Finance Minister, Dr Abdul Hafeez Shaikh said on Thursday that the government spent Rs 500 billion on the power sector during the outgoing financial year mainly to improve power generation and lower the burden on the poor. Addressing a press conference at the Economic Survey 2010-11 launching ceremony, he said that circular debt has reached Rs 120 billion and if the government clears this amount, the projected fiscal deficit of 5.1 percent will skyrocket to 5.7 percent of the GDP.
According to the Economic Survey, the circular debt represents inefficiency in electricity sector that increased 1.5 times compared to last year. Due to high energy prices, a shift from expensive imported fuel (oil) to indigenously available alternative fuel (gas) was witnessed, creating a massive gap between demand and supply of gas. This, in turn, compelled the government to tackle the shortage with gas load management strategy along with increase in prices.
On average electricity consumption increased at the rate of 5.2 per cent per annum during the period 2001-02 to 2009-10. Overall electricity generation increased by 2.8 percent during July-March 2010-11 against the comparable period March 2010-11. According to the Economic Survey, the modest increase in consumption of electricity indicated some revival in economic activities. The increase mainly emanates from industrial sector where an increase of 7.3 percent has been witnessed. With the exception of agriculture and street lighting sector, the remaining sectors witnessed a positive growth during July-March 2010-11.
The electricity sector remained plagued with inter-corporate circular debt, which restricted growth in the power sector as a whole and impacted negatively on the oil and gas sector to some extent. Entities in the energy sector were subjected to Rs 258.5 billion inter-circular debt till April 2011 compared to Rs 103.9 billion in April 2009 indicating an increase of 147 percent. Receivables amounted to Rs 775.2 billion and payables stood at Rs 516.7 billion. Out of Rs 258.5 billion, net receivables of PSO were Rs 51 billion, SSGCL Rs 7.1 billion, Pepco Rs 2.7 billion, OGDCL Rs 115.5 billion, Pepco Rs 37.5 billion, KESC Rs 27.5 billion, GHPL Rs 9.6 billion and PPL Rs 22.2 billion respectively.
Pakistan's total energy consumption stood at 63.1 million tons of oil equivalent in 2009-10. The energy mix comprised of gas, oil, electricity, coal and liquefied petroleum gas (LPG) with different share levels. The share of gas consumption stood at 43.9 percent in total energy mix of country followed by oil (27.9 percent), electricity (15.6 percent), coal (11 percent) and LGP (1.5 percent). This energy consumption mix witnessed a significant transformation since 2004-05.
The sectoral consumption of gas indicated that the commercial, cement, fertiliser, power and industrial sectors have experienced decline in consumption of gas during July-March 2010-11 against the same period of last year. Only two sectors, household and transport posted positive growth in gas consumption. Gas consumption in the transport sector increased by 14.3 percent, mainly due to a shift from imported fuel oil to relatively cheaper source of gas during July-March 2010-11; this was followed by the household sector with almost negligible growth rate of 0.75 percent. The cement sector has shown major decline of 64.7 percent mainly because of the fact that it has almost switched over to coal fire system for its production activities. Gas consumption in industrial, commercial and fertiliser sectors declined by 9.2, 5.0 and 2.7 percent respectively during the first nine months of the current fiscal year; whereas power sector consumption decreased marginally by 0.2 percent during the period under review.
Pakistan has huge coal resources estimated at over 185 billion tones, including 175 billion tons identified at Thar coal fields in Sindh province. Pakistan's coal generally ranks from lignite to sub-bituminous. About 56.5 percent of total coal in the country was consumed by the brick kilns industry whereas 42.7 percent by cement industry during the period July-March 2010-11. The coal consumption shares of brick kilns decreased by 2.4 percent and that of cement industry increased by 3.1 percent. The percentage share of power sector declined by 1.24 percent during July-March 2010-11 compared with the same period last year.
The primary energy supply increased by 1.9 percent during July-March 2010-11 as compared to corresponding period last year. The per capita availability of energy remained the same during the period under review. Analysis of the composition of energy supplies to the country suggests that supply of coal during 2001-02 to 2009-10 grew by an average rate of 9.3 percent per annum followed by gas, electricity, crude oil and petroleum products with per annum growth rates of 6.3 percent, 3.5 percent, 2.9 percent and 1.1 percent, respectively. Supplies of coal and electricity increased by 11.3 and 8.3 percent, respectively, whereas, the supply of gas showed a slight increase of 0.1 percent during the period under review. The remaining components experienced a decline in their supplies during July-March 2010-11 over the corresponding period last year
The balance recoverable reserves of crude oil in the country have been estimated at 280.647 million barrels. The average crude oil production per day has increased to 65,996.50 barrels during July-March 2010-11 from 65245.69 barrels per day during the same period last year. The overall production has increased to 18.08 million barrels during July-March 2010-11 from 17.88 million barrels during the corresponding period last year showing an increase of 1.15 percent. During the period under review, 34,762 (53 percent) barrels per day were produced in northern region and 31,234 (47 percent) barrels per day in southern region, as against 27,659 (42 percent) barrels and 37,586 (58 percent) barrels produced per day in North and South region respectively compared with the same period last year. During July- March 2010-11, production of crude oil increased by 25.68 percent from northern region whereas production decreased in southern region by 16.90 percent, as compared to same period last year.
The importance of natural gas to the country has been increasing rapidly. Government is making efforts towards enhancing gas production in order to meet the increasing demand of energy in the country. The balance recoverable natural gas reserves have been estimated at 26.62 Trillion Cubic Feet. The average production of natural gas per day stood at 4050.84 million cubic feet during July-March 2010-11, as compared to 4,048.76 million cubic feet over the same period last year. The overall production of gas increased to 1,109,930.16 million cubic feet during July-March 2010-11 as compared to 1,109,360.24 million cubic feet in the same period last year, showing an increase of 0.05 percent. Natural gas is used in general industry to prepare consumer items, to produce cement and to generate electricity. In the form of compressed natural gas (CNG), it is used in transport sector and most importantly to manufacture fertiliser to boost the agriculture sector. Currently twenty-eight (28) private and public sector companies are engaged in oil and gas exploration and production activities.
Liquefied petroleum gas (LPG) contributes about 0.6 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 over the past few years. The LPG marketing companies have imported around 55826.4 MT of LPG during July- March 2010-11 against 406975 MT of LPG during July-March 2009-10
In an effort to reduce dependency on expensive imported fuels as well as to improve the environment the use of CNG in vehicles has been encouraged. Currently Pakistan is the largest CNG using country. Due to existing price differential between CNG and petrol, consumers prefer to convert their vehicles to CNG. Presently, there are 3,329 CNG stations operating throughout the country. By March 2011 about 2.5 million vehicles had been converted to CNG. In addition, the government's policy of de-dieselization is being actively pursued with the provincial governments, as this policy is being implemented by them 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. Accordingly, Pakistan Mashal LNG Project (PMLP) was conceived to cater to the energy needs of the country as envisioned in the 25-year National Energy Security Plan. PMLP is to be set-up on integrated basis whereby a private sector project developer will manage the entire supply chain including procurement and shipping of 3.5 million tons per annum LNG, construction and operation of an onshore LNG receiving terminal, and delivery of 500 mmcfd re-gasified LNG to the SSGC's system in Karachi. The process for appointment of consultant for re-tendering of the Mashal Project would be initiated shortly through open international tendering and the process may take up to 6 months. Project's schedule and other details would be finalised after appointment of consultant and decisions regarding commercial structure of the project, terminal type, terminal location and SSGC's role will be finalised soon.
During July-March 2010-11, a total of 30 wells were drilled, including 13 wells in the public sector and 17 in the private sector. Exploratory wells witnessed a negative growth, whereas the development wells posted a positive growth in the public sector during the period under consideration. Total investment of $810 million has been made during July-March 2010-11 in the upstream petroleum sector.