Pakistan seeks more energy investments

from the Khaleej Times..

By M. Aftab

July 8, 2013

The new energy policy will raise the generation of electricity to 26,800 megawatts to reduce the massive outages that along with natural gas and oil shortages have brought down Pakistan’s GDP by more than two per cent.

Prime Minister Nawaz Sharif will launch the new policy within the next few days, in order to partly fulfil his election pledges, which gave him a big majority in the May 11 elections. Officials after the cabinet’s finalisation of the policy over the weekend said: “The new power generation will help the government cut down to at least half, the present daily outages from 12-18 hours to 6-8 hours by October this year.

The policy also envisages to reduce the electricity rates by “more than 30 per cent.” It targets a “zero load-shedding,” or  outages.

The average generation cost will be brought down from the present Rs14.67 to around Rs10 per unit, by improving efficiency.

The key features of the policy are to concentrate on building hydro power plants for low-cost electricity and coal-based power. Pakistan has a vast river system and a major  potential to generate hydel power, which it did in the first 25 years of independence, but various political and business lobbies and mafias prevented such plans for their own benefits, that led to the present acute energy crisis.

The policy will “encourage huge public and private investment.” Sharif is expected to unveil the details of investment, foreign aid and FDI requirements in his planned announcement in a week or so. Energy situation has to be improved quickly. In the event of his failure to do so, Prime Minister Sharif may face the threat of loosing power.

Top energy expert Mirza Hamid Hasan, former secretary in Federal Ministry of Water and Power, says: “A well planed policy shift should be made to correct the energy-mix by shifting the focus from oil-based thermal power to hydel power. Serious efforts should also be made for early development and utilisation of the huge Thar coal deposits (the world’s second largest, located at Thar in Sindh) for power generation. Greater efforts should also be made for exploration and development of new gas reserves in the country, which should be dedicated to power generation. The (completion) of the proposed gas pipeline from Iran to Pakistan should be accelerated. It is also imperative to improve governance of the energy sector in order to formulate power policies based on merit rather than vested interests, check power theft, ensure full revenue recovery, check corruption and reduce over staffing.”

One of the problems adding to the present crisis for over the years has been non-payment of the dues to the chain of private companies involved in providing oil and gas to the power generators. The dues, so for, have piled up at Rs503 billion. The new government paid Rs322 billion of these dues over the weekend with the promise to pay off the rest of the amount shortly.

The government has also finalised plans to import 2,000 megawatts of electricity from India and more from Iran and Tajikistan.

In order to fully implement the new energy policy, Pakistan will need a wide and large range of power generating plants and machinery. It will also need a sizable amount of forex from the World Bank, Asian Development Bank and FDI inflows from the UAE, Saudi Arabia, China and US. One of the top sources of help came China, where Sharif discussed energy plans with the Chinese Prime Minister Li Keqiang, as well as state and private companies, during his official visit to Beijing, started on July 4.

Of particular interest to investors and oil exploring and producing companies in the UAE, GCC countries and Saudi Arabia, is the provision of the new policy to encourage present and new oil and gas exploration companies to explore new fields and produce larger quantities of these vital sources of energy. A range of incentives for these investments and operations is provided in the policy.

“The private sector will be offered fresh incentives of a wide range in the oil and gas exploration and investment fields,” an official said.

“On advice of the prime minister, the energy committee of the cabinet has come up with an investment-friendly plan to increase generation, exploration and investment,” he said.

“The  new energy policy will prove to be a panacea for Pakistan’s energy ills,” Sharif said after it was finalised at the week-end cabinet meeting. It will phase out the use of compressed natural gas (CNG) by transport. Pakistan has more than 3.5 million cars and vehicles using CNG, which eat up gas to a huge extent. It makes Pakistan as one of the largest providers of scares gas to cars. Incentives will be provided to companies planning to establish hydro or coal–based power generation plants, Sharif says.

[Views expressed by the author are his own and do not reflect the newspaper’s policy]

Link to the article: http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/internationbusiness/2013/July/internationbusiness_July26.xml&section=internationbusiness

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