Thar coal energy accord

After years of foot-dragging over utilisation of Thar coal for power generation, the Sindh government has at last signed an agreement with Engro Power Generation Ltd for production of 600-1000 megawatts on public-private partnership basis, with an equity ratio of 40:60, but with an inverse representation on the BoD. The chairman of BoD will be a Sindh government nominee.
Under terms of the accord, the project's feasibility will be completed in 18 months, with another 6-12 months needed for its financial close. Engro Power Generation Ltd has world-class management expertise, which will be an asset in execution of the project. Meanwhile, China's Shenhua Group, which had abandoned the Lakhra power project after conducting extensive feasibility studies and surveys in sheer frustration over the Nepra-determined tariff, has also been invited to join the projects that are planned to be initiated. (Shenhua had walked out in 2006 after needless quibbling over tariff which the determinators later willingly paid to many other power producers.)
It is indeed gratifying to know that headway has at long last been made in the direction of coal energy generation. Thar coal deposits are estimated at 175 billion tonnes, which is equivalent, in energy terms, to oil resources of any of the two major oil producing countries put together. Pakistan has emerged as the seventh country among the world's top 20 following discovery of the huge lignite coal deposits in Sindh.
Fortunately, 3.3 billion tonnes out of 175 billion tonnes of deposits are in the measured category, while about 11 billion tonnes are indicated as reserves. The total mine-able coal reserves are estimated at two billion tonnes, which is about 60 percent of the measured reserves.
It has been estimated that Thar coal can produce energy equivalent to 400 billion barrels of oil or 850 trillion cubic feet of gas, and can meet energy requirements of the country for over a century. However, developing Thar coal reserves and generating power will pose huge challenges, requiring a higher level of expertise and technical know-how than perhaps the two partners in the project can ensure.
Pakistan's indigenous coal has a very strong case to be given maximum possible share in the country's energy mix on the ground of a relatively lower investment/growth rate co-efficient, and of much larger employment potential in comparison to oil and gas sectors.
Secondly, use of coal in power generation and cement manufacturing is amply justified on economic grounds. (Coal used to be a major source of energy generation prior to discovery of oil and gas.) Thirdly, after invention and popularisation of clean energy technologies, the use of coal world-wide has witnessed a sharp upswing, particularly in the US and Western Europe.
The US is a leading producer of coal in the world, and according to projections coal consumption in the US will increase at an average rate of three percent per annum till the end of the century.
Why it has taken us so long to exploit the Thar treasure trove has been rather a mystery, particularly when such reputable multinationals as Sumitomo of Japan, Siemens and Reinhaul of Germany, AES Corporation of the US, Al-Jumaih Group of Saudi Arabia, and Malakoff of Malaysia and Shenhua Group of China have been keen to participate in the projects. It appears that local power sector lobbies, which are perceived to have started behaving like a cartel for all practical purposes, might have played a role in it, in juxtaposition of other causes and factors.
Endless foot-dragging on coal and hydropower projects has meanwhile brought things in the energy sector to a head. As things stand today, about 50.4 percent of the country's energy needs are met through use of indigenous gas, 28.4 percent through domestic and imported oil, and 12.7 percent through hydropower. The contribution of coal and nuclear energy in the energy mix is limited only to 7.0 and 1.0 percent respectively, which falls dangerously short of an ideal mix.
There is a perception that importers of oil and power generators as well as the lobbies opposed to construction of dams are behind lengthy delays in implementation of the energy projects. Secondly, political point-scoring and overriding profit motive of the stakeholders are said to be the other factors that have precipitated the power deficit in the country. We believe that there is a need of a high-level inquiry to determine and affix responsibility for our failures in water and power sector, to prevent a repetition in future.
We believe that greater involvement of multinationals possessing world class expertise in coal energy projects would ensure better quality of project execution. Now that Shenhua has also been invited to restart work on Thar projects, it would perhaps be better to involve other reputable multinationals as well to tap their expertise to ensure the country's long-term energy future. The most important consideration for the decision-makers should be two-fold: 1) expeditious and quality execution of projects, and 2) their cost-effectiveness.