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Sindh Engro Coal Mining Company
Creating Value Through Investment
Indigenous Fuel is the Key to Energy Security of Pakistan
Khalid Mansoor, April 6, 2012
Wrong Fuel Choice
Source: 1) State of Industries Report 2010, NEPRA 2) Integrated Energy Plan
Gas 42%
RFO 25%
HSD 1%
Coal 0%
Hydel 30%
Nuclear 2%
2008-09
Gas 29%
RFO 38%
HSD 1%
Coal 0.1%
Hydel 29%
Nuclear 3%
2010-11
• Due to lack of indigenous natural gas shortages, reliance on expensive imported RFO has increased and exacerbated Circular Debt problem
• If Coal had been used instead of RFO to make up for indigenous natural gas shortage, it would have reduced energy import bill by USD 600 M and direct saving of USD 280 M to electricity consumers
• 50% reduction in use of RFO for power generation would reduce Pakistan’s energy import bill by USD 900 M and benefit electricity consumers by USD 400 M
Country Power Generated from
Coal (%)
Australia 80
China 78
India 53
USA 50
Germany 47
UK 30
World Average 42
Pakistan 0.1
Thar Coal Potential
Thar
PAKISTAN
Thar Desert contains the world’s 7th largest coal reserves:
Location of Thar Coal Field
1% = 25% Thar Coal Reserve
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
Source:: GSP data/report – Energy equivalent is based on Shenhua report/RWE
Pakistan’s Power Generation Capacity in 2010
Development of Block II alone would 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
Thar Block II - Lignite Reserves & Quality
• Total Lignite reserve in Block II is 2 Bt ; Exploitable Reserve - 1.57 Billion tons which can support 5,000 MW for
50 years . Additionally, Thar lignite can also replace imported coal after briquetting
• Average lignite quality calculated from 1618 samples :
• Heating Value 11.6 MJ/kg (~ 5000 Btu/lb)
• Ash 7.3 %,
• Moisture 47.48 %,
• Sulphur 1.1 %,
• Cumulative Lignite Seam Thickness is 32 m
Comparatively higher heating value and lower sulphur & ash content of Thar lignite to other lignite mines in
the world makes development of Thar mine favourable
Comparison of Thar Block II with Other International Mines
Deposit Stripping Ratio (m³ : t) Heating Value (MJ/kg)
Thar Block II 6.6 : 1 11.6 (5000 Btu//lb)
Kosovo 1 : 1 7.8 (3350 Btu//lb)
Rhenish Area, Germany 4.9 : 1 8.9 (3830 Btu//lb)
Hambach, Germany 6.3 : 1 10.5 (4510 Btu//lb)
Hungary 9 : 1 7.1 (3050 Btu//lb)
Greece 10 : 1 5.0 (2150 Btu//lb)
• Sindh Engro Coal Mining Company (SECMC) is a joint venture company formed in 2009 between Engro Powergen Pvt Ltd (60%) and Govt. of Sindh (40%)
• Sindh Engro Coal Mining Company’s Vision :
“To develop and execute technically and commercially viable Coal Mining Project in Thar Block II to generate electric power and bring energy security to Pakistan based
on indigenous Lignite resource”
• Core expertise and responsibilities of each JV Partner include :
• GoS to assist in obtaining requisite approvals from Federal and Provincial Governments and timely delivery of infrastructure requirement for the Project including water, roads, transmission line and effluent disposal
• Engro PowerGen will lead development, financing, management and execution of the Project in a professional and fast track manner
• This JV reflects new strategic focus of Government & Engro to develop Thar Coal reserves through Mining, Power Generation & Briquetting
Sindh Engro Coal Mining Company Overview
Bankable Feasibility Study (BFS) for Mining project :
• BFS for Thar Block II Coal Mining Project has been completed in 2010 by internationally renowned Consultants in compliance with International Standards
• Technical, environmental and social viability of the Project has been confirmed meeting all international lender’s standards (IFC/World Bank, ADB, etc.)
Project Scope :
• SECMC plans to develop Mining and Power Plant of capacity 6.5 Mt/a and 1200 MW respectively in phase 1 with future plans to achieve 22.8 Mt/a lignite production & 4000 MW Power generation
Current Status of the Project:
• Mine Lease has been issued to SECMC for Block II. Mine construction is targeted to start by 2013 & lignite production by 2016
• GoP has declared Thar Coal fields as Special Economic Zone and Thar Coal Projects are exempted for 30 years from all taxes and attractive USD based 20% IRR is allowed for the Projects
• Firm & cost effective Engineering Procurement & Construction (EPC) proposals have been negotiated & finalized with Chinese companies for Mining & Power generation projects on turnkey basis
Estimated project cost for Phase 1 is ~USD 3B - the largest investment in the history of Pakistan
Thar Block II Coal Projects - Scope & Status
Development of Thar Mining & Power projects will contribute to economic and social uplift of the entire Thar region:
• Creation of social assets: education institutions, medical facilities & vocational training institutes will enhance human capital, facilitate knowledge transfer and build capacity
• Infrastructure development: sewerage system, provision of clean drinking water will improve health, hygiene and environment
• Increased economic activity: will generate employment opportunities for local residents in the mining and power sector and related industries
• Dairy hub, improved livestock management, agriculture improvement programs: will contribute to sustainable livelihoods and prevent environmental degradation
• SECMC will spend 2% of Profit Before Tax on community and social development programs improving socio-economic indicators of the area and reducing burden on PSDP*
Social Benefits of Thar Projects
*Public Sector Development Program
Annual Savings in Foreign Exchange due to RFO Import Substitution
• Cumulative savings of over USD 218 Billion from Thar Block II alone
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Annual Savings in Foreign Exchange over 45 years
Benefits of Thar Coal Development
• To overcome the current energy crisis, Pakistan has no other alternative except development of
indigenous energy resources
• Investment in Thar Mining & Power projects will provide the following benefits :
•Strategic energy resource that will guarantee energy security to Pakistan in the decades to
come
• Import substitution of expensive RFO or Natural Gas – Due to import substitution benefits, Thar
mining will act as a direct “foreign exchange earning sector“ and help lower the adverse impact
of imported fuel on Pakistan’s Trade Balance
•Lower power tariff for Coal fired Power Plants as compared to RFO based power tariff
•Socio-Economic Development of Thar region
•Presently Thar District ranks lowest on all socio-economic development indicators in Sindh
•Development of indigenous coal mining industry will lead to skilled job creation and transfer of
technology
•Potential for future downstream industries in Petro-chemical and Fertilizer products
Thar Coal is a fortune turning opportunity for Pakistan
Major Challaenges on Further Development of Thar Projects
• Inspite of fast track progress achieved so far, Project financing and Financial Close of the Project could not be achieved due to following :
• Timely Completion of of Infrastructure Projects
•Govt. to expedite timley completion of critical infrastructure projetcs especially Water Supply and transmission line
•Circular Debt Crisis in Power Sector (around PKR 400 Billion in March 2012)
•Low Investor & Financial Institutions confidence for new initiatives by Engro due to the following :
•Gas curtailment for its newly commissioned Fertilizer Project (World’s Largest Urea Plant, single largest private sector investment of USD 1.1 Billion)
•Gas Supply to the Plant suspended 55% of the time by SNGPL since commissioning, inspite of Contractual Committment of GoP, incurring huge losses to production
•Only 75% of agreed quantiity supplied by SNGPL, during the supply period
THANK YOU
Bankable Feasibility Study Consultants
SECMC
RWE-Germany
* Environment and Social Impact Assessment
SGS Pakistan
Sampling/Coal
Analysis Contractor
SRK-UK /
Hagler Bailly Pakistan
ESIA* Consultants
North East Coal Bureau
(NECB) China
Hydrological Field Work
Contractor
SINOCOAL Intl.
China
Bankable Feasibility
Study Consultant
Hydrological Model
& GW Abstraction
Consultant
DRD-Pakistan
Drilling Work
Sub-contractor
RWE-Germany
Owner‘s Consultant