fleet should also be
considered.
7. The selection of optimal technology for coal mining should be made on economic
grounds using appropriate weightages for machine utilization under Indian conditions and keeping
in mind the availability of an abundant labor force.
(iii) Oil Sector
1. India’s oil policy should be based on an understanding of the international oil situation. It should be
designed with the specific objectives of
(a) Reducing the quantity of oil products to be imported; (b) Reducing the total foreign exchange
expenditure; and
(c) Improving the security of supplies in crude and oil products required from sources outside the
country.
2. Oil exploration in India should be given priority attention. The exploration activities particularly in
the offshore areas and selected onshore areas should be speed‐up. There is an urgent need to
augment the capabilities of ONGC by providing them with more modern equipment.
3. All attempts should be made to take advantage of the complementarities of the resource endowments
of India. Meaningful bilateral agreements may be entered into with oil exporting countries including
participation in crude production.
4. To provide insurance against short‐run breakdowns in the supply of crude to the country, there is a
need to build up stock of crude within the country.
5. While planning refining capacity, there should be a careful examination of refinery locations, the
product mix required in each refinery, the extent of
secondary process to be established and a feedstock choice in the fertilizer industry.
6. Road and rail transport must be coordinated in an optimal manner in order to manage the HSDO
demand. Long distance movement of commodities by road should be discouraged while simultaneously
increasing the capabilities of rail transport.
7. Fuel oil being a valuable raw material for the production of high cost petroleum products which have
good export potential or can serve as import substitute, large quantities of it should be earmarked for
the high value products like lubes, bitumen, petroleum coke and wax.
8. The price of HSDO and kerosene should continue to be kept at par with each other to avoid diversion
of kerosene for use in transport sector.
9. The production of fertilizers, methanol and other chemicals based on natural gas will have to be given
preference over the use of natural gas solely as a fuel.
(iv) Power Sector
1. Efforts should be made to develop a more optimal load structure: (a) By setting up of more pumped
storage schemes.
(b) By shifting production of electricity intensive industries from peak to off peak periods.
(c) By general pricing of the industrial tariff and agricultural tariff to provide incentive for use of more
electricity during off peak hours.
2. In the overall interest of the economy and keeping in mind environmental considerations, more power
stations should be located at pitheads. Depending on the local conditions, however, construction of
power stations at load centers can be considered on merits as a special case.
3. The schemes for setting up of regional grids and regional load dispatch centers should be vigorously
pursued.
4. A proper pricing policy for the power supplies to the agricultural loads so as to encourage the
consumers to use the optimal size of pump sets, and to draw supplies during off peak hours.
5. In the overall national interest and given the limited available resources, the setting up of captive
power stations should not be encouraged.
(v) Domestic sector
1. To take up programs of afforestation with quick growing wood species to increase the availability of
firewood.
2. To intensify the popularization of ‘gobar gas plants’ in view of the social benefits
of the nutrient production, pollution abatement etc.
3. The problem of substitution of noncommercial fuels with the commercial fuels in the domestic sector
has to be considered with due regard to the overall economic implications of the use of different fuels in
this sector.
Pricing and distribution policies should be based on a full understanding of the social costs of the use of
different fuels.
(vi) Cost and prices
1. The price fixed for any fuel‐coal, oil or electricity should be such that the particular fuel industry, as a
whole, is enabled to earn a return of al least 10%on the investment made in the industry.
2. There should be a serious examination of the need to continue the import parity formula for pricing of
petroleum products and to evaluate other possible methods of fixing prices, which will best serve the
national interest.
3. The electricity tariff should be designed so as to discriminate between the use of power during the
peak periods and during the off peak periods.
(vii) Technology
1. A National Fuel Efficiency service may be instituted to ensure improvement in energy efficiency in the
industries.
2. Research and development in areas relating to combined gas turbine – steam turbine plants should be
intensified for increasing the overall efficiency of coal utilization in thermal power plants.
3. A long‐term program for development of coal to oil should be drawn up.
4. R&D work on coal gasification and pipeline transport of coal gas should be undertaken.
5. R&D on solar energy in India may be concentrated on the development of thin‐ film technology,
developing low cost solar water heaters etc.
6. Development of battery powered vehicles, fuel cell technology, Fast Breeder
Reactors etc. should be emphasized.
(II) THE WORKING GROUP ON ENERGY POLICY (1979)
The Working Group on Energy Policy (1979) was constituted by an order of the Planning Commission on
6th December, 1977, with a view to “carry out a comprehensive review of the present situation in the
light of recent developments both within the country and outside, to develop a perspective for the next
five to fifteen years and to recommend appropriate policy measures for optimal utilization of available
energy resources including non‐conventional sources of energy”.
The terms of reference of the Working Group were set out as follows:
(a) To estimate the perspective energy demand in the different sectors of the economy and regions of
the country by 1982‐83 and a decade thereafter;
(b) To survey the present and perspective supplies of energy;
(c) To recommend measures for optimum use of available energy resources; and
(d) To outline the national energy policy for the next five years, fifteen years and the longer term
conservation policy.
RECOMMENDATIONS
General
1. A reappraisal of our economic development strategies, especially those elements of the strategy which
have a direct link to energy consumption like technology choice, location policies, urban growth, and
mechanization in agriculture etc., with reference to the new awareness of the energy supply and
demand in future needs to be addressed.
2. Examination of the technological processes and the achievable levels of efficiency for each
industry or equipment, and to prescribe the standards of efficiency to be achieved by energy users or
equipment manufacturers.
Oil Sector Policies
1. All efforts should be made to reduce the demand of oil to levels even below what is forecast in the
Optimum Level Forecast (OLF). It would be prudent to plan a pattern of growth of the economy, which is
less dependent on oil. Demand Management should form the most important element of oil policy in the
future.
2. The techno‐economics of converting gas into liquid fuels for use in the transport sector should be
examined.
3. Larger investment should be made in secondary processing like Hydrocrackers,
catalytic crackers or delayed coking equipment, which would convert the heavy end products to middle
distillates.
Coal Policy
1. Planning and construction of coalmines should proceed on a steady basis without linking specific
mines to specific consumers.
2. There is a need to develop a well‐defined policy towards mechanization of coal mines taking into
account the need to increase production very quickly and with due consideration for employment and
training implications.
In doing so the changes in the share of open cast and underground mines and the optimal technology
that could be used in such mines would also deserve careful consideration.
3. There is a need to synchronize investment in coal production and coal transportation by railways with
due flexibility so that transport would not be a constraint to the use of coal.
4. The idea of washing non‐coking coal should be pursued cautiously and resorted to only where its
techno economic benefits are clearly established. The planning of thermal power stations based on
middlings should proceed in step with planning of coal washeries. There are also possibilities of using the
rejects and middling as raw material for manufacturing domestic fuels similar to soft coke.
Power Sector Policies
1. Power planning in the future should be based on the concept of an optimal mix of thermal/nuclear
and hydro stations in which the hydro stations should take the Peak and the thermal stations provide the
base load.
2. With the steeply increasing costs of power generation, it might become more remunerative to invest
in System improvements that might reduce losses in T& D, than investing in additional capacity and if
this is done, it may be possible to reduce losses still further.
3. Detailed State‐wise and region‐wise power planning studies should be undertaken. It is essential
that a long‐term transmission plan be prepared for each region, which could be executed in a phased
and systematic manner.
Rural Energy Policy
1. A comprehensive survey of all the energy needs in a village community should be carried out.
2. Pilot installations should be set‐up as early as possible for Micro‐hydel stations to be constructed in
rural areas on irrigation canals.
3. A study should be made to install community type biogas plants and the utilization of gas from
such plants for households, pumping and industrial applications should be explored.
Cost and Prices in the Energy Sector
1. The energy prices must at least reflect long‐run marginal costs and allow for a reasonable return. A
suitable institutional framework for regulating, monitoring and adjusting energy prices in a mutually
comparable manner should be set‐up.
2. A tariff schedule for electricity that distinguishes between peak and off‐peak consumption on a diurnal
and seasonal basis may be put in place. The relative
prices of different fuels should encourage the required inter‐fuel substitutions.
Research and Development in the Energy Sector
(a) Oil Sector
1. R & D efforts aimed at enhancing our exploration capability, maximization of yield from oil reservoirs
and efficient utilization in all the consuming sectors need to be encouraged. In this context, Secondary
and Tertiary recovery technologies should be developed to maximize yield from oil reservoirs.
2. The potential of Hydrogen as a substitute for liquid fuel for the transport sector should be examined.
(b) Coal sector
1. R&D activities in the areas of gasification and liquefaction of coal and their economics under Indian
conditions must be pursued.
2. R & D efforts in the field of coal combustion (e.g. fluidized bed combustion) & other technologies
should be reviewed and intensified so that these technologies are adequately developed for use in both
industrial and power sector.
3. Research on coal beneficiation for achieving better coal recovery from washeries, utilization of
rejects, etc., may be intensified.
(c) Nuclear Energy
1. R&D work for development of Fast Breeder Test Reactor (FBTR) being constructed at Kalpakkam
should be expedited.
2. Development work for fabrication of reactors based U233 with Thorium needs to be carried out.
(d) Power Sector
R&D efforts are recommended in the following areas:
1. Improvement in the methodology of load estimating and forecasting, power system planning etc.
2. Reliability of Power Systems
3. Optimisation of System Economics
4. Software development for problems in power system operation, load flow, short circuits etc.
5. Research in the problems of Integrated operation of Power Systems
6. Improvement in Po wer System protection techniques.
(e) Other Energy Technology Areas
1. R&D effort should be intensified for development of alternative technologies (Solar energy, Wind
energy & biomass) that appropriately harness these sources of energy.
2. Research on biomass should be directed towards identification of fast growing species, methods of
increasing the photosynthetic efficiency and development of
costeffective processes utilising biodegradable materials for producing fuels‐ gaseous as well as
liquids with high priority.
3. R&D to establish the feasibility of integrated systems based on solar, wind, biogas, and mini hydro
wherever available, will have to be expeditiously undertaken.
(f) Sectoral Policies/Prescriptions
(a) Transport
1. The coordination of rail and road traffic and the extent to which other less intensive modes like inland
waterways, coastal shipping etc., can be used should
be understood and encouraged.
2. Accelerated pace of electrification of the high‐density traffic trunk routes, especially those connecting
Bombay, Delhi, Calcutta and Madras deserves serious consideration.
(b) Agriculture
1. Standards of fuel efficiency have to be prescribed for electrical and diesel pumps and the
manufacturers persuaded to adopt a time bound approach of increasing the efficiency of pumps to the
level suggested in the report. Similarly in the case of diesel tractors also there is a need to prescribe fuel
efficiency standards.
2. Improve the design of the animal drawn water lift and agricultural implements, which would increase
the useful energy delivered by animal driven appliances/ implements.
(c) Household sector
1. Setting up of standards of fuel efficiency for manufacture of lighting and cooking appliances and
introduction of more efficient chulhas at subsidized rates on a large‐scale.
2. Efforts must be made to maximize the use of agricultural waste as fuel directly by burning or by
conversion into liquid/gas fuels by microbial conversion. Biogas plants capable of using more of
agricultural waste are to be developed.
(d) Industry sector
1. In many of the industries the specific energy consumption is inversely proportional to the level
of capacity utilization. Therefore, the utilization factor should be improved with special reference to
conservation of energy.
2. Co‐generation holds prospects of large energy savings in the industrial sector, as it improves the
overall thermal efficiency. Such possibilities in existing industries should be identified and pursued.
Further, for new industries the energy implications of the technology chosen need to be studied to select
the least energy intensive option, particularly with respect to the use of depleteable sources of energy
and electricity.

ANNEXURE 4

30‐Nov‐14 31‐May‐13
Intra‐ Intra‐
Bank
Power Sector Circular Debt ……. Total Bank Borrowing Bond government
Total Bond government
Settlement Borrowing
Settlement
WAPDA-Hydel 1,789 90,083 - - 90,083

NTDC 576 10,216 - - 10,216
Gencos 5,915 14,888 - - 14,888
Nuclear Plants 3,199 22,964 - - 22,964
OGDCL 4,823 4,823 56,322 - 56,322
PPL 3,156 3,156 23,363 - 23,363
PSO 154,602 154,602 81,333 33,217 48,116
Mari Gas 1,321 1,321 16,432 - - 16,432
Govt. Holding Limited 8,825 8,825 3,278 - - 3,278
SNGPL -
Total 184,206 162,581 10,146

IPPs ‐ Cash 117,192 318,879 33,217 127,801 157,861
Wind and Other 174 161,229
Total 301,572 480,109

Note:
1 ‐ Receivables and Payables of Oil and Gas companies are taken as on November 28, 2014 with the exception of SNGPL (November 26, 2014)
2 ‐ Payables of PEPCO are taken as on November 30, 2014
3 ‐ It is assumed that Government will receive entire amount from GHPL as dividend

ANNEXURE 5
PAPER ON POWER SECTOR REGULATORY ISSUES:
A WAY FORWARD
Many issues with the power sector exist on account of regulatory non‐performance. While this is not
necessarily a fault on the part of the regulator, the National Electric Power Regulatory Authority (NEPRA),
since its establishment in 1997, has been unable to perform its statutory role as the main oversight body of
the energy sector in Pakistan and the body which is tasked with provision of a conducive environment for
the development of the sector. Instead, its main function appears to be only tariff determination as opposed
to undertaking enforcement actions for regulatory non‐compliances by the power sector entities, and
encouraging competition so as to ensure the provision of the best possible services to the consumers,
despite a statutory obligation to develop standards which:
a) Protect consumers against monopolistic and oligopolistic prices;
b) Keep in view the research, development and capital investment programe costs of licensees;
c) Encourage efficiency in licensees operations and quality of service;
d) Encourage economic efficiency in the electric power industry;
e) Keep in view the economic and social policy objectives of the Federal Government; and
f) Determine tariffs so as to eliminate exploitation and minimize economic distortions.1.
Below is a tabular summary of the main issues identified as barriers to effective regulatory performance,
along with specific recommendations on how to address the issues:
1. Issue: Appointment of Chairman
The method of appointing the Chair of NEPRA is through a process of advertisement, against which a
number of resumes are received. However, very senior persons with a standing in their respective sector are
usually reluctant to apply against an advertised position unless an appointment is guaranteed. Moreover,
there is a general perception that the Supreme Court of Pakistan has imposed the requirement to advertise
for statutory positions in regulatory bodies, whereas in C.P. 59 of 2011, the court has clearly held that:
“…there is a need to devise a proper mechanism for targeting and attracting a pool of qualified potential
appointees. Randomly entertaining CVs, with or without the backing of political patrons, or seeking
nominations from arbitrarily selected consultees do not meet this requirement. The requirement can be
achieved through a number of different means, be it by open advertisement, or through the auspices of
talent scouts who have the needed expertise and who ensure confidentiality to applicants or through any
other sufficiently transparent and inclusive process2.”
Further, we have also noted that advertisement is not necessarily the most transparent mechanism of
appointments to statutory positions, as evidenced by a number of judicial decisions3,
Recommendation:
1
Section 31(2) of the Regulation of the Generation Transmission and Distribution of Electricity Act, 1997
2
Paragraph 28
3
E.g. the cases of Chairman PEMRA, Chairman PTA, and Chairman OGRA.
The GoP needs to devise a mechanism whereby the executive authority selects persons of strong standing
and repute from the energy sector through a search and selection process, whereby resumes are invited
from specific people. In order to comply with the requirement of transparency, the parameters of selection
of the appointee should be clearly documented, along with a demonstration of how the person meets the
criteria for appointment as laid down in section 3(3) of the Regulation of the Generation Transmission and
Distribution of Electricity Act, 1997 (1997 Act).
Further, in exercising greater discretion in appointments (subject to demonstrating the suitability of the
appointee) the autonomy of the Chair in decision making vis‐à‐vis political support would be substantially
strengthened – the case of the State Bank of Pakistan is an example which would merit replication in the
case of NEPRA as well.
2. Issue: Appointment of Members
The Members who are nominated from the Provinces are playing the role of mere nominees instead of
professional appointees with experience in the power sector. This is partly because NEPRA is yet to
formulate rules for prescribing the procedure for seeking nominations of members from the Provincial
Governments under section 46(2)(a) of the 1997 Act. Further, it also needs to be kept in mind that post‐18th
Amendment, with electricity and Federal Regulators having become a subject matter which requires
approvals of the Council of Common Interest (CCI) in all related policy and legislative matters4, the
requirement of provincial nomination on the regulator may no longer be required.
Recommendation:
In the short term, to address the issue of ensuring technically sound professionals in the power sector are
nominated as Members of NEPRA, the regulator should immediately develop rules under section 46(2)(a)
which lay down the qualifications against which nominations will be sought from the Provinces. However, in
the long run, in light of the provincial representation and consultation at the level of the CCI, the
requirement of provincial nominations against the position of Members should be replaced with the
requirement of appointing professional members, regardless of their domicile.
3. Issue: Length of Tenure
Section 3 of the 1997 Act envisages that the Chairman and Members will be appointed for the same length
of time, i.e. four years. This means that (despite the lag in filling the positions of Chairman and Members of
NEPRA by the GoP) when a majority of the Authority retires at the same time, it would result in lack of
continuity of policy and executive actions.
Recommendation:
The GoP should consider appointing the Chairman in tandem with the tenure of the sitting Government, up
to a maximum of 5 years. The Chairman, who is supposed to be treated as a core team member of the
Government’s economic team, would then be strengthened to effectively implement GoP power sector
4
Article 154 read with entries no. 4 and 6 of Part II of the Fourth Schedule of the Constitution of the Islamic Republic of Pakistan, 1973
policies – with the Members being appointed on a rotational basis for 3 years so as to retain a degree of
continuity across governments as well.
Such a step would serve to minimize regulatory uncertainty while at the same time allowing the GoP to
effectively exercise its right to develop and implement its policies regarding the power sector.
4. Issue: Effective Oversight
Under section 42 of the 1997 Act, NEPRA is required to submit its annual reports to the Federal Government
and the CCI. However, given that NEPRA is undertaking an executive function, and the Chairman of NEPRA is
a government employee, this will not necessarily ensure the political oversight over the performance of
executive authority as envisaged under the Constitution5.
Further, how effectively these reports are discussed or understood is questionable. In February, 2014, while
considering the reports of NEPRA the CCI directed that a diagnostic review of the organization should be
conducted in order to see why it wasn’t performing satisfactorily6. However, this was a general direction
without any specific terms of reference or areas of concerns identified, which evidences a lack of in‐depth
appreciation of the real issues.
Recommendation:
The GoP should consider making an amendment in the 1997 Act to ensure submission of the annual report
of NEPRA to the Parliament through the Federal Government. The reports should then be placed before a
parliamentary committee which may be authorized to co‐opt independent consultants to assist it in
evaluating the performance of NEPRA (if required) against annual benchmarks set by NEPRA and notified to
the Federal Government and the general public (e.g. by placing them on its website).
5. Issue: Security of Tenure
Presently NEPRA’s Chairman and Members can be removed by the Federal Government after an inquiry by
the Federal Public Service Commission7. However, we have seen in the past that Chairs of regulatory
organizations have been removed by the Courts and subsequently also investigated by Federal Investigation
Agencies, such as the National Accountability Bureau. This has happened despite a specific provision of law
stating otherwise. Moreover, the investigations conducted have examined decisions taken by the
Chair/Member which were entirely technical in nature, but which the Investigation Officer had no expertise
in. This is not to say that an inquiry by the Federal Public Service Commission would be any more technically
sound.
Such investigations in the long term will only serve to hamper strong decision making capability on the part
of the regulator and therefore they should be avoided at all costs.
Recommendation:
The law should be amended to ensure that whichever body is tasked with inquiry of the Chairman/Member
of NEPRA should include technical expertise and skill in the area in which the decision making is being
5
Article 91(6)
6
http://www.app.com.pk/en_/index.php?option=com_content&task=view&id=265570&Itemid=2
7
Section 4(2) of the 1997 Act.
questioned. Further, until and unless such inquiry points towards a criminal intent behind the decision
making, the matter should not be referred to the Investigation Agencies, and, if referred, should be
restricted to investigating the decision maker instead of investigating the entire organization so as not to
disturb the functioning of the organization.
6. Issue: Mandate of the Regulator
NEPRA, as regards its function as a regulator, is seen as doing little more than merely determining tariffs;
whereas its objectives should specifically include initiation of enforcement actions and encouraging sector
development. In fact, NEPRA seems to have abdicated the latter function almost entirely to the Federal
Government, which is presently negotiating reform programs with the international donors.
This is a serious problem, because NEPRA was put in place to undertake the task of improvement in the
energy sector with technical expertise and specialized statutory powers. Its failure to do so has given greater
authority to the Federal Government, with NEPRA conveniently shifting the blame of the state of the sector
to the Federal Government.
Recommendation:
The Government should bring about an amendment in the 1997 Act, whereby NEPRA is specifically
empowered to oversee the energy sector development. NEPRA should also be staffed with sector specialists
who perform a purely Research and Development function and put in place/recommend policies and
reforms which enhance the overall functioning of the energy sector in Pakistan.
7. Issue: Institutional Capacity
Interactions with NEPRA evidence that there is a great deal of potential and ability present in the regulator
insofar as technical knowledge, expertise and experience is concerned. Despite this, there is inefficiency in
the discharge of its functions. For example, a tariff determination takes so much time the Petitioner has to
bear a financial cost of the delay. This can be attributed to a number of factors, e.g. lack of succession
planning, weakness of decision making and under staffing.
Recommendation:
A formal HR analysis of the process flows and the work to employee ratio needs to be undertaken to identify
the specific problems resulting in organizational inefficiency. Further, a training needs assessment also
needs to be undertaken to identify the areas in which training is required, whether it be management skills
or technical skills.
For this purpose, international counterparts should also be contacted to provide assistance in identifying
areas of HR improvement – especially insofar as updating technical skills of employees is concerned.
These recommendations are based in international best practices, and are simple yet effective methods of
bringing about a change in regulatory performance. The Government of Pakistan and NEPRA need to give
serious thought to bringing about these changes as acknowledgment of these shortcomings will only serve
the national interest.
ANNEXURE 6
Coal is the cheapest, most abundant
yet least understood and overly mystified energy resource
of Pakistan.
Understanding
Thar Coal
Presented by:
Zahoor A. Abbasi
Delta Engineering – Tetra Tech Group
8736 Production Avenue
San Diego, California. USA
August 2013
The Author of this report is a United States based Geotechnical Engineer with first hand experience
of working on Groundwater and Coal resources in Thar and can be contacted for any questions via
email: abbasi.tetratech@gmail.com
Understanding Thar Coal
Project Overview
Much has been talked about Thar Coal. Provincial and Federal Governments have
fought over its ownership, created numerous organizations along the way without a
clear vision. Lack of strategic policy guidelines has resulted in a series of very costly
ad-hoc decisions in the past 20 years. Current energy crises has created a renewed
interest for including Thar Coal in the energy mix, especially due to declining natural
gas production and the skyrocketing imported Oil prices.
Govt. of Sindh’s efforts for Development of Thar Coal have included creating a
Private/Public sector partnership with Engro, signing MOU’s with various investors
and massively funding the experimental and dangerously destructive technology of
underground Coal Gasification (UCG) which has the potential to endanger the entire
Thar coal resource. These efforts by the GOS, however well intentioned, have not
worked due to lack of professional capacity within the system for understanding the
fundamentals associated with a project of this kind and scope.
Past few years have seen a flurry of activity, tall claims of energy production have
been made by all and sundry, however, after spending billions we are no closer to
creating energy from Thar Coal today than we were 20 years ago, we may even be a
few steps behind due to confusion created by numerous ad hoc, counterproductive
and contradictory decisions which are costing the nation both ways.
Thar coal has created a financial windfall and a bonanza for consultants, contractors
and opportunists who are clearly controlling the agenda. Due to energy shortage in
Pakistan the economy is suffering and there is social unrest. Thar Coal obviously
holds the key; it is the most viable and the cheapest source of thermal energy in
Pakistan at $2 per Mmbtu (Million British Thermal Units) as compared with LNG @
$16 per Mmbtu and Furnace Oil @ over $22 per Mmbtu.
Thar Coal is a very complex mega project involving multiple aspects which require a
clear vision, a comprehensive understanding of all aspects and integrated approach,
which is missing in this case. Development initiatives currently within the project are
haphazard, primarily self interest driven, each narrowly focused on achieving its own
objective, meandering in its own individual direction and lacking strategic coherence
with each other. These initiatives are often contradictory and negate each other. The
most glaring example is simultaneous pursuit of two entirely different and mutually
destructive methodologies i.e. Open Pit Mining and Underground Coal Gasification.
There is a serious technical conflict between underground coal gasification and open
pit mining; they cannot co-exist side by side without one destroying the other.
The most important aspect of project planning is to have an overarching strategy

which dictates the tactical initiatives needed to achieve the strategic objective, in the
case of Thar Coal; it has been the opposite, much like the tail wagging the dog.
Discussion:
“A Strategic Development Plan” for Thar Coal can be formulated within weeks as all
required information is available with the GOS; another multimillion dollar study will
not be needed. In order to achieve this objective a comprehensive understanding of
all the administrative and technical challenges impeding development of Thar Coal is
very important. The purpose of the foregoing discussion is to highlight some of these
issues and provide suggestions from a professional perspective.
Administrative
 Thar Coal Energy Board (TCEB), a toothless, functionless organization needs

to be empowered by making it an independent statutory body.
 TCEB should be reconstituted as a fully autonomous body with a full time non
executive Chairman as in the case of SNGPL, SSGC, PSO, OGDC etc, with
60% board members from private sector and 40% nominated by Government.
 CEO should be designated as a 4 year tenure post in order to protect against
undue political and administrative pressure and be appointed by the Board.
 All matters related to Thar Coal should be solely assigned to TCEB.
 Project management should be professionalized with qualified professionals
selected strictly on merit and market based emoluments. Merit based culture
should be put in place, with no political appointments.
This paradigm shift can form the base to build upon for the developmental aspect of
the entire Thar Coal project.
Granted, there are unresolved federal government related issues such as the lack of
an electricity evacuation grid system for mine mouth power generation and the foot
dragging by NTDC, coal based tariff determination by NEPRA etc. These reasons
are cited for failure of the Thar project from taking off. Blame game however should
not be used to justify failure because simple solutions do exist; failure to grasp and
implement these solutions is mainly due to lack of professional capacity within the
organizations responsible for Thar Coal development, additionally, confusion created
by proliferation of myths regarding Thar Coal are yet another reason for not being
able to grasp the simple solutions, not only have these false myths been allowed to
proliferate unresponded, new myths have been created by the very people who are
supposed to find solutions.
Thar Coal - Myths versus Facts.
These myths and misrepresentations about Thar Coal have been spread by people
with no professional knowledge or experience. Blatant untruths have been presented
as scientific facts on TV talk Shows and news paper articles; these have created a
lot of confusion and contributed to delay in implementation of the Thar Coal project.
Professional responses provided herein are intended to put these myths to rest.
Myth # 1: Thar coal is lignite and therefore is of poor quality and is useless.
Facts: Coal ranking is based on age; these classifications range from the oldest to
the youngest formation (1) Anthracite (2) Bituminous (3) Sub Bituminous (4) Lignite.
Coal deposits in Thar are in fact lignite, the quality is equal to or better than some of
the lignite found in Europe. Globally 1 Billion tons of lignite are mined annually and
used for power generation and other beneficial applications including conversion to
Lignite Coke used as filtering material in the Oil & Gas industry and water treatment
plants including Coal fired power plants which use recycled water.
Myth # 2: Thar Coal reserves are not sufficient.
Facts: Nearly 500 bore holes have been drilled and sampled in Thar coalfield area,
a twelve block area has been quite extensively investigated by international and local
firms, the proven reserves average around 2 billion tons/block, coal reserves in each
of these blocks can potentially support a 4000 Megawatt power plant for 100 years.
Since these 12 blocks represent only a small fraction of Thar coalfield, there is no
doubt about the sufficiency of coal reserves.
Myth # 3: Thar Coal has high Sulpher content.
Facts: Sulpher content of Thar coal is around 2% which is considered reasonably

low by industry standards, for example, in the United States where environmental
protection is enforced stringently, coal from the eastern states of Ohio, Pennsylvania
etc. containing 7% Sulpher has been widely used for power generation. Furthermore,
Sulpher content has become irrelevant. In order to meet international environmental
standards modern coal fired power plants are equipped with desulphurization units,
therefore from an environmental perspective this is a non issue.
Desulphurization is achieved by scrubbing flue gases with limestone downstream of

the combustion chamber (Boiler), this method of desulphurization generates Gypsum
as a marketable byproduct. In case of Thar, nearest source of abundant limestone is
Jamshoro, typical Thar Coal based 1000 Megawatt power plant consuming 6 million
tons coal/year will generate approximately 350,000 tons of marketable Gypsum.
Myth # 4: Thar Coal is not transportable and will self combust if transported,
therefore the only option is to have mine mouth power generation.
Facts: Thar coal does not combust spontaneously; the author of this report has
actual samples from Thar Coal obtained from the 1990’s drilling work done by USGS
and John Boyd & Co. performed under USAID contract # 391–0494-C-00-0540-00.
Samples have not combusted in over 20 years. However, coal is a hydrocarbon fuel,
improper bulk storage and transportation can create conditions conducive to creating
coal fires, necessary precautions will need to be taken in order to ensure fire safety,
as per practices normal to the coal producing industry.
Myth # 5: Moisture in Thar Coal is too high; it can’t be used for power generation.
Facts: Thar Coal is Lignite; a major portion of global production of over one Billion
tons/ year of lignite is used for power generation because it is the best economic use
of this particular hydrocarbon natural resource, any lignite coal found anywhere on
this planet contains high moisture content, creation of water is a natural occurrence
of the coalification process, younger coal formations such as lignite contain more
moisture than the older formations of Sub-Bituminous, Bituminous and Anthracite
coal, moving forward in the hydrocarbon fuel chain to Natural Gas and Oil, even they
contain certain levels of moisture that need to be brought down to levels acceptable
for the intended use, in the case of lignite coal as a feedstock for power generation it
is a standard operating practice in coal based power industry to dry the lignite before
feeding it into the boilers and in order to obtain maximum thermal efficiency coal fired
power plants are equipped with coal drying and moisture recovery units.
High moisture content of Thar Coal is an asset and not a liability as being perceived.
Thar Desert is arid; importing water into Thar will be technically challenging and very
expensive undertaking. 1000 Megawatt power plant using Thar lignite will require 6
million tons/year lignite as mined, also referred to as “Run of Mine” (ROM) lignite,
moisture content of Thar lignite averages around 50%, with a calorific (heating) value
of 5000 btu/lb, drying will reduce this moisture and provide the following benefits:
 Heating value of coal will be doubled from 5000 btu/lb 10,000 btu/lb.
 Coal (feedstock) handling costs will be reduced by 40%.
 Boiler sizes will be optimized.
Power Plants which recycle and reuse the same water are considered ideal for arid
environments. Selection of such Power Plants will also eliminate the need for large
volumes of waste water disposal (saving significant costs), as it will generate only
3% to 5% waste water compared with Open Cooling Cycle Plants. Make up water
requirements for 1000 Megawatt power plant, using recycled water will be 1.7 million
tons annually. Moisture recovery from lignite itself will yield more than 2 million tons
of water annually which will not only meet the power plant requirements but have
surplus for other uses, eliminating the need for importing water into the desert.
Myth # 6: Power Plants in Thar will require water to be imported from the Indus
River system to the extent of 300 cusecs per each 2000 MW power plant.
Facts: This bottleneck is self created, Indus water is not needed. Water needs of the
entire project can be met from available local resources, conclusively demonstrated
by the Govt’s International Consultant, Rheinbraun Wasser Engineering /RWE in a
report dated December 2004, prepared at a cost of US$ 4 Million, in which bringing
water from Indus has been ruled out (page 72), instead a cost effective alternative of
extracting water from the coal itself has been recommended, in 2004 senior officials
from GOS visited power generation plants in Germany to observe these operations
first hand and agreed with the benefits of this concept. Ignoring the advice of their
own Consultant, Government of Sindh has committed itself to providing 300 cusecs
water at public expense from the Indus River system to one licensee. The flagship
US$ 4 Billion Sindh/Engro joint venture project in block II hinges on this commitment,
in fact this very project has been set back by many years on account of yet another
ad-hoc decision. Reasons for this policy shift are inexplicable.
Since all major project planning efforts are geared towards achieving specific goals,
which is presumably the Govt of Sindh’s declared intent to develop 10 blocks of Thar
Coalfield for production of 20,000 MW of electricity by the year 2030. Under this
paradigm, cumulative water demand for 10 blocks would be 3000 cusecs. There is a
chronic water shortage in Sindh; where will it come from? Assuming that somehow
this additional water does become available, the next challenge is to get it to the
coalfield. Due to topographic constraints, conventional gravity driven channel flow of
water to the coal project is not possible, costly upslope pumping would be required.
Thar coal project is located near Islamkot in the Desert, which is outside the Sukkur
Barrage irrigation Command; the nearest source of Indus water will be distribution
complexes and branches related to Nara Canal which draws water from Sukkur
Barrage. Due to siltation of the Canals and degradation of the 80 year old regulatory
system, additional water carrying capacity of the entire Nara Canal command stands
significantly diminished.
In order to meet agriculture demands these canals are forced to carry water beyond
their current capacities and will not be able to handle additional 3000 cusecs of water
for Thar coal project without a total overhaul and remodeling of their entire regulatory
systems. This will be a massive undertaking costing Billions of Dollars and at least
20 years. Government of Sindh does not have the financial resources for this nor can
it afford to wait another 20 years for power generation from Thar Coal.
A recently completed study by GOS estimates providing a mere 100 cusecs of water,
in the first phase from Nara canal’s Farash regulator at a staggering capital cost of
Rupees 27 Billion (operational costs of pumping not included). Costs for second
phase of providing additional 200 cusecs of water are not yet published; however,
total costs for the entire 300 cusecs are estimated to likely exceed Rs.100 Billion.
100 cusec (Phase 1) -Thar Coal, Water Carrier Project.

S.No. Description Length
1 Construction Stone pitching Re-aligned Nara canal RD 0 to 105 21 Miles
2 Construction CC lining Makhi Farash Canal from RD 105 to RD305 40 Miles
Construction of 100 cusec CC lined channel from Farash regulator

3 42.8 Miles
to Nabisar through Dhoro escape
Two Pressure pumping pipe lines of 4ft Diameter, each 50 cusec
4 62 Miles
capacity (one for auxiliary support)
5 Major reservoir (Nabisar & Vajhiyar) 0.16 MAF
6 Intermediate Reservoir 4 Nos
7 Pumping Station 5 Nos

(Source: GOS Department of Coal and Energy)
Transporting the additional 200 cusecs in Phase 2 will require water to be pumped
upslope through 4 additional pipelines, construction of numerous other canals and
reservoirs, and operating numerous other large scale pumping stations in the middle
of the desert with logistical problems such as equipment breakdowns, spare parts,
fuel availability, staff and O&M funding shortages typically experienced by projects in
Sindh. Water supply from Indus River will be cumbersome, expensive, and unreliable
with high potential of operational failure, the province of Sindh has a long history and
experience with operationally failed or stalled mega projects.
This is cost of water for Block II only, what about the rest of the Thar coalfield?
Bringing Indus River water for Thar Coal based power plants is neither economically
nor practically viable. However, a viable, technically superior alternative is available,
which would be to utilize the available underground water resources in Thar and/or
recover excess moisture from the coal itself, a proven concept being practiced in
many European coal mines and power production facilities.
Since simple solutions regarding Thar Coal seem to evade everyone another ad-hoc
and ill-conceived project is already in the works, which is: Purify LBOD (Left Bank
Outfall Drain) water, pump it upslope to Thar coalfield. This concept is nothing short
of an absurd waste of resources. A multimillion dollar study is not needed in order to
recognize that LBOD is a “drain” the sole purpose of which is to transport “effluent”
from upcountry and drain it into the ocean, it is not a fresh water channel, information
already available with WAPDA indicates that during non rainy season (10 months of
the year), salt concentrations can be as high as 20,000 PPM and LBOD water is also
contaminated with chemicals from fertilizers and pesticides. Millions have been spent
on this project and additional billions will be wasted before another ill conceived idea
is invented and the saga of Thar coal will continue to go on and on, unless there is a
paradigm shift and a complete professionalization of the project is initiated.
Open Pit Mining in Thar:
Open pit mining, a tried and tested method being used throughout the world for more
than 150 years is the most viable option for coal in Thar; it is basically a large scale
earth moving operation which entails removing the soil and rock material that sits
atop the coal seams (“Overburden”) in order to gain access to the coal which is
accomplished by heavy earth moving machinery such as Bulldozers, Scrapers, high
capacity Shovels, Trucks and/or Bucket Wheel Excavators, some of which are used
in various combinations as the site conditions demand. 3 blocks in Thar have been
licensed for open pit mining to the following companies:
Global Mining – Block I (Bankable Feasibility completed in 2004 - US$4 Million)

Engro – Block II. (Bankable Feasibility completed in 2010 - US$6 Million)
Oracle Coalfields PLC – Block VI. (Progress not published)
Preliminary Design - Thar Coal Open Pit Mine

Typical earth moving equipment used in open pit mining:
This 3 storey high Hydraulic Shovel This heavy duty Dump Truck can haul 400 tons of
excavates 9000 tons of earth in 1 hour. earth per each trip.
Groundwater:
Thar coal seams occur between 450 feet to 650 feet depth, there are 3 ground water
aquifers. The upper 2 aquifers are intermittent and not considered to be significant
however, the lowest aquifer containing 90% of the groundwater which is estimated to
be spread over an area of approximately 15000 square kilometers with water column
depths of several hundred feet. This aquifer is highly pressurized; dewatering and
depressurizing of this aquifer will be needed for creating safe mining conditions.
Source: GOS, Sindh Coal Authority
A state of the art mathematical model, simulating Thar coal area ground water
conditions was employed by Rheinbraun Engineering (RWE). This same modeling
method has been used successfully in European open pit mines. The model predicts
that 35 million cubic meters/year of water can be expected to be pumped in order to
dewater each mine. The dewatering is anticipated to last for the entire 40 year life of
each mine, although pumped water volumes are expected to decrease in later years
of mining operations. Future development of 10 mines will cumulatively generate 350
million cubic meters/year of pumped groundwater.
Groundwater in Thar Desert is as precious a natural resource as the Coal itself, the
predominant aquifer containing 90% water indicates 4500 – 6500 (PPM) parts/million
total dissolved salts (TDS), (Sindh/Engro Block II report, 2010) compared to sea
water which has 35,000 Parts Per Million TDS. This “Brackish” water can be used
“as is” for growing salt tolerant plants or treated and used for cultivation of high value
crops such as fruits and vegetables. Groundwater produced by coal mines in Thar
can cultivate thousands of acres of land and support livestock industry which is well
suited for the lifestyle of local Thari people. Downstream economic benefits from
beneficial use of groundwater are immeasurable in terms of job growth, poverty
alleviation, improved food security and price stability due to increased food
production and transportation through the existing road network in Thar.
Mindset of entities dealing with Thar Coal is dispensed towards considering Thar
groundwater as waste water “effluent” which needs to be disposed off; costly plans
are already in the works. This mindset needs to be changed; Thar groundwater is a
precious natural resource and definitely not “effluent” disposing it as such would be a
monumental and a historic mistake which Sindh and its people will surely regret in
the coming years, furthermore, contaminating this drinking water source for people of
Thar with deadly cancer causing toxins from Underground Coal Gasification (UCG)
projects planned for Blocks III & V will be a catastrophe and a genocide against the
people of Thar.
Ironically, on the one hand policies are formulated for undertaking the difficult task of
importing an extremely expensive and unreliable supply of Indus River water for use
in open cooling cycle plants, which in turn will effectively convert this same water into
contaminated “effluent” which will then have to be disposed off in accordance with
internationally acceptable environmental practices, at a huge additional cost. Simply
stated, we will first spend Billions to help create a problem and subsequently spend
Trillions to solve this problem. On the other hand, a simple policy paradigm shift of
utilizing the indigenous water resource and selecting a suitable power plant design
would save costs and years in terms of time for development of the Thar Coal
resource, besides saving the lives of thousands of Thari people.
Beneficial Use of Thar groundwater:
Beneficial use of groundwater pumped by Thar coal licensees to achieve their mining
goals is essential and doable, it will be in their own best interests to create robust
community relationships with local land owners whose land they intend to tear up for
open pit mining of Coal, not all the land falling in their license area belongs to the
GOS, there are private owners, these licensees have obtained mineral rights for coal
and not “fee” ownership of land either by GOS fiat or usurpation of legal rights of the
holders of title to that land.
The decision makers must convince or even mandate that all groundwater extracted
from each coal lease in Thar will be treated, desalinized and given back to the local
people for their use in growing high value crops such as fruits, vegetables etc, based
on modern techniques of “green housing” or drip irrigation systems. Similar type of
corporate responsibility is practiced by other international firms doing business in
Pakistan, including British Petroleum, BHP Billiton, ENI, Shell and other companies
working in the oil & Gas sector. They take care of the local people and they are
better off for it. Cost of this community based initiative will be miniscule compared to
cost of disposal of billions of gallons of otherwise useable water which some ignorant
soul in the system has chosen to categorize as waste water “effluent”. Companies
hoping to work on Thar coal need to be made aware that as much as Pakistan needs
the energy, this need cannot be used as a basis for exploitation. Their desire to save
a few million dollars by installing power generation plants employing cooling systems
requiring huge quantities of water for one time use needs to be discouraged and the
need for installing plants that recycle and reuse water (a worldwide practice) needs
to be emphasized.
Power Plant water treatment system
Lignite Coke bed
Lignite Coke Bed
Thar Coal – A Potential Natural Gas Resource:
Massive amounts of groundwater will need to be pumped in order to dewater and

depressurize the aquifers, with proper planning; mine operators and the GOS can
realize windfall profits by recovering/harvesting Methane (natural gas) which will be
released upon depressurization of the coal seams. United States Geologic Survey
(USGS) sources quoted by Cathy Oil and Gas (a Canadian E&P Company) estimate
that Thar Coal deposits may contain over 21 Trillion cubic feet (TCF) of recoverable
natural gas with a production potential of nearly 1 Billion Cubic feet/day (GOS needs
to undertake confirmatory studies). Coal deposits of Thar are the western extension
of coal found in the Cambay and Barmer coalfields in neighboring India, where a
robust natural gas recovery program has been initiated. In the United States over 4
billion cubic feet per day (BCFD) are recovered from just 2 coal basins (amongst
many others), the Powder River coal basin in Montana and Wyoming and San Juan
basin in New Mexico and Colorado. British Petroleum which has a sizable presence
in Pakistan, operating the Badin oil and gas field also have 30 years of experience of
harvesting 650 MMCFD of natural Gas (coal based Methane). British Petroleum can
assist GOS in transfer of technology regarding CBM extraction.
The dual concepts of harnessing Coal energy by (a) Recovering/harvesting Coalbed

Methane (CBM), which is essentially Natural Gas in its purest form (pipeline quality
gas) and (b) Mining out the Coal to serve as a thermal energy resource for power
generation and other uses, are mutually inclusive. Technical processes involved in
both of these concepts compliment and support each other, for example, recovery of
natural gas from coal requires dewatering and depressurizing of the coal seams,
which helps the mining process and results in cost savings for both. Underground
Coal Gasification (UCG) process on the other hand, works at cross purposes with
both CBM as well as conventional Coal mining in Thar.
Underground Coal Gasification (UCG):
Without any technical evaluation of the extremely destructive consequences of UCG

upon the groundwater, which is a drinking water resource for the local people of Thar
and the fire hazard UCG poses for other open pit mines, Block V was licensed for
UCG as a Govt. funded project, while Block III was licensed to Cougar Energy, this
company’s UCG pilot project in Kingroy, Queensland has been shut down due to
groundwater pollution caused during the test burn and the company is subjected to
many UCG related groundwater pollution lawsuits in Queensland, Australia.
UCG is an untried experimental concept with no commercial application anywhere in

the world. UCG is suggested for coal deposits which are “stranded”, “deep” “under
the oceans” which are considered otherwise “un-minable” and are located at a safe
distance from any drinking water resource. Thar Coal deposit does not fall within this
category or criteria. It is easily minable coal and is surrounded by a significant
amount of drinking and agricultural use water resource.
Questions that remain unanswered regarding UCG projects in Thar are:
1. How will the underground coal fires created by the UCG operations be controlled
from spreading into adjacent open pit coal mines?
2. What toxic contaminants will UCG introduce into Thar groundwater?
3. Is there a groundwater quality assurance and monitoring plan?
4. What will be quantum and toxicity of gases released into the atmosphere by the
UCG process? What about Sulpher Dioxide which causes Acid rain?
5. Is there an environmental assessment done for the UCG projects?
6. What is the total thermal efficiency of the entire UCG process, in other words how
much coal will be burnt per unit of thermal energy produced and what heat losses
will be incurred underground?
7. What will be the Mmbtu (Million British Thermal Units) cost of energy from UCG?
8. Is there any professional analysis and technical data supporting the cost of
electricity production at Rs.3- 4/Kwh and millions of barrels of cheap diesel?
Open pit mining done side by side with UCG creating fires within the same coal
seams is a recipe for disaster, dewatering required for coal mining will allow air
intrusion into the coal seam fractures. Underground coal fires from the UCG projects
will migrate in the direction of the air (oxygen) source, i.e. sidewalls & floors of the
adjacent open pit mines, causing massive coal fires and near total destruction of
their entire mining and power generation facilities. UCG poses a grave threat to the
entire Thar Coal enterprise. This dangerous experimental concept is being massively
funded, legitimized and promoted based on vague and unsubstantiated promises of
thousands of megawatts of cheap electricity and millions of barrels of cheap Diesel.
A feat that even the most technologically advanced countries in the world have been
unable achieve from Underground Coal Gasification. UGG proponents are confusing
the public by comparing Thar UCG project in block V, with South Africa’s Coal
Gasification and Fischer–Tropsch Synthesis Gas to Liquid (GTL) conversion success
story, which is a completely different concept; it is an outright scientific deception to
imply that Thar UCG project will replicate the same successes. Coal gasification and
conversion to diesel is a sophisticated process and achieved after coal has already
been mined out and not while it is still in the ground.
Simply Stated, UCG projects in Thar will not only contaminate the groundwater but
will also create conditions conducive for destruction of the Sindh/Engro, $4 Billion
and other mining projects next door, in fact both the UCG and the mining projects
along with a part of the coal reserve itself can stand destroyed. Thar Coal is much
too valuable a national energy resource to be put at risk like this.
The very same hydrostatic pressure that is needed to be removed by dewatering for
Coal mining is necessarily needed to be retained in the ground in order to contain
and control the UCG’s coal burn from spreading into the adjacent mines. This
technical conflict can force a complete shutdown of mining and power
generation activity in Thar coalfield.
All UCG operations in Thar coalfield area must be stopped in order to prevent the
potential of uncontrollable spread of the underground coal burn/fire from reaching the
nearby mines and for preventing deadly toxins such as Benzene, Toluene etc,
normally created by the UCG process, from entering the groundwater. Clear and
unambiguous environmental policy must be formulated to ensure that groundwater is
protected from contamination during the mining operations, a rigorous groundwater
quality assurance regime and effective monitoring program must be established.
Visualize this scenario: Can this happen? – YES it can.
Fire
Fire
Global
Genuine Bottlenecks for development of Thar Coal:
Power Evacuation Grid.
Lack of an evacuation grid is a genuine bottleneck which is impeding development of

Thar Coal. No private sector entity holding a coal lease in Thar is going to start any
operation without being assured that they can evacuate the electricity.
A). Mine Mouth Power Production.
GOS through Sindh Board of Investment can create a public private partnership or a
consortium to finance a transmission line, on Build, Own and Operate (BOO) basis
from Islamkot to the main grid and recover the investment from the DISCO’S or
WAPDA (the end buyer) or the Thar IPP’s if they can build it into their tariff. This
issue is of prime importance for development of Thar Coal, GOS will have to take the
lead in sorting out this issue one way or another for this scenario to work.
B). Mining and Power Production – Uncoupled.
Based on the unfounded belief/myth that coal from Thar cannot be transported, the
decision makers have focused on mine mouth power generation which of course has
depended on NTDC to provide a transmission line from the coalfield to the main grid,
which has not happened therefore has delayed progress on Thar Coal. Separating
coal mining from power generation is an alternative which merits serious attention. In
this scenario the power plants can be located in Jamshoro which has direct access
to the high tension distribution grid. Coal which is mined in Thar can be transported
by road; this however, would require major improvements and constant maintenance
of the existing road network, which could become cumbersome. Road transportation
would add another approximately $ 8/ton to the cost of coal. Alternatively, a rail link
between the coalfield and Hyderabad could prove to be easier and economical.
Construction of a new railway line

from Islamkot/coalfield to Chhor,
on the existing Mirpurkhas to
Munabao broad line will provide
linkage to Jamshoro, Hyderabad,
Karachi and up country and will
New Rail line enable Thar coal to be shipped
60 miles economically to the entire country
Islamkot for generation plants anywhere in
Pakistan and create additional
revenue for Pakistan Railways.
This can also be financed on BOO
basis like the transmission grid.
Conclusions Summarized:
Thar Coal is a destiny changing project for Pakistan, a project of this magnitude and
importance requires a multi dimensional strategic approach, this can only be done by
completely professionalizing the project and it is doable provided:
 Thar Coal Energy Board is allowed to be independent and is professionalized.
 Thar Coal resource can only be developed by the private sector, facilitated by the
government. Both GOS and Industry must understand issues and work together
sincerely for this project to work for their mutually beneficial advantage.
 All activity on UCG projects in Thar must be stopped as it is a very expensive

counterproductive initiative which will cause serious problems for open pit mining
as well as severely contaminating a drinking water resource of Thar.
 Potential for harvesting/recovering coal based methane (natural gas) should be

seriously evaluated as an additional windfall for GOS and mine operators.
 Thar Coal Licensees must be taken into confidence that the power plants have to
use recycled water (a worldwide practice) and will therefore have to rely on
indigenous water resources. It isn’t practically or financially viable to import water
or dispose large quantities of contaminated water created by plants using cooling
systems which require huge quantities of water, for one time use only.
 Beneficial use of Thar groundwater will create tremendous economic benefits for
the local population and also benefit the IPP’s by creating goodwill in the
community particularly in land use and compensation matters, this issue must be
emphasized upon Thar coal Licensees.
 Work on the transmission line and rail link should be started simultaneously and
immediately, this will widen the market for the investors in Thar Coal, who are
leery about circular debt and court related problems of the IPP’s. Construction of
the rail link will lure investors who are only interested in mining and not in power
generation besides allowing power plants to be built elsewhere in the country.
 Private sector is driven by profits. Cost of coal generated from open pit mining in
Thar is calculated at US $ 37/ton, with international prices of coal between $80 to
100/ton for coal of equal standard (Thar Coal dried to 10% moisture content –
calorific value over 10,000 btu/lb).
 Pakistani private sector will capitalize on this economic opportunity. Market for
coal exists in the cement, steel, ceramic and other industries that need thermal
energy for making their products. Once the coal becomes available, that too at an
extremely low cost of less than $2 per Mmbtu, as compared to furnace oil @ $22
and LNG @ $18 per Mmbtu respectively. Market forces will take over and power
generation from it will follow, it is basic economics.
ANNEXURE 7
CONVERSION TABLE
UNIT CONVERSIONS
Tonne Barrel Tonne Tonne MWh MWh
Million M cft Tonne Crude Crude Local Imported Primary Final

Oil Oil Coal Coal Electricity Electricity
1 Million
1 1.02 0.025 0.024 0.178 0.053 0.036 0.100 0.293
Btu=
1 MM cft
Pipeline 980 1,000 24.024 23.392 174.363 0.052 0.036 0.098 0.287
Gas=
1 tonne 40.792 41.62 1 0.974 7.258 2.176 1.480 4.079 11.955
FO=
1 tonne
Crude 41.895 42.75 1.027 1 7.454 2.235 1.520 4.190 12.279
Oil=
1 Barrel
Crude 5.620 5.74 0.138 0.134 1 0.300 0.204 0.562 1.647
Oil=
1 Tonne
Local 18.74 19.13 0.460 0.447 3.335 1 0.680 1.874 5.494
Coal=
1 Tonne
Imported 27.56 28.13 0.676 0.658 4.904 1.471 1 2.756 8.079
Coal=
1 MWh
Primary 10.0 10.20 0.245 0.239 1.779 0.534 0.363 1 2.931
Elect.=
1 MWh
Final 3.412 3.48 0.084 0.081 0.607 0.182 0.124 0.341 1
Elect.=

ANNEXURE 8

GROSS CALORIFIC VALUES

Million Btu Giga Joule
TOE/ MMCFT
Gas Per MMCFT Per MMCFT
Sui Standard Natural Gas 980 1033.9 23.4
Badin & Condensates Average 1,047 1104.6 25.0

TOE/ Tonne
Oil Per Tonne Per Tonne
Indigenous Crude Oil 41.895 44.20 1.0000
Imported Crude Oil 43.313 45.7 1.0338
Avgas 43.659 46.1 1.0421
JP‐1 43.218 45.6 1.0316
JP‐4 44.144 46.6 1.0537
Motor Spirit 44.761 47.2 1.0684
HOBC 44.541 47.0 1.0632
HSD 44.045 46.5 1.0513
LDO 43.648 46.0 1.0418
Furnance Oil 40.792 43.0 0.9737
Kerosene 43.218 45.6 1.0316
Neptha 44.761 47.2 1.0684
LPG 45.326 47.8 1.0819
MTBE 34.128 36.0 0.8146

TOE/ GWh
Electricity Per GWh Per GWh
As Primary Energy input for Hydro/Nuclear 10,000 10,550 238.69
As Final Energy 3,412 3,600 81.44

Million Btu Giga Joule TOE/ Tonne
Coal Per Tonne Per Tonne
Indigenous 18.74 19.8 0.4474
Imported 27.56 29.1 0.6579


Integrated Energy Plan 2015

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Integrated Energy Plan 2015

Încărcat de

Drepturi de autor:

Formate disponibile

Source: Pakistan Energy Year book

Source: Pakistan Energy Yearbook

2025 Proposed Energy Mix

Losses Saving if Saving if

Natural Gas 12.2 4 8.2 2.6 1.2

Power Sector 21.7 7 14.7 1.1 0.5

Natural Gas Nuclear Renewables Hydro Coal Oil

Consumers: 6.7 Million (1.6 million)

GAS FIELD (156)

SSGC LINES (44,887)

SNGPL LINES (94,915)

DOMINION HOPE USA 7.20%

GREENLIGHT GAS USA 7.08%

ENVESTRA Australia 13.20%

ALLGAS Australia 5.50%

OKATO (POWERCO) New Zealand 9.35%

PAEKAKARIKI New Zealand 8.83%

Pakistan Natural Gas Supply Demand Forecast

1st LNG in 2014/15: 3.3 MMTPA (400MMCFD)

IPI 2018 & TAPI 2020

4000 Anticipated from

0 Years 2007 2015 2017 2018 2024

PRL, 11% BYCO, 38%

Source: Pakistan Energy Year book

Pakistan Power Demand and Supply Projections

25000 Wind 700 MW

Thar Coal will provide Pakistan Long term energy security

Major WTG Suppliers are product suppliers:

Wind Turbines WTG S/S Collection System Main Substation

WTG 1 Busbar A: 20kV / 132kV

Civil Works Surge Arrester

Foundations: 01/turbine Roads: 10 - 15km/50MW Project

WAPDA-Hydel 1,789 90,083 - - 90,083

Total 184,206 162,581 10,146

Total 301,572 480,109

The most important aspect of project planning is to have an overarching strategy

 Thar Coal Energy Board (TCEB), a toothless, functionless organization needs

Thar Coal - Myths versus Facts.

Myth # 2: Thar Coal reserves are not sufficient.

Facts: Sulpher content of Thar coal is around 2% which is considered reasonably

Desulphurization is achieved by scrubbing flue gases with limestone downstream of

100 cusec (Phase 1) -Thar Coal, Water Carrier Project.

1 Construction Stone pitching Re-aligned Nara canal RD 0 to 105 21 Miles

2 Construction CC lining Makhi Farash Canal from RD 105 to RD305 40 Miles

Construction of 100 cusec CC lined channel from Farash regulator

6 Intermediate Reservoir 4 Nos

7 Pumping Station 5 Nos

Open Pit Mining in Thar:

Global Mining – Block I (Bankable Feasibility completed in 2004 - US$4 Million)

Preliminary Design - Thar Coal Open Pit Mine

Source: GOS, Sindh Coal Authority

Beneficial Use of Thar groundwater:

Lignite Coke bed

Lignite Coke Bed

Thar Coal – A Potential Natural Gas Resource:

Massive amounts of groundwater will need to be pumped in order to dewater and

The dual concepts of harnessing Coal energy by (a) Recovering/harvesting Coalbed

Without any technical evaluation of the extremely destructive consequences of UCG

UCG is an untried experimental concept with no commercial application anywhere in

Questions that remain unanswered regarding UCG projects in Thar are:

Visualize this scenario: Can this happen? – YES it can.

Power Evacuation Grid.

Lack of an evacuation grid is a genuine bottleneck which is impeding development of

A). Mine Mouth Power Production.