Energy Supply & Demand Situation in Pakistan

By Mr. F a r k h a n d I q b a l

Oil
Energy Supply & Demand Situation in Pakistan Oil Pakistan is currently producing around 64,000 bbl/d. Pakistan has ambitious plans to increase its current output to 100,000 bbl/d by 2010. According to the Oil and Gas Journal (OGJ), Pakistan had 28.8 million barrels of proven conventional oil reserves as of January 1, 2005. Consumption of petroleum products is estimated at 351.4 thousand bbl/d. While there is no prospect for Pakistan to reach self sufficiency in oil, the government has encouraged private (including foreign) firms to develop domestic production capacity. Pakistan Petroleum Limited (PPL) has expanded its interests by drilling offshore at the Pasni field. Pakistani domestic oil production centers are concentrated in the Potwar Plateau of Punjab and lower Sindh province. Refining/Downstream Refining/Downstream Pakistan's net oil imports are projected to rise substantially in coming years as demand growth outpaces increases in production. Demand for refined petroleum products also greatly exceeds domestic oil refining capacity, so nearly half of Pakistani imports are refined products. Pakistan's Pak-Arab Refinery (PARCO) became operational in late 2000, adding to the country's refining capacity and helping to alleviate refined product import dependence. The PARCO Mid Country Refinery (MRC) at Mahmood Kot is Pakistans largest oil refinery. It was formally commissioned in 2001 and has capacity of 100,000 bbl/d of throughput (mostly crude oil from Abu Dhabi and Light Arabian Crude from Saudi Arabia), supplied to the plant by pipeline from Karachi. A small, 30,000-bbl/d refinery operated by private Bosicor Pakistan Limited (BPL) near Karachi, began commercial operation in November 2003. The plant is supplied with shipments of crude oil from Qatar. The Bosicor plant will allow Pakistan to become a new supplier of naptha to Far Eastern markets. Naptha makes up approximately 9 percent of the plant's output. The plant produces about 10,800 bbl/d of fuel oil, 6,980 bbl/d of diesel, and 4,350 bbl/d of kerosene, among other products. PSO has a supply contract to purchase the entire output of the Bosicor refinery's products for the next 10 years Another major planned project is the "Iran-Pak" refinery, which would have a capacity of 130,000 bbl/d. The refinery would be located near the border with Iran in Baluchistan province and would be a 50:50 partnership between Pakistan's Petroleum Refining and Petrochemical Corporation (PERAC) and the National Iranian Oil Company (NIOC). Oil processed at the Iran-Pak refinery would come almost exclusively by sea from Iran, and would be unloaded at a terminal to be built for the refinery.

Natural Gas
Natural Gas Currently, natural gas supplies 51 percent of Pakistans energy needs. According to the Oil and Gas Journal (OGJ), as of January 1, 2005, Pakistan had 26.83 trillion cubic feet (Tcf) of proven natural gas reserves. In 2003, the country produced around 0.84 Tcf. Consumption of natural gas during 2003 was at 0.84 Tcf, but consumption levels are expected to grow over the next few years. Pakistan is looking to increase its gas production to support increasing consumption. Currently, Pakistan ranks third in the world for use of natural gas as a motor fuel, behind Brazil and Argentina. In addition, Pakistan hopes to make gas the fuel of choice for future electric power generation projects. Exploration and Production Exploration and Production Development of new natural gas fields with the help of foreign investors is moving forward in Pakistan. In the past few years, the country discovered seven new gas fields. Pakistans government expects the development of these new fields to add an additional 1 billion cubic feet per day (Bcf/d) to Pakistan's natural gas production. Additional producing fields in Pakistan include Sawan at about 366 Mmcf/d, Bhit at about 316 Mmcf/d, and Zamzama in Sindh province at about 248 Mmcf/d. Zamzama may now be able to produce 380 Mmcf/d, following a new gas discovery in January 2004. In addition, Pakistan gas production stands to increase following a memorandum agreement with Gazprom, Russian state-owned oil and gas giant. The agreement include the research and development of future gas fields. Pipelines : Pipelines Pakistans government is working on plans to build a pipeline that spans from Irans massive reserves to Indian markets across Pakistani territory. Russias biggest gas producer, Gazprom, has recently shown interest in the $7.4 billion pipeline project and has indicated its desire to invest in it. Iran has offered to cover 60 percent of the construction costs of the pipeline and Pakistani officials have stressed their ability to safeguard the pipeline. Another natural gas import possibility that has been considered is an eventual link to the Dolphin Project. This plan would supply gas from Qatar's North Dome gas field to the UAE and Oman, via a sub sea pipeline from Oman. Even though Pakistan has signed a preliminary agreement to eventually purchase natural gas from Qatar, it remains to be seen if further action on the project will be taken. The final natural gas pipeline option that has been discussed is a line from Turkmenistan to Pakistan via Afghanistan. Pakistan would face serious obstacles with this option unless Afghanistan becomes more secure. In addition, completed feasibility studies on the project, funded by the Asian Development Bank (ADB), indicate that the Turkmenistan field of Dauletabad will only be able to supply a portion of the gas needed by Pakistan.

Coal
Coal currently plays a minor role in Pakistans energy mix. However, Pakistan contains an estimated 3,362 million short tons (Mmst), sixth-largest in the world. Recently, the discovery of low-ash, low-sulfur lignite coal reserves in the Tharparkar (Thar) Desert in Sindh province, estimated at 1,929 Mmst, has increased both domestic and foreign development interest. China, which began developing various electric power plants in tandem with the coal mines in 1994 in Pakistan, has shown the most interest in the Thar region. A feasibility study was carried out for the construction of a coal-fired power plant near the Thar coal mines, and President Musharraf has stated that coal should make up more than the current 1 percent of electric power generation in Pakistan.

Electricity
Electricity Pakistan has 18000 MW of electric generating capacity. Thermal plants using oil, natural gas, and coal account for about 70 percent of this capacity, with hydroelectricity (hydro) making up 28 percent and nuclear 2.5 percent. Pakistan's total power generating capacity has increased rapidly in recent years, due largely to foreign investment, ultimately leading to a partial alleviation of the power shortages Pakistan often faces in peak seasons. Rotating blackouts ("load shedding") are, however, still necessary in some areas. Transmission losses are about 30 percent, due to poor quality infrastructure and a significant amount of power theft. Periodic droughts affect the availability of hydropower. In the short-run, Pakistan has some excess power, but after 2007, estimations are an annual shortfall of at least 1,000 megawatts (MW). This shortage will be met through alternate energy sources. Presently, much of Pakistans rural area does not receive electric power and about half the population is not connected to the national grid. Alternative Energy Development Board has been given the task to use solar, wind and biomass sources to provide electric power to such villages which are away from the national grid. Sector Organization Sector Organization The electric power sector in Pakistan is still primarily state-owned. The main state-owned utilities are the WAPDA, and the Karachi Electricity Supply Corporation (KESC), which serves Karachi and surrounding areas. Together, WAPDA and KESC transmit and distribute all power in Pakistan. Over half of the electricity goes to household consumers, about one third to industrial consumers, and the rest to commercial and government consumers. Rates are determined by the National Electric Power Regulatory Authority (Nepra). Privatization Privatization The Pakistan government continues to seek reform in the state-held electric companies. Efforts in that direction continue. Plans have been made to transform WAPDA into three generation companies, eight distribution concerns and a transmission

entity with the hope of seeing it privatized. In addition, the KESC has been privatized and is now being rehabilitated, and modernized by a private invester. Future Expansion Future Expansion Growth in power generation in recent years has come primarily from new independent power producers (IPP's), some of which have been funded by foreign investors, and a few WAPDA hydroelectric dam projects. The two largest private power plants in Pakistan are the Hub Power Company (HUBCO) and the Kot Addu power company (KAPCO). HUBCO, with a 1,300-MW capacity, is owned by a consortium of International Power (UK), Xenal (Saudi Arabia), and Mitsui Corporation. The Kot Addu plant, with a 1,600-MW capacity, was privatized in 1996 (from WAPDA). International Power holds a 36 percent equity stake in the Kot Addu plant, while the government holds a soon-to-be divested 64 percent stake. Both of these plants, as well as a few other small private operators, sell power to the national grid currently run by WAPDA. The Pakistani Ministry of Industries and Production has granted a Chinese company to build two coal-fired power-generation plants to supply 600 MW of electricity. The plants will be located in industrialized areas of Pakistan to provide an inexpensive source of energy. Officials also hope to exploit the large, untapped coal reserves in Tharkparkar. At present, coal accounts for less than a 5 percent share in overall energy production. Hydroelectric Hydroelectric Plans are also underway to expand Pakistan's hydroelectric generating capacity. In 2004, the Pakistani government approved the construction of 4 new hydro plants to be built in the North West Frontier Province by 2005/2006. These plants would generate several hundred megawatts of additional power. If the $5.5 billion Kalabagh project is completed the estimated completion time is seven years - the new hydro plant could supply 2,400-3,600 MW of generation capacity. The Ghazi Barotha hydro plant came online in 2003 at a cost of $2 billion and a generation capacity of 1,450 MW.Basha hydroelectric Project with 4500 MW is under construction. Environment Environment Pakistan's attempt to raise the living standards of its citizens has meant that economic development has largely taken precedence over environmental issues. Unchecked use of hazardous chemicals, vehicle emissions, and industrial activity has contributed to a number of environmental and health hazards, chief among them being water pollution. Much of the country suffers from a lack of potable water due to industrial waste and agricultural runoff that contaminates drinking water supplies. In the cities, widespread use of low-quality fuel, combined with a dramatic expansion in the number of vehicles on Pakistani roads, has led to significant air pollution problems. A hopeful trend is that Pakistan has become the third-leading country in the world to use compressed natural gas (CNG) to fuel vehicles. Currently, government vehicles are being

converted and soon over 100,000 taxis that have been using LPG will change to CNG. Although Pakistan's energy consumption is still low by world standards, lead and carbon emissions are major air pollutants in urban centers such as Karachi, Lahore, and Islamabad. Theft or diversion of electricity in transmission, as well as a lack of energy efficiency standards, have contributed to Pakistan's high energy and carbon dioxide intensities. To increase energy efficiency, the country is stepping up its use of renewable energy sources to bring electricity to rural areas. As urbanization continues and the population grows at a rapid rate, in the 21st century Pakistan will need to confront its environmental problems in order to safeguard the health of it citizens. Governments Energy Policy & Renewable Energy Governments Energy Policy & Renewable Energy Energy Policy Energy sector is regulated and to a large extent owned and operated by the Government of Pakistan (GOP). GOP has been carrying out institutional reforms in the energy sector for the last 15 years. Besides improving the efficiency of public sector institutions, policies are aimed at increasing private sector participation in the development of energy sector. In line with these objectives, in 1986, the GOP encouraged setting up of private sector power projects on BOO (Build-Own-Operate) basis as a matter of policy, but the response was not very encouraging. The GOP announced comprehensive frameworks in 1994 and 1995 aimed at attracting private sector investments for the development of power sector. In 1998, the GOP announced a policy to increase the role of regulatory body National Electric Power Regulatory Authority (NEPRA) for the power producers. Various policies have also been announced for other sub sectors of the energy sector (e.g. Petroleum, etc.) in order to increase the private participation. Introduction of Independent Power Producers (IPPs) Introduction of Independent Power Producers (IPPs) When the Policy Framework and Package of Incentives for Private Sector Power Generation Projects in Pakistan was announced by GOP in March 1994, the total installed capacity in the country was 10,800 MW. This capacity was insufficient to meet the demand on year round basis, particularly during low river flows period, and it necessitated load shedding of the magnitude of 2,000 MW during peak load hours. At that time, an optimistic load projection at the rate of 8% per annum for the next 25 years gave rise to an estimated 54,000 MW additional electricity generation capacity requirement up to year 2018. Such an ambitious programme could not be financed by the GOP, and therefore, resource mobilization in the private sector was considered essential to meet these development targets. Due to poor response of 1986 policy a policy package was devised in March 1994 for attracting overseas investment as well as domestic capital for developing power projects. The lucrative terms, with a high rate of return on equity, attracted a large number of foreign investors and created a situation of surplus power in the country, since the economic growth slowed down in the following years and power demand did not grow as

projected. The financial position of Water and Power Development Authority (WAPDA) was adversely affected due to high tariffs and guaranteed payments to be made to the IPPs. The GOP revised the power policy in July 1998. This policy envisages power generation additions in future through competitive bidding for specific sites and types of plants and gives priority to indigenous fuel based (hydro and local coal) projects. Competitive bidding amongst power suppliers is likely to keep the tariff low. In the mean time efforts are being made to solve the problem of surplus power by revival of the sick industry. The present policy of the government is not to use public sector funds for power production, except for hydro generation. FIRM TARGETS The alternative energy policy has been written utilizing the experience of the world. The requirement of firm targets by the government helps to create a decent size of market to attract national and international investors and manufacturers. Alternative/ Renewable Energy Resources will be developed at such a pace so as to achieve 10% share in primary commercial energy supply ie 9700 MW by the year 2015. 2% of investment made in power sector should be dedicated to development of Alternative/ Renewable Energy Technologies Base in Pakistan. All localities not planned/anticipated to be connected with national grid in next 20 years are to be earmarked for Alternative/ Renewable Energy resources. All solar/ wind energy related technologies would be indigenized in next 5 YEARS through national/ international collaboration. Availability of Biomass in Pakistan Availability of Biomass in Pakistan 50,000 tons garbage collected in major cities (Contract for a study awarded to assess the quality and quantity of solid waste generated in 10 major cities) Millions of gallons of wastewater produced daily Rice Husk, Cotton Stalks and baggasse (study required to assess the quantity of biomass available in Pakistan) Case Study on Use of Biomass for Renewable Energy Case Study on Use of Biomass for Renewable Energy Karachi city is considering installing a bio-gas plant in Cattle Colony, Landhi, where tons of buffalo manure is generated daily and is just drained in nullas. A New Zealand firm have started doing surveys in the Cattle Colony for installing a bio-gas plant in order to generate electricity through animal waste. The process of conversion to bio-gas is simple and yields a gaseous product consisting of 55-60 per cent methane and the remaining carbon-dioxide gas.

The heating value of bio-gas is approximately 600-800 btu/ft3. Bio-gas of this quality can be used to generate electricity and may also be used as fuel for steam boilers, space heaters and refrigeration equipment. Bio-gas is also combustible which can be used in cooking. The buffalo manure emits large quantities of ethane carbon-dioxide and hydrogen sulfide into the tmosphere. This pollutes the air and atmosphere around Cattle Colony where pollution level has exceeded those laid down by NEQS (National Environmental Quality Standards). Pakistan has one of the worlds largest animal populations. According to an estimate, around 1 million cattle are present in three different locations of Karachi. Brief data analysis shows that a 100 MW power plant can be installed by using cow dung. Several small scale biogas plants have been installed in villages to provide gas to the residents of the villages for their cooking needs. Due to lack of maintenance, most of these biogas plants are not operating on full capacity. Role of AEDB in Promoting Renewable Energy through Biomass Role of AEDB in Promoting Renewable Energy through Biomass Pakistan, like other developing countries of the region, is facing a serious challenge of energy deficit. Renewable Energy (RE) resources can play an important role in bridging this deficit. More importantly, RE can take electricity to remote rural areas, where it is needed the most. Realizing the importance of RE, the Government of Pakistan created the Alternative Energy Development Board (AEDB) in May 2003 to act as the central national body on the subject of Renewable Energy. The main objective of the Board is to facilitate, promote and encourage development of Renewable Energy in Pakistan with a mission to introduce Alternative/Renewable Energy at an accelerated rate to achieve 10% share of RE in the energy mix of the country. The current initiate is directed towards creating a market-based environment that is conducive to private sector investment and participation. One of the mandates of the Board is also to play a pivotal role in establishing international linkages and engaging in the transfer of the state of the art know how on renewable energy technologies to local research institutions and industries in Pakistan. Projects Solar Cells Manufacturing (Solar Homes). Solar Water Geysers/Cookers. Solar Thermal Power Generation. Solar Stilling Engines. Wind Turbines. Biogas/Bio Diesel. Fuel Cells. Micro Hydel.

AEDB Terms of Reference AEDB Terms of Reference Ensure 10% Share of Alternative Energy Technologies in National Grid by Year 2015. Act as Central Agency

a- Awareness. b- Policies. c- Facilitate Creation of Base in Pakistan for Alternative Energy (AE) Technologies. Develop National Plans and Policies for AE a- Tax Holidays. b- Encourage Private Sector. c- Facilitate Investment. Foster Sustainable Development a- Facilitate Enhancement of Technical Skills. b- Initiate & Incubate Projects.