Out of the frying pan?

Pakistan’s power sector seems to be a victim of déjà vu. Last year, the nation was gripped by a fuel shortage which hindered electricity production and saw long queues of cars lined outside pumping stations. A comprehensive inquiry was launched into the reasons behind the incident, which led to the ouster of Special Assistant to the Prime Minister Nadeem Babar.

This year, a similarly precarious situation is threatening to upend the power sector. The Qadirpur gas field supplying fuel to SNGPL has been abruptly scheduled for maintenance, which is causing a shortfall of approximately 200 million cubic feet of gas (mmcfd) – almost 25-30% of the requirement for power generation. SSGC has also announced its own shutdowns at the Kunnar-Pasakhi Deep field, which will bring a 170mmcfd shortfall to SSGC’s quota. Simultaneously, Tarbela Dam is also under maintenance and operating sub-optimally, reducing the contribution of hydropower to the national generation mix.

Compounding this issue is a dearth of furnace oil supply. Ironically, the historically low demand of the power sector (due to the dependence and utility of RLNG) was cited as a reason by Oil Marketing Companies (OMCs) to reduce their uptake of furnace oil, pushing refineries to reduce their production. Almost as if in response, the dry-docking of the Floating Storage Regasification Unit (FSRU) is being scheduled for the end of June. Expected to last until the first week of July, this activity will drop the amount of RLNG being brought into the country as well.

Two weeks ago, Nepra had called a hearing of the CEOs of all Distribution Companies (Discos) and K-Electric, seeking an explanation for the load-shedding taking place across the country. A generation shortfall had been triggered by maintenance work on two turbines of Tarbela Dam, but different sources reported different numbers of the reduced megawatts. Official sources quoted 1500MW while others said the deficit was actually as much as 6500MW.

In addition to the reduced generation, inadequate transmission capacity in the national grid and theft of electricity compounded the issue. Discos were unable to draw their allocated electricity quotas, which translated into load-shed ranging between 3 to 20 hours across various parts of the country. PKR 347.435 billion had been invested by the 10 Discos over the period of seven years to improve their transmission and distribution losses, but the mammoth investment had only yielded a trivial decrease of 0.9%.

It seems that the country is not yet out of the frying pan but is heading into the fire as reports have begun to break about a shortage of RLNG, furnace oil, and water – three of the biggest sources of power generation for the country.

SNGPL has also only pledged the availability of 300MMCFD RLNG against a requirement of 900MMCFD; even this 300MMCFD is not a firm commitment. The maintenance activity itself normally takes 3 weeks, but on the request of the Oil and Gas Development Corporation Limited (OGDCL), the work is being expedited for completion in 8 to 9 days. This is an optimistic timeline, and one hopes that is also realistic.

Maintenance of hydropower turbines is usually scheduled for the winters, but surprisingly two units of Tarbela Dam had to be shut down for maintenance work during peak summer, which caused the shortfall in the beginning of the month and cascaded into load-shedding for citizens all over Pakistan. In a meeting between Chairman Indus River System Authority and Secretary Power Division, the Chairman clearly stated that it would not be possible to increase the output of Tarbela and Mangla dams until August owing to a number of external factors. Further, increasing the outflow from Mangla would come at the expense of the quota allocated for Rabi crop for Sindh and Punjab.

Furnace oil is also being affected because of the ban on imports since 2019. If thermal power plants across the country are expected to utilize furnace oil to operate, it is imperative that they have sufficient inventory to fulfill the requirements. But using additional furnace oil to bridge the generation shortfall will exhaust this inventory quicker. Without an adequate rate of replacement, this will continue to compound the problem.

So, we are in a situation where our cheapest sources of generation will be underperforming, and without RLNG, natural gas, or furnace oil, the only option left for the government will be to operate power plants on High-Speed Diesel (HSD). HSD is an expensive fuel source, and utilizing it will invariably increase the cost of electricity for end consumers, because the additional charges will be recovered through Fuel Cost Adjustments in bills. It seems that the current circumstances are not just trapping DISCOs between a rock and a hard place, but also consumers across the country – on the one hand they will have to pay higher costs of electricity; on the other hand they will have to bear excess load-shed. It is also important to mention that not all power plants across the company can operate on a dual-fuel arrangement. This means that it is possible that even the utilization of HSD to generate power will not be able to bridge the shortfall caused by a lack of principle fuel supply.

It is a very precarious situation to be in especially as temperatures are expected to increase as well as the humidity level during the monsoon season, driving a corresponding increase in demand of electricity. Could planning and better governance have prevented this predicted shortfall?

It is also alarming that Pakistan still has to face these shortages despite having invested heavily in increasing generation capacity. There has also been an almost 20% increase in electricity demand over the last 11 months of FY21, but there is still more generation available in the country. With this simultaneous shortage though, all the government’s investments will be for naught. This includes the USD 800 million invested by the government in the last 2.5 years to improve the transmission and distribution system, and the USD 117 million earmarked for the upcoming fiscal year.

It is unfortunate that despite the efforts of all stakeholders to bolster Pakistan’s energy sector, unexpected setbacks continue to prevent the sector from fully realizing its potential. We seem to be moving from one crisis to another. The current situation requires the intervention of all concerned stakeholders and government ministries to prevent it from escalating into a nationwide crisis. The citizens of the country have already been suffering under excess load-shed; it is time that the government step in and utilize its resources to support them at this critical juncture.

Copyright Business Recorder, 2021