LNG has become expensive exceeding USD 15.0/mmBtu and price scenario remains uncertain for the coming winter. Furnace Oil (FO), which was almost replaced by LNG, has become cheaper and seems to be emerging once again. Will LNG-FO price ratio remain to the disadvantage of LNG for a long time? There is confusion now whether FO-based power plants should be shut down or not as opposed to a consensus earlier for its closure? What are the other fuel alternatives? What is the future of combined cycle power plants?
LNG was introduced in Pakistan for two reasons: (i) Local gas fields are depleting and local chapter gas production has been going down; and (ii) HSFO has been expensive (by 20% on the average) than LNG and HSFO power plants were much less efficient than combined cycle power plants running on gas/RLNG. Highest efficiency of new oil-fired power plants has been quoted at 40%.Older oil-fired power plants such as GENCOs and KE are even less efficient (28-30%). A decision has been made by Power Division and power regulator Nepra to close down such plants. However, this could not happen initially for demand reasons and later due to transmission constraints. Nepra has been reprimanding NTDC, CPPA-G and PCC for repeating the usage of oil plants but they have continued it. Hubco has been on the agenda for a long time now about which we will discuss later in this space.
HSFO is a co-product of a number of oil refineries in Pakistan, although most of the oil refineries are switching to deep conversion which eliminates/converts production of HSFO. HSFO was used to be imported as well due to a high share (40%). Import of HSFO is no more. However, HSFO continues to be produced some of which continues to be used in continued running of oil power plants. There has been an installed capacity of 7500 MW of oil plants out of which 1500 GW has been used irregularly on the need basis.
It appeared earlier that finally the time of these plants is over. However, recent price increase of LNG has made oil plants and HSFO relevant again. SPOT LNG prices have been quite low for the last three years going down even to 2 -3 USD/mmBtu level, albeit briefly. Average RLNG prices including about 2 USD overheads remained at 8-10 USD. In winters, however, LNG prices did touch the 15 USD/mmBtu mark. This time, LNG prices crossed the 15 USD mark even in summer. It is being projected that winter prices may even be higher.
All commodity prices are at high prices these days. This is the classical capitalist cycle. Low demand pushes the prices lower than even cost which discourage investments in capacity which when demand increases pushes the prices due to lower capacity and supply. This is a 5-7 years cycle usually, unless there is change in technology as has happened in the case of Shale gas in the US.
Recently, the price of HSFO remained at 10 USD/mmBtu while LNG price crossed the 15 USD/mmBtu mark. The price difference has come down but still HSFO remains cheaper.
In winters, residential sector's demand increases to 2.5 times the summer demand in the SNGPL region. Thus it appears that in the coming winter, oil power plants could emerge as viable and needed ones.
The PPA contract of Hubco oil-fired plant (1200MW) is expiring in 2027. Due to higher oil prices, Hubco hardly runs at more than 1%. CPPA-G will pay an estimated Rs 260 billion in terms of fixed capacity charges. The present value of these future payments comes out to be Rs 65 billion. The government is said to have been proposed to buy out this plant. There has been a proposal made by Hubco to convert the oil-fired power plant to Thar coal which also involves some valuation of the present value of the future series of payments. The problem has many dimensions. Firstly, the government is not flush with cash so as to retire future liabilities earlier. Secondly, there is an excess capacity. Thirdly, even newly-built combined cycle power plants are projected to be almost redundant due to high LNG prices and due to the induction of relatively cheaper base load power plants like coal and nuclear. Fourthly, there are Genco FO power plants which are of low efficiency and are on 'Take or Pay'. Shouldn't such GENCO plants be the candidates for buy-out by government as also emphasized by Nepra? Fifthly, there are ten other oil-fired power plants which are producing electricity regularly, although at a lower load factor. What is wrong with Hubco? Why isn't it working like others? If it has some problems, why should the government bail it out through public funds? Why to have a specific treatment for one power plant?
It may be noted that it was only recently that Nepra had to extend PPAs of two oil power plants-Gul Ahmad and Tapal-with a combined generation capacity of about 300MW, while the PPAs of the two plants were expired. Now KE will be importing LNG (probably more expensive than HSFO) for a new LNG power plant of 550MW. Capacity payment of Rs 240 billion will have to be made by the government for an under-utilized Hubco! Separation of generation, transmission and distribution has been on the cards for a very long time.
In passing, it must be mentioned here that Thar coal's fate has been compromised by those who manipulated its tariff to a very high level. Its production cost elsewhere is 20-25 USD/t at the comparable mine characteristics. It has not required elsewhere scale economy argument to be able to mine and sell at a reasonable price. Small mines in Eastern Europe are producing at afore-mentioned cost, while Thar coal's cost is more than double. Fortunately, Thar coal board has become alive to this and has taken steps to reduce these costs. There are other investigations that are purportedly going on in this respect. International opinion against coal is building fast. Only a reasonable Thar coal price may compensate the externalities that may come to be imposed. Furthermore, Railway link for transporting Thar coal has been put into jeopardy by ambitious businessmen who are asking a subsidy in CAPEX for installing this link. The simpler solution would have been to give it to Pakistan Railways under a normal tariff system and financed under the Public Sector Development Plan (PSDP).
For high demand and price reason of gas/LNG in winters, alternate solutions may have to be found out. Combined cycle power plants can be run on Naphtha and as well as condensate. These are currently being exported. There are logistical problems in its exports as well. If these two fuels are stored for winter period, LNG problem can be partly resolved for winter season. We have earlier written a full length article (RLNG: no panacea) in this regard. The reader is referred to it in case of interest. Biogas, bio-CNG and coal gasification can improve gas supplies and stabilize prices, reducing the impact of uncertain LNG prices.
(The writer is former Member Energy, Planning Commission and author
of several books on the energy sector)
=============================================================================================================================TABLE 4=============================================================================================================================Installed Capacity by Type (MW)=============================================================================================================================As on 30th June 2016 2017 2018 2019 2020=============================================================================================================================HYDEL=============================================================================================================================WAPDA Hydel 6,902 6,902 8,341 9,389 9,389IPPs Hydel 214 214 372 372 472Sub-Total 7,116 7,116 8,713 9,761 9,861% Share (Hydel Installed Capacity) 27.99 24.78 24.22 25.03 25.47=============================================================================================================================THERMAL=============================================================================================================================GENCOs: CPPA-G System 5,897 5,897 5,637 5,637 4,881KE Own 1,874 1,874 2,294 2,294 2,294IPPs: CPPA-G System 8,643 10,566 15,297 16,946 17,276IPPs: KE System 252 252 366 366 366SPPs/CPPs/N-CPPs: CPPA-G System 0 313 340 340 340SPPs/CPPs/N-CPPs connected with KE 35 87 87 87 87Sub-Total 16,701 18,989 24,020 25,670 25,244% Share (Thermal Installed Capacity) 65.70 66.14 66.76 65.83 65.20=============================================================================================================================NUCLEAR.=============================================================================================================================CHASNUPP (I, II, III and IV) 615 1,005 1,330 1,330 1,330KANUPP 137 137 137 137 137Sub-Total 752 1,142 1,467 1,467 1,467% Share (Nuclear Installed Capacity) 2.96 3.98 4.08 3.76 3.79=============================================================================================================================RENEWABLE ENERGY {WIND, SOLAR AND BAGASSE)=============================================================================================================================Wind Power Plants 306 785 1,048 1,248 1,248Solar Power Plants 400 400 430 430 430Bagasse based Power Plants 146 280 301 369 369RE Power Plants: CPPA-G System 852 1,465 1,779 2,047 2,047Solar Power Plants: KE System 0 0 0 50 100RE Power Plants: KE System 0 0 0 50 100Sub-Total 852 1,465 1,779 2,097 2,147% Share (RE Installed Capacity) 3.35 5.10 4.94 5.38 5.55Total Installed Capacity of the Country 25,421 28,712 35,979 38,995 38,719=============================================================================================================================Source: WAPDA/GENCOs/lPPs/KE/CPPA-G==================================================================Nuclear NTDC KE Total==================================================================Hydro 9,861 0 9,861Nuclear 1,330 137 1,467Wind 1,248 0 1,248Solar 430 100 530Gas 13,814 2,421 16,235Coal 4,770 52 4,822RFO 3,913 262 4,175Bagasse 369 0 369==================================================================TOTAL 35,735 2,972 38,707==================================================================Gross Capacities at 30-Jun-2020========================================================================================================================================================================================TABLE 8========================================================================================================================================================================================Plant-wise Electricity Generation (GWh)========================================================================================================================================================================================Power Station Primary Alternate 2015-16 2016-17 2017-18* 2018-19* 2019-20* Fuel Fuel========================================================================================================================================================================================Al: Hydel (WAPDA)========================================================================================================================================================================================Major Hydropower UnitsTarbela Hydel Hydel 15,990.31 15,049.44 13.356.B6 10.619.28Tarbela 4th Ext. Hydel Hydel - - 2,318.06 5,498.03Ghazi Barotha Hydel Hydel 6,721.69 6,885.76 6.020.89 6.552.14 6.S51.36Mangla Hydel Hydel 6,864.40 5,347.57 4.141.86 3,860.85 4,686,36Warsak Hydel Hydel 924.25 985.44 916.53 1.002.27 1.104,95Chashma Hydel Hydel 897.05 890.33 756.00 767.16 751.58Khan Khwar Hydel Hydel 37.64 199.06 170.90 237.74 279.12Allai Khwar Hydel tydel 568.42 396.66 462.09Jinnah Hydel Hydel Hydel 296.32 292.69 230.25 225.63Duber Khwar Hydel Hydel 643.07 589.47 514.83 594.42Neelum Jhelum Hydel Hydel - - 174.08 4.842,30Golen Gol Hydel Hydel - - 99.31 88.85========================================================================================================================================================================================Small Hydropower Units========================================================================================================================================================================================Dargai Hydel Hydel 114.58 104.80 95.72 109.35 98.91Rasul Hydel Hydel 95.98 93.47 65.54 71.86 36,56Shadiwal Hydel Hydel 25.55 31.05 25.93 28.39 14.25Chichoki Mallian Hydel Hydel 34.16 34.23 31.43 29.05Nandipur Hydel Hydel 40.75 43.15 45.73 36.97 35.25Kurram Garhi Hydel Hydel 23.40 18.44 17.24 14.23 15.28Renata Hydel Hydel 2.03 2.20 2.31 2.19 2.08Chitral Hydel Hydel 3.60 4.20 3.45 3.51Gomal 2am Hydel Hydel 11.86 6.17 0.36 32.68 55.25Malakand/Jabban Hydel Hydel 138.27 117.16 105.39 135.99 139.02Total Hydel (WAPDA) 33,433.33 31,091.29 26,951.19 31,167.85 37,425.41A2: Hydel (lPPs)Malakand-III (PEDO) Hydel Hydel 425.00 426.00 362.11 399.25 408.53Pehur (PEDO) Hydel Hydel 40.00 45.00 32.61 35.86Laraib Energy (AJ&K) Hydel Hydel 545.00 424.00 389.66 354.38Garam Chashma Hydel Hydel 0.00 0.00 0.00Marala Hydro (PPDCL) Hydel Hydel - - 0.74 527.45Patrind Hydro (AJ&K) Hydel Hydel - - 246,20 527.45 566.25Gulpur Hydropower Project Hydel Hydel - - 34.33Total Hydel (IPPs) 1,121.00 988.00 1,118.24 1.928.04 1.562.55Total Hydel (A1+A2) 34,554.33 32,079.29 28,069.43 33,095.89 38,987.96========================================================================================================================================================================================B1: Thermal (GENCOs: CPPA-G System)========================================================================================================================================================================================TPS Jamshoro RFO/Gas RFO 3,246.46 3,253.56 1,792.06 880.09 209.90GTPS Kotri Gas HSD 582.02 338.67 94.92 37.19TPS Guddu (Units 1-4) Gas RFO 148.64 227.08 258.11 10.02 0.00TPS Guddu (Units 5-10) Gas - 2,058.19 2,487.81 3.617.95 3.467.30 1,294.64TPS Guddu (Units 11-13) Gas - 272.26 820.54 1.043.97 B37.20TPS Guddu (Units 14-16) Gas HSD 3,551.47 4,543.55 3,855.08 5.069.78TPS Quetta Gas - 111.29 53.32 0.00 0.00TPS Muzaffargarh Gas RFO 4,644.65 5,160.13 3,040.37 836.73SPS Faisalabad Gas RFO 85.84 107.68 6.26 0.00GTPS Faisalabad Gas HSD 275.16 214.62 105.29 149.53 0.00TPS Nandipur Gas HSD 1,267.78 1,379.05 2.3 81.70 1,729.09 1,476.33FBC Lakhra Coal Coal 148.16 123.97 3.39 0.06 0.00Total Thermal (GENCOs: CPPA-G System) 16,391.91 18,709.99 16,199.10 13,016-99 7,907.85========================================================================================================================================================================================B2: Thermal {IPPs: CPPA-G System)========================================================================================================================================================================================Lai Pir Power RFO - 1,946.10 1,601.09 1,089.06 613.80 186.32Pak Gen. power RFO - 878.13 1,727.18 1,237.28 495.56 149.76Altern Energy Gas - 184.60 198.30 145.12 22.03 3.73Fauji Kabirwala Gas HSD 1,138.06 1,122.84 1,017.26 563.13 346.32Habibullah Coastal Gas HSD 563.03 785.90 880.33 716.78 108.37Hub Power RFO - 7,546.99 6,793.11 5,196.60 814.43 32.38KAPCO Gas RFO/HSD 6,757.00 7,524.00 7,436 76 4,959.40 3,476.67Kohinoor Energy RFO - 877.41 816.83 645.40 387.44 363.86Rousch Power Gas HSD 2,970.66 2,459.69 2,591.64 1,035.85 217.53Saba Power RFO - 70.59 510.46 465.88 225.41 50.S3TNB Liberty Power Gas HSD 1,491.36 1,430.23 1,041.56 1,307.61 896.74Uch Power Gas HSD 4,213.96 4,406.44 4.442.99 3,895.85 4,087.33Attock Gen. RFO - 1,179.30 1,135.41 912.45 532.18 320.96Atlas Power RFO - 1,320.46 1,336.90 1,246.45 691.30 259.33Engro Powergen. Qadirpur Gas HSD 1,222.00 1,731.00 1,668.42 1,385.13 700.74Saif Power Gas HSD 1,088.78 905.44 841.56 828.20 476.28Orient Power Gas HSD 1,155.62 944.68 041.39 877.80 338.00Nishat Power RFO - 1,272.16 1,239.76 1,171.19 675.10 277.46Nishat Chunian RFO - 1,240.16 1,350.33 1,099.67 599.74 351.23Sapphire Electric Gas HSD 1,056.42 989.71 814.96 808.51 296.76Halmore Power Gas HSD 916.00 553.00 871.01 612.91 347.69Narowal Energy RFO - 1,161.91 1,334.18 1,199.68 636.13 338.08Liberty Power Tech. RFO - 1,277.44 1,369,33 1,175.61 776.26 458.54Foundation Power Gas - 1,211.48 1,382.85 1.392.39 1.330.60 777.30Davis Energen. Gas 74.00 61.05 8.82 0.00 0.00Uch-II Power Low BTU Gas 2,332.81 2,731.34 2,593.04 3,018.37 2,148.02Huaneng Shandong Ruyi Bituminous Coal - 873.17 8,461.59 8,220.07 6,167.19QATPL (Bhikki) RLNG HSD - 502.77 3,655.62 6,149.75 5,192.50NPPMCL (HBS) RING HSD - 155.11 2,856.73 7,027.24 7,050.34NPPMCL (Balloki) RLNG HSD - - 2,050.62 5,284.19 5,911.84Port Qasim Electric Power Bituminous Coal HSD - - 3,319,02 7,553,64 8,969.74Reshma Power RFO/HSFO - - 60.86 15.11 2.07Gulf Powergen RFO/HSFO - - 2.78 0.00 0.00China Power Hub Imported Coal - - - 260.82 6,136.20Engro Powergen Thar Thar Coal - - - 277.42 4,280.22Total Thermal (IPPs/SPPs/CPPs: CPPA-G System) 45,146.42 47,972.10 62.433.73 62,597.73 60.720,31Total Thermal: CPPA-G System (B1+B2) 61,538.33 66,682.09 78,632.82 75,614.72 68,628.16========================================================================================================================================================================================C: Nuclear========================================================================================================================================================================================CHASNUPP-I NUC NUC 1,486.00 2,118.00 2,433.42 2,141.02 2,044.64CHASNUPP-II NUC NUC 2,368.00 2,315.00 2,301.74 2,262.73 2,636.12CHASNUPP-III NUC NUC - 1,435.00 2,246.55 2,484.34 2,322.85CHASNUPP-IV NUC NUC - - 1,738.16 2,117.59 2,701.28KANUPP NUC NUC 362.00 410.00 330.86 129.99 193.00Total Nuclear (C) 4,216.00 6,278.00 9,050.73 9,135.67 9,897.89========================================================================================================================================================================================D: Import========================================================================================================================================================================================Import from Iran (Tavanir) 463.00 496.00 554.74 486.80 513.74Total Import: CPPA-G System (D) 463.00 496.00 554.74 486.80 513.74================================================================================================================================================================================================TABLE 15================================================================================================================================================================================================Thermal Electricity Generation by Sector arid by Fuel (GWh) 2015-16 2016-17 2017-18* 2018-19* 2019-20*================================================================================================================================================================================================Thermal Generation by:================================================================================================================================================================================================GENCOs (1. II. HI and IV) 16.391 .91 18.709.99 16,199.10 13.016 99 7.907.85KE Own Power Plants 10,323.00 10,147.00 10,337.75 10,727.68 10,358.00IPPs: CPPA-G System 45.146.42 47.972.10 62,463.23 62,597.73 60,720.31IPPs: KE System 1,421.00 1.53 2,131.72 1,862.68Others (SPPs/CPPs/N-CPPs): CPPA-G System 251.00 271.40 665.53 405.13 170.99Others (SPPs/CPPs/N-CPPs): KE System 139.00 187.00 550.49 523.74 535.00Total Thermal Generation 73.672.33 78,818.49 92,013.90 89,402.99 81.554.B3Thermal Generation using: CPPA-G Generation on Gas (GWh) 29.497.42 31.520,24 23.291.97 22.439.40 15,236.00 System** Share of Gas Generation (%) 40.04 39.99 25.31 25.10 18.68Gas KE Generation on Gas (GWh) 8,065.00 6.768.50 6,374.93 5,571.15 5,379.18 System' Share of Gas Generation {%) 10.95 8.59 6.93 6.23 6.60 Total Generation on Gas (GWh) 37,562.42 38,288.74 29,666.90 28,010.55 20,615.48 Share of Gas Generation (%) 50.99 48.58 32.24 31.33 25.28 CPPA-G Generation on RLNG (GWh, 0.00 20,678.32 28.148.92 23,830.58 System Share of RLNG Generatior 1.83 22.47 31.49 29.22RLNG KE System Generation on RLNG (GWh 0.00 0.00 496.34 2,664.40 2.985.50 Share of RLNG Generation (%) 0.00 0.00 0.54 2.98 3.66 Total Generation on RLNG (GWh) 0.00 657.88 21,174.66 30,813.32 26,816.08 Share of RLNG Generation (%} 0.00 0.83 23.01 34.47 32,88 CPPA-G Generation on RFO (GW 30,631.47 22,755.88 9.091.79 System Share of RFO Generatior 41.5E 40.69 24.73 KE Generation on RFO (GWh) System** Share of RFO Generation (*VI 34,449.47 37,108.20 28,159.18 13,825.87 8,156.25 Generation on RFO (GWh) 46.76 47.08 30.60 15.46 10.00 Total Share of RFO Generation (%) 1,512.28 1.704.54 27.74 0.67 CPPA-G Generation on HSD (GWh) 2.05 2.16 0.86 0,03 0.00 System Share of HSD Generatioi 0.00 0.00 0.00 0.00 0.00HSD KE System Generation on HSD (GWh) 0.00 0.00 0.00 0.00 0.00 Share of HSD Generation (%) 1.512.28 1,704.54 788.18 27.74 0.67 Total Generation on HSD (GWh) 2.05 2.16 0.86 0.03 0.00 Share of HSD Generation (%) 148.16 997.14 11,786.50 16,312.0 25,553.34 CPPA-G Generation on Coal (GWh) 0.20 1.27 12.81 18.25 31.33 System Share of Coat Generation (V 0.00 62.00 438.49 413.51 413.00Coal KE System Generation on Coal (GWh) 0.00 5.85 3.59 2.47 1.59 Share of Coal Generation (%) 146.16 1,059.14 12,224.99 16,725.52 25.966.34 Total Generation on Coal (GWh) 0.20 1.34 13.29 18,71 31.84 Share of Coal Generation (%) 73,672.33 78,818.50 92,013.91 89,402.99 81,554.82================================================================================================================================================================================================Total Thermal Generation* Net Electricity Generation during FY2017-18. 2018-19 and2019-20.** Including generation of SPPs/CPPs/N-CPPs in CPPA-G System.* Including generation of IPPs in KE System.* Including generation of IPPs/CPPs in KE System.Source: GENCOs/IPPs/KE==================================================================Power Plants capacity (MW) and Generation (GWh)-2019-20================================================================== MW GWH MW (%) GWH (%)==================================================================Hydro 9861 28069 25.48 20.75Nuclear 1330 9898 3.44 7.32Wind 1248 2882 3.22 2.13Solar 530 705 1.37 0.52Gas 16235 20615 41.94 15.24RLNG 4834 26816 12.49 19.83RFO 4175 8156 10.79 6.03Coal 4822 25966 12.46 19.20Bagasse 369 564 0.95 0.42==================================================================Total 38707 135259 100.00 100.00==================================================================Source: NEPRA SOI 2019-20, includes KE,NTDCCopyright Business Recorder, 2021