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Pakistan Power SectorNeed for Reforms
By Kalim A. Siddiqui
President-Petroleum MarketingByco Petroleum Paksitan Limited
3rd Pakistan Oil & Gas Conference 2011 – January 29, 2011
Outline
• Overview of Pakistan Energy Sector
• Reasons for Power Crisis
• Need for Reforms
• Roadmap towards reform
January 31, 20113rd Pakistan Oil & Gas Conference 2011, Islamabad
Pakistan Power SectorNeed for Reforms
Overview of Pakistan Energy Sector
January 31, 20113rd Pakistan Oil & Gas Conference 2011, Islamabad
Overview of Pakistan Energy SectorEnergy Mix
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Source: Economic Survey of Pakistan 2009-10
Energy Consumption of 37.4 Mn TOE in 2009-10Energy Consumption of 37.4 Mn TOE in 2009-10
Overview of Pakistan Energy SectorEnergy Mix - Comparison with global trend
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Source: Economic Survey of Pakistan 2009-10, EIA
World Pakistan
Overview of Pakistan Energy SectorA Profile
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Transmission System:NTDC : 5,177 km; 500kV
7,500 km; 220kVDISCOs: 31,000 km; 132kV
7,800 km; 66kV
Total KESC
Energy Generation 90 TWh 9 TWh
No. of Customers 20.7 Mn 2.0 Mn
T&D Losses 21% 34%
Source: Nepra
Overview of Pakistan Energy SectorPower Sources
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Source: Economic Survey of Pakistan , WAPDA
Total Installed Generation Capacity of 20, 190 MW in 2009-10 Total Installed Generation Capacity of 20, 190 MW in 2009-10
Overview of Pakistan Energy Sector Energy Consumption & Output
3rd Pakistan Oil & Gas Conference 2011, Islamabad
Average annual Consumption of electricity in the last 10 years has increased by nearly 5%, 73 Mn MWh of electricity being consumed in FY 2010 (-1.7% growth from FY 2009).
January 31, 2011
Source: Economic Survey of Pakistan 2009-10, Hydrocarbon Development Institute of Pakistan
Overview of Pakistan Energy SectorSupply and Demand Gap
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011Source: Websites of Wapda, Nepra
Pakistan Power SectorNeed for Reforms
Reasons for power crisis
January 31, 20113rd Pakistan Oil & Gas Conference 2011, Islamabad
Major Reasons for Power Crisis
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Lack of utilisation of alternative energy sources like coal, solar, wind, gas and nuclearLess emphasis and awareness regarding use of renewable sources of energy (wind, solar, waste to energy, etc)Availability and supply for natural gas for power generation
Lack of utilisation of alternative energy sources like coal, solar, wind, gas and nuclearLess emphasis and awareness regarding use of renewable sources of energy (wind, solar, waste to energy, etc)Availability and supply for natural gas for power generation
Alternate Energy
Alternate Energy
Lack of long term sustainable roadmap of power generationPlan to produce low cost power due to better mix of power generation sources Ineffective utilisation of installed power generation capacity
Lack of long term sustainable roadmap of power generationPlan to produce low cost power due to better mix of power generation sources Ineffective utilisation of installed power generation capacity
PlanningPlanning
Inefficiency due to ageing power generation equipment and old technologyWaste of energy due to line losses (technical and theft)Up -gradation of distribution network
Inefficiency due to ageing power generation equipment and old technologyWaste of energy due to line losses (technical and theft)Up -gradation of distribution network
Technical Losses
Technical Losses
Major Reasons for Power Crisis
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Uncertain law and order situationPolitical stability and continuity of government policies is vitalAlternate gas availability projects not materialized ( e.g. LNG, QP, IPI and TAPI) and need to expedite local exploration activities
Uncertain law and order situationPolitical stability and continuity of government policies is vitalAlternate gas availability projects not materialized ( e.g. LNG, QP, IPI and TAPI) and need to expedite local exploration activities
No major water reservoirs/dams developed in over 3 decadesCoal reservoir not developed timelySlow development of Hydrocarbon projects Mismatch of economic progress and increasing power generation capacities
No major water reservoirs/dams developed in over 3 decadesCoal reservoir not developed timelySlow development of Hydrocarbon projects Mismatch of economic progress and increasing power generation capacities
Development issues
Development issues
Investment Crisis
Investment Crisis
High cost of furnace oil (price volatility)Circular DebtPoor mix of power generation sources linked to high cost
High cost of furnace oil (price volatility)Circular DebtPoor mix of power generation sources linked to high cost
Electricity price
Electricity price
Pakistan Power SectorNeed for Reforms
Need for Reforms
January 31, 20113rd Pakistan Oil & Gas Conference 2011, Islamabad
Need for ReformGlobal Trends Observed
3rd Pakistan Oil & Gas Conference 2011, Islamabad
• Ever increasing energy demands creating shortfalls in developed and emerging economies
• Increased competition between strategic players for energy
• Volatility/rise in furnace oil prices directing the development on alternative energy sources
• Increasing correlation between energy use and environmental impact such as carbon emissions, conservation and protection
January 31, 2011
Need for ReformDrivers of Power Sector Reform
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Capital ScarcityCapital Scarcity Economic Inefficiencies
Economic Inefficiencies
Industrial Development
Industrial Development Debts and DeficitsDebts and Deficits
•The power sector is a direct victim of lack of capital. Governments have been unable to spend on this sector over the years
•The challenge is reforming the power sector to attract the needed private investment
•The power sector is a direct victim of lack of capital. Governments have been unable to spend on this sector over the years
•The challenge is reforming the power sector to attract the needed private investment
•The power sector in Pakistan is saddled with large debts accumulated from years of not charging cost recovery tariffs, not collecting from all consumers, not disconnecting consumers who do not pay, and using the utility as a vehicle for subsidies and political patronage for jobs and other favors
•The power sector in Pakistan is saddled with large debts accumulated from years of not charging cost recovery tariffs, not collecting from all consumers, not disconnecting consumers who do not pay, and using the utility as a vehicle for subsidies and political patronage for jobs and other favors
•Lack of power generation has adversely affected industrial activity in Pakistan
•Lack of power generation has adversely affected industrial activity in Pakistan
•The power sector has been troubled by high technical losses, a lack of power generating cost recovery, poor maintenance, low equipment reliability, high staff levels, low productivity, corruption, a crippling non-payments problem, and mounting debt
•The power sector has been troubled by high technical losses, a lack of power generating cost recovery, poor maintenance, low equipment reliability, high staff levels, low productivity, corruption, a crippling non-payments problem, and mounting debt
Need for ReformEnergy Threats and Opportunity -Pakistan
Threats Opportunity
•Imported oil constitutes over 29% of energy consumption, at a very high cost due to import dependency.
• The depletion/decline of Pakistan’s natural gas reserves/production
• Energy prices are expected to increase over the next few years.
•To reduce poverty and increase prosperity – the energy consumption in Pakistan has to increase.
• The price and availability of natural gas and oil have grave impacts welfare and national security.
•India’s appetite for energy is escalating – natural gas pipelines from either Iran or Central Asia will have to pass through Pakistan.
•LNG for India is an option but at a much higher price.
•Develop energy corridor by partnering with China to provide energy to its western regions.
•Pipeline option can be attractive.
•Utilisation of Pakistan’s coal reserves could a big step towards solving Pakistan’s energy crisis.
Pakistan Power SectorNeed for Reforms
Roadmap Towards Reform
January 31, 20113rd Pakistan Oil & Gas Conference 2011, Islamabad
Roadmap Towards ReformMajor Potential Areas
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
InvestmentInvestment GovernanceGovernance Diversification
Diversification
Infrastructure
Infrastructure
• Fostering the environment to bring in foreign Investment in the power sector
• Fostering the environment to bring in foreign Investment in the power sector
• Improve existing infrastructure and upgrade it with latest technology for efficiency enhancement
• Improve existing infrastructure and upgrade it with latest technology for efficiency enhancement
• Developing sources of alternate Energy and encouraging diversification of energy mix
• Developing sources of alternate Energy and encouraging diversification of energy mix
• Resolve governance and organizational issues to streamline institutions and reduce flaws
• Stability in policy making and proper planning
• Resolve governance and organizational issues to streamline institutions and reduce flaws
• Stability in policy making and proper planning
EfficiencyEfficiency
• Reduction of inefficiencies
• Collection of dues
• Efficiency in transmission systems
• Reduction of inefficiencies
• Collection of dues
• Efficiency in transmission systems
R & DR & D
• Encourage research and development
• Spending on new technologies
• Encourage research and development
• Spending on new technologies
Vibrant economy with increasing
demand for power.
Vibrant economy with increasing
demand for power.
Attractive and competitive return
on investment
Attractive and competitive return
on investment
Roadmap Towards ReformIncentives to invest in Pakistan Power Sector
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
One‐window facility provided by Private Power Infrastructure Board for PrivateProjects
One‐window facility provided by Private Power Infrastructure Board for PrivateProjects
Balanced risk profile for
investors, lenders and government
agencies
Balanced risk profile for
investors, lenders and government
agencies
Independent regulator to
balance interest of consumers and
power sector companies
Independent regulator to
balance interest of consumers and
power sector companies
Track record of successful private
sector participation (5599 MW ;US$ 6 billion)
Track record of successful private
sector participation (5599 MW ;US$ 6 billion)
Identified hydropower
potential of over 54,000 MW
Identified hydropower
potential of over 54,000 MW
Confirmed wind energy potential of more than 346,000 MW and solar power potentialof over 2.9 million MW
Confirmed wind energy potential of more than 346,000 MW and solar power potentialof over 2.9 million MW
Proven coal reserves of 175 billion tons in Thar generating a potential of 100,000 MWs @ 536 million tons per year
Proven coal reserves of 175 billion tons in Thar generating a potential of 100,000 MWs @ 536 million tons per year
Source: PPIB Website
Roadmap Towards ReformGovernance & Organizational issues
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• Ministry of Energy be formed by consolidating MoPNR and MoWP
• One window operations for investors to facilitate investment in power sector
• Need for continuity in government policies and reforms
• Reforms to strengthen good governance
• Decentralize WAPDA/PEPCO system and privatize distribution companies
Roadmap Towards ReformAlternate Energy
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• Availability of low cost power generation mix
• Increase share of nuclear, hydel and coal based power projects in the country’s energy mix
• Encourage and facilitate private sector participation
• Foster development of renewable energy sources such as Wind, Solar, Ocean Waves, etc
• Policies to establish alternate energy sources so that market potential is clearly visible to MNCs and International investors
• Develop Global alliances for energy security
Roadmap Towards ReformAlternate Energy - Examples
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• Initial development alone could bring in investment of USD 12 Billion
• Entire Thar Coal Reserves can be used to generate 100,000 MW of electricity for over 200 years with cost and environmental benefits
Thar Desert contains the world’s 7th largest coal reserves:
175 Billion Ton = 50 Billion TOE = 2000 TCFTotal Thar Coal Reserve More than Saudi Arabia 68 times higher than
& Iranian Oil Reserves Pakistan’s total gas reserves
Source: Thar Coal Mining & Power Generation Project – Engro Powergen
1% = 25%Pakistan’s Power Generation Capacity in 2010
Thar Coal Reserve
Roadmap Towards ReformAlternate Energy - Examples
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
•Total Area of Sindh suitable for wind farms = 9,749 km2
•Gross wind power potential of Sind Coast is 43 kMW
• Exploitable electric power generation potential of this area is 11 kMW
•Total Area of Sindh suitable for wind farms = 9,749 km2
•Gross wind power potential of Sind Coast is 43 kMW
• Exploitable electric power generation potential of this area is 11 kMWLandhi Bio Gas Project
Landhi Cattle Colony (spread over an area of 18,500 hectares) is expected to produce 15-20 MW of renewable energy for KESCFrom 3,000 MT of manure (daily being discharged into the Sea).
Pakistan is the 6th luckiest country in the world where sun-availability is up to 16 hours on average
Pakistan is the 6th luckiest country in the world where sun-availability is up to 16 hours on average
Pakistan has about 1000 km long coastline of with complex network of creeks showing relevance of strong wave energy, which could be harness for the generation of electric power for rapidly developing coastal cities
Sources: KESC, Pakistan Meteorological Dept, Other media sources
Roadmap Towards ReformInfrastructure
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• Effective and efficient utilization of existing power generation infrastructure
• Capacity Additions through thermal and hydro power projects
• Expedite projects such as power projects (nuclear, coal, solar, wind, etc) pipelines (Qatar, IPI and TAPI) and large as well as small and medium sized dams
Roadmap Towards ReformInfrastructure
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
Proposed Dams in the country
Roadmap Towards ReformInfrastructure
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• Transmission Projects need to be developed for evacuation of power from hydro projects in the north and from thermal projects in south
• Distribution system needs to be modernized by use of smart metering systems
Roadmap Towards ReformInfrastructure – Example of Power Parks
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• To facilitate investment on fast track basis, there is a need to establish Power Parks
• These will be located at 4-5 strategic locations near river or canal head for availability of water, and near main highway or rail link for transportation of fuel in addition to the availability of utilities
• These Parks will house 4000-5000 MW capacity plants which serve as ‘base load plants’
• These will be based on coal and gas, local or imported
Source: Nepra
Roadmap Towards ReformEfficiency
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• Transmission and distribution losses to be curtailed to reduce cost of generation
• Reducing illegal use and theft as well as encourage efficiency in usage and savings
• Improving efficiencies through latest technologies and better governance
• Recovery of billed amounts and financial discipline
Roadmap Towards ReformResearch & Development
3rd Pakistan Oil & Gas Conference 2011, Islamabad January 31, 2011
• Integrated energy plan for the country
• Roadmap for progression
• Develop R&D mechanisms in the country
• Synergy between nuclear, hydel and coal/gas energy and environment policies
• Foster niche markets for early commercialization of new technologies and development of alternative energies such as Wind, Solar, Ocean Waves, Bio-technology, etc