Economic Survey 2008-09: July-March POL products' consumption shows negative growth

During three quarters of current fiscal year (July-March 2008-09), the consumption of petroleum products by most of the sectors other than the power and the government sectors reflected a negative growth over the same period last year. The consumption of petroleum products in the power sector increased marginally.
According to Economic Survey 2008-09 the sector-wise consumption of gas indicates that the household, commercial, fertiliser, industrial and transport sectors have experienced growth in consumption of gas during 2007-08.
Likewise, consumption of gas in the transport sector increased by 27.1 percent mainly due to a shift from imported fuel oil to relatively cheaper source of gas during July-March 2008-09 followed by the commercial, industrial and fertiliser sectors with the growth rate of 3.2 percent, 2.8 percent and 0.7 percent respectively.
The gas consumption in industry increases owing to its cost effectiveness. Fertiliser sectors gas consumption showed a negligible improvement of 0.7 percent during first nine months of the current fiscal year.
However, the major gas consuming sectors witnessing negative growth are cement and power having declined by 35.3 percent and 13.1 percent respectively over the same period last year due to reduced construction activities coupled with problems like inter corporate circular debt which laid power plants to remain under utilised.
After recording at an average rate of 6.1 percent per annum since 1999-00 to 2007-08, the electricity consumption by different sectors increased merely by 0.7 percent during July-March 2008-09 against the comparable period of last year.
This trend of the decelerating growth of electricity consumption started in 2006-07. With the exception of other government sector, all remaining sectors witnessed a negative growth during July-March 2008-09 over the same period last year. Reduction in consumption of electricity by different sectors is due to a shortage of electricity, its higher cost due to gradual phasing out of a subsidy on electricity, and the circular debt problem.
The primary energy supply has increased by 12.9 percent since 1998-99. After remaining positive until 2007-08, primary energy supply and per capita availability of energy witnessed a negative growth during 2008-09, due to lower than normal economic growth experienced during this period.
Analysis of the composition of final energy supplies to the country suggests that supply of coal during the last ten years (from 1998-99) grew by an average rate of 13.0 percent per annum followed by gas, crude oil, electricity and petroleum products with per annum growth rates of 9.5 percent, 7.2 percent, 4.7 percent and 1.5 percent respectively during the period under review. All components of final energy supply have experienced a negative growth during July-March 2008-09 over the corresponding period last year with the exception of gas which showed a marginal increase of 0.2 percent.
The total recoverable reserves of crude oil in the country as on January 1, 2009 have been estimated at 313 million barrels. The average crude oil production during July-March 2008-09 was 66532 barrels per day as compared to 70166 barrels per day during the corresponding period last year showing a negative growth of 5.2 percent.
The Northern region witnessed a decrease of 4490 barrel average production per day, whereas the Southern region's average per day barrel production increased by 856 in absolute terms during the first nine months of the current fiscal year over the comparable period last year. Consequently, during the period under review, 40.4 percent of overall oil production took place in the Northern region and 59.6 percent in the Southern region.
Government is making efforts towards enhancing gas production to meet the increasing demand of energy in the country. To this end, aggressive exploration activities are afoot. As of January 1, 2009, the recoverable reserves of natural gas have been estimated at 29.671 trillion cubic feet.
The average production of natural gas during July-March 2008-09 was 3986.5 million cubic feet per day (mmcfd) as compared to 3965.9 (mmcfd) during the corresponding period last year, showing an increase of 0.52 percent. Presently 26 private and public sector companies are engaged in oil and gas exploration & production activities.
Liquefied Petroleum Gas (LPG) contributes about 0.7 percent of the country's total primary energy supply mix. The main objective to enhance the use of LPG is to stop deforestation in the areas where the supply of natural gas is technically not viable. As a result of the government's policies, LPG supplies have been increasing at an annual cumulative growth rate of 18.2 percent during last few years with a supply of 601,592 tons in 2007-08. The cornerstone of the LPG policy is to ensure enhanced availability of the product at a competitive price. LPG marketing companies have imported provisionally around 32,621 tons of LPG during July-March, 2009.
In an effort to reduce dependency on other fuels as well as to improve the environment, the use of CNG in vehicles is being encouraged. Due to price difference of about 60.0 percent between petrol and CNG, vehicles are still being converted to CNG and approximately 2.0 Million vehicles are using CNG. The numbers of CNG stations are increasing with an increase in the conversion rate and there are about 2,700 established CNG stations in the country presently.
With an investment of Rs 70 billion, Pakistan at present is the largest CNG user country. In addition, the government's policy of de-dieselization is being actively pursued with the provincial governments, who are implementing this policy to achieve import substitution. For instance, the diesel operated intra-city urban public transport is being phased out in Karachi, Hyderabad, Lahore Faisalabad, Peshawar, Quetta and Islamabad/ Rawalpindi.
The government is encouraging LNG import by the private sector and in this connection the first LNG policy was announced during 2006. SSGC has been mandated to launch the "Pakistan Mashal LNG Project" and to act as a project vehicle company for implementation of the project through the private sector in two phases between the years 2011 to 2014. At present, SSGC is in the process of finalising the LNG project. Additionally, Pakistan GasPort Limited, a private company, is also pursuing the LNG import project at their own cost and risk.
During July-March 2008-09, altogether a total of 60 wells were drilled, including 20 wells in the public sector and 40 in the private sector as compared to 45 wells in the same period last year showing an increase of 33.3 percent. Exploratory wells witnessed a negative growth, whereas the development wells posted a positive growth in both the public and the private sector during period under consideration. A total investment of US $1001 million has been made so far in the current financial year in the upstream petroleum sector.
The company has drilled 20 wells showing an increase of 33 percent in the drilling activities as compared to the corresponding period last year. The production activities of OGDCL consist of oil, gas, LPG and sulphur. Average oil production during the period July-March 2009 was 40,745 barrels per day as compared to 41,128 barrels per day during the corresponding period last year while the average gas production during July-march 2008-09 stood at 920 mmscfd as compared to 909 mmscfd during the corresponding period last year.
During the period July-March 2008-09, the production of LPG has decreased by 47 percent as compared to last year's production owing to depletion of gas production from Dhodak field. In addition, the production of LPG remained depressed due to the shut down of couple of plants owing to annual turnaround and other problems like refrigeration package and high line back pressure etc.
Average sulphur production during the period was 66 metric tons per day. During the corresponding period in the previous financial year, the average production of sulphur was 71 metric tons per day.
During July 2008, the Company encountered Gas/Condensate in its Kunnar South Exploratory well No 1 located in district Tando Allah Yar of Sindh Province. The short duration initial testing results of zone no. 1 of the well produced 200 BPD of Condensate and 11 mmscfd of gas. Similarly zone no. 2 of the well produced 250 BPD of condensate and 14.7 mmscfd of gas.
SNGPL has supplied gas to 1300 towns and villages of Punjab, NWFP and AJK/Federal areas so far. During the first nine months of the current fiscal year 2008-09, the Company connected 450 industrial, 2,850 commercial and 180,000 domestic consumers. SNGPL carried out development work for extension of the gas network to the tune of Rs 7,848 million on transmission projects, Rs 5,831 million on distribution projects and Rs 285 million on other projects.
The General Industry sector is the largest consumer of gas provided by SNGPL and transmission projects account for 56.2 percent of the total investment made by the company. During the next fiscal year 2009-10, the company is projected to invest Rs 18,457 million in transmission, distribution and other projects.
By the end of March 2009, Sui Southern Gas Company Limited was supplying gas to 1,875 towns and villages of Sindh and Balochistan. During the period under review, SSGC provided new connections to 218 industrial, 1,349 commercial and 80,545 domestic consumers bringing the total consumers to 2,148,622.
During July-March 2008-09, the Company carried out development work for extension of the gas net work to the tune of Rs 1,034 million on transmission projects, Rs 3,907 million on distribution projects and Rs 579 million on other projects under the 'Khushal Pakistan' programme and with the collaboration of district Governments.
Power and General industry has remained a major consumer of the gas provided to all sectors accounting for around 32.0 percent share each followed by the domestic sector with the share of 19.0 percent with 98.0 percent of new connections being provided to the domestic sector. Furthermore, most of the investments made by the SSGC are in distribution projects. During the next fiscal year the company plans to invest Rs 13,381 million on transmission and distribution projects.
The installed capacity in the private sector witnessed a positive growth of 3.4 percent during 2008-09 over the same period last year. While the private sector showed a negative growth of 1.7 percent in 2007-08. The total installed capacity of WAPDA accounting for 58.0 percent of total capacity declined by 1.7 percent during July-March 2008-09. The total installed capacity of IPPs remained 5,954 MW followed by KESC's 1884.0 MW and nuclear.
The installed capacity of Pepco system is 18,019 MW as of March 2009 with hydro 6555 MW and thermal 11,464 MW. The hydropower capacity accounts for 36.38 percent and thermal 63.62 percent. Out of 11,464 MW of thermal power, 4899 MW is owned by ex-Wapda Gencos, 285 MW by rental, 325 by PAEC and 5954 by IPPs.
To meet the current and future energy demands, the government is working on different power generation projects expected to be completed by 2011-12 with total generation capacity of 9817 MW. These power generation projects, including 615 MW, have been planned to commission during 2008-09.The power generation projects having a capacity of 4039 MW are expected to be commissioned in the fiscal year 2009-10. Furthermore, 3370 MW of capacity will be added in 2010-11. In addition, 1793 MW capacity projects are expected to be commissioned during 2011-12.
Nepra is the authority responsible for granting licenses, determining tariffs, prescribing performance standards and addressing the complaints of electric power consumers. During July-March 2008-09, ten applications for the grant of Generation License for conventional power plants including thermal and hydro with a cumulative capacity of 3300 MW were processed and one license was issued. An additional two generation licenses were granted to Wind Energy Projects.
Nepra received generation license application from 21 existing captive power plants (CPPs), 12 CPPs were granted generation licenses after processing while the remaining cases are at different stages of processing currently.
Regarding addition of capacity for reducing the demand-supply gap, Nepra processed the cases of six Rental Power thermal power plants and finalised the cases of four such plants. Further, the case for addition of a new 220 MW thermal power plant at Korangi was finalised for KESC and the application of another 150 MW is expected to be finalised shortly.
Five applications for the grant of Distribution License from Small Power Producers (SPPs) and Housing Colonies were processed out of which 2 SPPs were granted distribution licenses and the other cases were at different stages of processing. Three companies were granted approval of tariffs under the Government of Pakistan's policy on Fast Track power Generation Projects.
Work on the Government of Pakistan's initiatives on power sector assistance and the Central Asia-South Asia transmission line continued as well along with continuous deliberations on the development of coal and hydel policies.
With the expansion of the electricity network, the number of consumers has increased by 7,675 thousands since 1998-99. During July-march 2008-09, the growth of consumers stood at 4.2 percent as it reached 18.5 million consumers during July-March 2008-09 as compared to 17.7 million in same period last year.
The share of domestic consumers remained 84.9 percent followed by the commercial and industrial sectors having a 12.3 percent and a 1.4 percent share respectively. The sectoral consumption of electricity by economic group identifies the domestic sector as the largest consumer of electricity for the past many years. During the current year (July-March 2008-09), the consumption pattern remained more or less the same since 1998-99 with a domestic share of 42.2 percent, industrial share of 25.2 percent and agricultural share of 13.3 percent.
The transmission and distribution losses exhibited decreasing trend during July-March 2008-09 with transmission and distribution losses declining at 19.4 percent as compared to 20.3 percent in the corresponding period of last year. NTDC and Discos have started a range of technical and administrative measures to enhance operational and managerial efficiency to reduce power losses.
During July-March 2008-09, the company's own generation stood at 5837 Million units (kWh), 5.3 percent less than the previous year generation of 6164 Million Units (kWh) owing to "Planned Maintenance Outages" undertaken in the winter of 2008-09. The installed capacity of various generating stations increased to 1884 MW by the end of July-March 2008-09 compare to 1690 MW in the corresponding period last year.
KESC has increased the required supply of power by various sources including the purchase of 577 Million kWh from "Independent Power Producers" and 4398 Million kWh from Wapda, Kanupp & Pasmic.
The total units available to the company's system posted a decline of 0.8 percent by reaching 10,349 million kWh during July-March 2008-09 compared to 10,437 Million kWh in the corresponding period of last year. Transmission and Distribution losses have increased from 3216 million kWh during July-March 2007-08 to 3543 million kWh in the current fiscal year.
The setback in power purchase was due to the unavailability of DHA COGEN 80MW Power Station. KESC has made considerable progress in its comprehensive rehabilitation program for the restoration of its generating capacity. In addition to the completion of 220 MW Combined Cycle Power Station, the addition of two rental power stations in the current Fiscal Year will add supply of 50MW to the system.
The addition of two power generating stations of 87MW each at KESC's existing locations is in full swing. These stations will come into the system in first quarter of fiscal year 2009-10.
Furthermore, as part of the generation expansion program, the "Financial Close" of the 560MW Combined Cycle Power Station at the existing Bin Qasim power Station Site is expected in the next quarter.
Pakistan Atomic Energy Commission (PAEC) is responsible for the planning, construction and operation of nuclear power plants in the country. Presently, two nuclear power plants; Karachi Nuclear Power Plant (K-1) and Chashma Nuclear Power Plant unit-1 (C-1) are operational, while construction of a third plant, Chashma Nuclear Power Plant unit-2 (C-2), is in progress.
K1, has been in commercial operation since 1971. After completing its design life of 30 years, K-1 is operating on extended life at 90 MWe. K-1 generated 317 million kWh of electricity during the period July-March 2008-09, raising its lifetime generation to 12.21 billion kWh. C-1, a PWR type plant with a gross capacity of 325 MWe, and has been in commercial operation since September 2000.
C-1 generated 602 million kWh of electricity during July-March 2008-09, raising its lifetime generation to 16.86 billion kWh. The construction and installation activities of C-2 are in progress as per schedule. The commercial operation of C-2 is expected in 2011.
Pakistan Atomic Energy Commission has been given the task of increasing nuclear power generation capacity to 8,800 MW by the year 2030 with increasing share of indigenisation. Studies are in progress at six new sites to establish their suitability for installation of additional nuclear power plants. PAEC is communicating with China National Nuclear Corporation for establishment of additional nuclear power plants.
Pakistan has huge coal resources estimated at over 185 billion tones, including 175 billion tones identified at the Thar, Sindh province. Pakistan's coal generally ranks from lignite to sub-bituminous. The production of coal has remained stagnant with no significant market demand. The production of coal decreased by 28.8 percent during July-March 2008-09 over the comparable period last year.
About 60.4 percent of total coal production in the country has been consumed by the brick kilns industry followed by cement with the 37.3 percent consumption share of coal during the period under consideration. The coal consumption shares of brick kilns and power sectors increased by 9.7 and 0.3 percentage points respectively during the first nine months of the current fiscal year over the corresponding period last year.
Operational coal mines decreased production by 15 percent from 4.12 million tons in 2007-08 to 3.49 million tons in 2008-09. Almost the whole cement industry has been switched over to coal from furnace oil, which has enhanced utilisation of indigenous coal along and imported coal. Utilisation of indigenous coal in cement manufacturing plants has saved considerable scare foreign exchange.
As part of promotional activity to increase the share of coal, the Government of Sindh has leased out a coal block for an integrated mining project and a 250 MW coal based power plant to M/s China National Chemical Engineering Group Corporation in Sonda Jherrick coalfield.
The government of Pakistan has developed the infrastructure of Thar coalfield (ie roads, water supply, communication network, airstrip & railway track). The Government of Sindh has incorporated "Thar Coal Energy Board" for the development of the coal resources of Thar to fulfil the energy requirements. The establishment of experimental small scale open-pit mining is also under consideration to collect data for large-scale mining, as a guideline for investors.