Energy crisis in Pakistan

2
TheDiagnosis
Keyreasonsbehindcurrentandpreviousenergy
crises:
1. Lackoflongtermintegratedplanningand
implementationforlast40years
2. Ignoredindigenousresources
3. Dependenceonimportedfurnaceoil
4. Lackofpoliticalwilltoreform/deregulate
3
.Lackoflongtermintegratedplanning
1994PowerPolicyalateresponsetochronicshortages
1994Policyadded6,000MWofmostlyimportedthermalbetween
19972001
Thermalshareincreasedfrom30%to70%
Ledtoexpensivesurpluscapacitybyearly2000s
Surplusbredcomplacency;
Politicalwitchhuntinlate90sdroveawayinvestors
Electricitydemandjumpedto10%p.a.between200407
Asalate,kneejerkresponse,anewwaveofIPPsapproved
between200407
4
Lackoflongtermintegratedplanning(contd)
3,700MWnewcapacitycameonlinein200711
Again,basedonfurnaceoil
Orgasthatwasnotavailable
RentalPowerPlantsfiascoduetoshorttermmeasures
100MWbeingproducedvs.2,000+MWplanned
OneofthefewRPPsonlinechargingRs.43/kWh
Asaresult,inthelastfiveyears
Tariffhasalmostdoubled
Rs.1trillionspentonsubsidies
Andthereisstillnosolutioninsight
5
Ignoredindigenousresources
StalledOilandgasexplorationaftermajordiscoveriesinSindhin
the90s
Complacencyandlackoffocusonresolvingsimmering
Balochistanissue
Majorinternationalcompaniesdrivenawaybyunattractive
policyincentives(2001PetroleumPolicy)
Hydellargelyignoredafter1970s,sidetrackedbypolitics
Only6,600MWoftotal50,000MWpotentialdeveloped
TharCoalstillapipedream
NolongtermThardevelopmentplan
Ongoingprojectsheldupbyfederal/provincialissues
Circular Debt choking the cash flows of energy supply chain
Circular debt understanding the complexity of the problem
owerdeficitmayrisetoover11,000MWinnextfive
earswithbusinessasusual
8
12,000
16,000
20,000
24,000
28,000
32,000
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Peak Demand Peak Generation
Projected peak demand
at 6% p.a. growth
About 2,500 MW of ongoing,
funded projects should come
online between FY11-15
Few sizable projects
due to circular debt
Neelum Jhelum likely
to be delayed further
(11,400 MW)
(8,600 MW)
(6,400
MW)
(5,700
MW)
Source: NTDC National Power System Expansion Plan 2011, NEPRA State of Industry Report 2011, PPIB, WAPDA public documents
9
heGasCrisis
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2
0
1
1
-
1
2
2
0
1
2
-
1
3
2
0
1
3
-
1
4
2
0
1
4
-
1
5
2
0
1
5
-
1
6
2
0
1
6
-
1
7
2
0
1
7
-
1
8
2
0
1
8
-
1
9
2
0
1
9
-
2
0
2
0
2
0
-
2
1
(3.5 bcfd)
(5.2
bcfd
Projected gas supply
from domestic sources
Source: Petroleum Institute of Pakistan projections updated for actuals
Projected gas demand
(1.6 bcfd)
GDP growth has declined to 3.1% FY08-13; from 5.7% previous 5y
-4
-2
0
2
4
6
8
10
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2

F
Agriculture Industry Services Real GDP
Real GDP growth % y/y
Investment spending has collapsed lowest in history
Investment & saving as % of GDP
nsustainable fiscal deficits lead to macroeconomic instability
Source: SBP Annual Report 2012

Fiscal deficit widens to record 8.6% of GDP in FY12 (SBP)
arge external debt payments USD 6bn payment in FY14
Repayments to IMF 2012 2014 USD million
BP FX reserves fall below USD 6bn (1.8 months of import) J une 2013
Recommendations - Energy Mix
E & P - Recommendations

Petroleum Policies announced in 2001, 2007 and 2009 failed to
attract investment in the E&P sector. It is therefore
recommended that the well head gas pricing should be based
on 70% of a basket of imported crude price. This is in line with
the 1997 Petroleum Policy price which gave great impetus to
investment in oil and gas exploration. The pricing of this policy
was later rescinded by later Governments.

The GOP should engage a world class consultant to evaluate
the unconventional gas reserves in Pakistan and make the
study available to potential investors

To have a formula of making the local population as
shareholders
E& P The Unconventional Gas Potential in Pakistan
The demand supply gap has
changed dramatically with the
addition of unconventional
gas potential in Pakistan.
The decline in conventional
natural gas predicted is
reversed somewhat through
commencement of Tight Gas
production in 2015 16. Shale
Gas production is expected to
commence production from
2018 19.
Deficit in supply of natural
gas will still need to be met
through transnational
pipelines, LNG imports and
through fuel substitution

Pakistan Current Natura
Gas

Conventional Reserves 2
TCF

Daily Supply
4.2 BCF

Unconventional:
-Tight Gas 50 TCF
- Shale Gas
50 TCF
Pakistan Current Natura
Gas

Conventional Reserves 2
TCF

Daily Supply
4.2 BCF

Unconventional:
-Tight Gas 50 TCF
- Shale Gas
50 TCF
2.5 3.5
Source: Pakistan Petroleum Limited

Implications of business as usual
Unless there is a political will and
resolve to implement an integrated
energy plan the country will face
growing crisis on the energy front
With nominal GDP growth
projections of 2.5 4% the energy
consumption by the year 2025 would
be 142 mmtoe which translates to a
Power Requirement of 38,000 MW.
Oil Requirement will be 40 MMTOE,
Gas Requirement 67 MMTOE
The total energy import bill in 2025 at
US$ 100/ bbl will be
US$ 90 billion
19
Renewable
1%
Gas
Import
37%
LPG
2%
Gas Local
10%
Oil 28%
Hydel
13%
Coal 8%
Nuclea
1%
2022 Energy Mix Outlook
Business As Usual
2025