Pakistan is unlikely to attract any new IPPs in future as the Petroleum Ministry has denied gas availability to gas-fired or dual-fuel based thermal projects in future, says a Recorder Report quoting ministry sources.
A letter written to the PPIB chief says that the Petroleum Ministry has reviewed the gas availability position in the country, and in the light of overall projections, it is not possible to provide gas for power projects, in addition to the allocation already made for those currently in operation. PPIB wanted allocation of gas for power projects of Tecna, an IPP, which plans to set up thermal power plants in the country.
Keeping in view the commercial operation date of the planned IPPs, block gas allocation at the PPIB's disposal would be 300 mmcfd in 2007-08, followed by 240 mmcfd in 2008-09, and 180 mmcfd in 2009-10, whereas gas already allocated to IPPs is estimated at 151 mmcfd in 2007-08, 227 mmcfd in 2008-09 and 152 mmcfd in 2009-10. The Petroleum Ministry has, however, said that 40 mmcfd gas from the block allocation already placed at the disposal of PPIB may be considered for allocation to Tecna by PPIB on nine-month basis up to 2009-10 on the understanding that for the period up to October 2008 or till the commissioning of the planned IPPs, whichever is later, gas allocation would be only to the extent that remained uncommitted from the block gas allocation placed at the disposal of PPIB.
Further, the Petroleum Ministry has set conditions for providing gas to Tecna, according to which the project should be implemented on fast-track basis and completed within eight months of the signing of the power purchase agreement, as was decided in case of Savari. According to the sources quoted in the Recorder Report, due to non-availability of 200 mmcfd gas, PPIB had to shelve 900-megawatt projects, ie 600 mw Hawkes Bay and 300 mw Gadani projects in KESC area, where power shortages have reached an alarming level.
Pakistan has unfortunately come to depend more and more on IPPs for meeting its expanding power requirements. It has a well-developed and integrated infrastructure of transporting, distributing and utilisation of natural gas. Commercial, cement, fertiliser, industrial and transport sectors registered a sharp rise in the consumption of gas during 2005-06. And during the past ten years Pakistan's power sector has emerged as the largest consumer of gas (36.4 percent), followed by fertiliser (21.6 percent), industries (19.1 percent), households (17.8 percent), commercial (2.7 percent), cement (1.1 percent) and transport sector (CNG) 1.0 percent. This shows the level of dependence Pakistan has developed for natural gas.
The thermal power was supposed only to fill a gap in the power generation system of Pakistan, but the fuel mix policy for thermal generation pursued by various governments in Pakistan during the 1970, denied the country this option. Most of the thermal additions in the installed capacity made in Pakistan since the late 1950s had been gas-based. As a result, the consumption of gas by power sector increased from 2,922 mmcft in 1956-57 to 42,344 mmcft in 1969-70 to 60,328 mmcft in 1977-78 and 84,743 mmcft in 1980-81.
The consumption had to be decreased, mainly due to non-availability of gas, to 74,294 mmcft in 1982-83, but it again increased to 88,906 mmcft in 1984-85. In 1978-79, gas (in terms of heat units) accounted for 98 percent of the total fuel consumed for thermal power generation. The percentage share of gas had fluctuated, depending upon its availability, mostly between 80 percent and 98 percent during the 1964-82 period, after which it decreased, with gas accounting for 69.4 percent in 1982-83 and 65.4 percent in 1987-88. The demand of gas increased in the country at a tremendous rate.
Its demand for more productive use multiplied over the years, resulting in reduction of supplies to some users like cement, sugar and power sectors. Consequently, the alternative use of oil in the gas-based thermal power stations, due to non-availability of gas, started affecting their capability adversely. Unfortunately, the utilisation of coal for power generation remained completely neglected, and its percentage share continued to decrease, reaching the lowest 0.03 percent in 1981-82 and its share in 1988 was only 0.2 percent.
It cannot be denied that IPPs require foolproof gas/furnace oil supply guarantees to continue their operations at the optimum level, but with the depleting availability of gas it will become more and more difficult for the independent power producers to maintain the optimal level of power generation. Secondly, power supplied by IPPs has become prohibitively expensive, which is apparent from the fact that Wapda paid Rs 82.4 billion to IPPs for the purchase of electricity during July-March period of FY 2004-05.
The payment to the IPPs was higher by Rs 17.40 billion, as compared to the payment of Rs 65 billion made during the corresponding period of the preceding year, which shows incremental rise in the cost of thermal power. As we have earlier argued in this space, there is a need for the government to execute mega hydropower projects on a fast-track basis, to rid the exchequer of this avoidable financial drain. Secondly, there is a need to tap our huge coal energy potential at the earliest for power generation.
Perhaps the Petroleum Ministry's inability to ensure gas availability for new gas-fired or dual fuel based thermal projects in future is a blessing in disguise, because then the water and power bureaucracy may speed up implementation of hydropower projects. Even the World Bank has reminded us on a couple of occasions of the urgent need to hurry up with the implementation of hydropower projects.