Pakistan's Energy & Water - News and Updates

[Argus Panoptes]

............
Originally Posted by Argus Panoptes



No Sir, gas, oil and coal is available aplenty. What is not available is the money to pay for their use. That is an important difference.



Pakistan is short of oil, gas and coal as well as electricity. That is why GOP is spending about $12-billion to import it. It may be available a plenty in the Arab Gulf, but not in Pakistan.

Money is without doubt the main problem. However, even if all the circular debt is cleared and PSO has sufficient funds to import as much as they want; there will still be shortage of gas and load shedding will still be with us; albeit a lot less than it is now.

That is what I meant Sir @niaz, that all types of energy sources are freely available in the international markets, but we don't have the money to pay for their import and utilization. After all, Japan has very few indigenous energy sources too, but they have the money to pay for whatever they need to import, don't they?

 

[Devil Soul]

Pakistan's new government plans $5 billion debt issue to switch lights on
By Mehreen Zahra-Malik
ISLAMABAD | Tue May 28, 2013 9:11am EDT
(Reuters) - Pakistan's new government plans to sell $5 billion in treasury bills to pay off a chain of debt choking the country's power sector and its economy and boost electricity output by a quarter - all within its first 100 days in power.

The incoming administration of Prime Minister-elect Nawaz Sharif has identified widespread blackouts that last up to 20 hours a day in some areas as its top political and economic challenge.

The deepening power shortages have sparked violent protests and cost hundreds of thousands of jobs in a country already beset by high unemployment, a failing economy, widespread poverty, sectarian bloodshed and a Taliban insurgency.

Several key members of the incoming government's energy team interviewed by Reuters over the past few days said that out of a long list of challenges ranging from lack of investment to electricity theft, plugging a 500 billion rupee ($5.08 billion) financing hole was the most pressing task.

Sources in the new administration said these funds would be raised through sales of 3-month, 6-month and 12-month treasury bills.

By breaking a vicious cycle of withheld payments running through the entire power-generation chain from end consumers to electricity distributors, power plants to refiners who can't import enough oil because of unpaid fuel bills, the team hopes to bring immediate relief.

"In the first three months of our government, we plan to add 2,000-3,000 megawatts to the national grid and at least 16,000 megawatts in the medium term," said Khawaja Asif, who is due to take the energy portfolio in Sharif's cabinet that will be sworn in on June 5.

Pakistan's power sector now generates about 8,000 MW, with needs estimated at 15,000.

A "100-day roadmap" for the energy sector, due to be unveiled by Sharif on June 5, and made available to Reuters, also calls for an overhaul of a decades-old system of subsidies that is considered one of the root causes of the crisis.

100-DAY ROADMAP

"It makes no sense that you subsidize electricity at the same rate for the person who drives a Mercedes and the poor guy who rides a bicycle to work," said Asif, who briefly served as minister for petroleum and natural resources in 2008 and headed a privatization body in a previous Sharif cabinet in the 1990s.

"People who can pay more for power will pay more. That will be the hallmark of our government's energy policy."

That, alongside a promised push to tackle electricity theft and a growing mountain of unpaid electricity bills, can set the new government on a collision course with the country's rich and influential elite.

While hooking up a cable to overhead electricity wires is the common man's way of getting power without paying for it, well-connected businessmen, politicians and even government departments simply refuse to pay their bills.

The incoming government's response is to pick competent managers to run power distribution companies and give them revenue and other performance targets.

"The priority is to appoint professional management in power distribution companies, and sack political appointees and cronies of the previous government," said Suleman Shahbaz, Nawaz Sharif's nephew who runs the party's economic think-tank.

The sector has long been plagued by waste and allegations of endemic corruption with public funds lavished on poorly-run state power firms while more efficient independent power producers were starving for cash.

"It is mind-boggling that there was so much low-hanging fruit that the previous government didn't even bother to pick," said Miftah Ismail, who co-authored the incoming administration's energy policy, referring to missed opportunities.

The 100-day plan is meant to buy the government time to focus on medium- and long-term solutions, such as modernization of power generators, investment in new capacity, encouraging sugar mills to use biofuels to produce electricity and finally, to reduce the nation's reliance on expensive imported oil.

"We have to move from oil to coal, hydro and gas-based power generation to bring down costs," said Ismail. "There is no other way."

With an estimated nationwide electricity shortfall of more than 60 percent exacerbating a balance of payments crisis, Asif says the new government is well aware of its responsibility.

"How we tackle the energy crisis will not just determine the political life of this government but also life itself of this country," he said. "Failure is not an option."

($1 = 98.4550 Pakistani rupees)

(Editing by Tomasz Janowski and Robert Birsel)
Pakistan's new government plans $5 billion debt issue to switch lights on | Reuters

 

[niaz]

Watch the following video from 35:30

I have watched the discussion in full. My comments are:

One would have noticed that Mr Cheema, ex MD of PEPCO never once mentioned the quality of furnace supplied by PSO. Dr Sulehry mentioned about an incident in KOT ADDU Power plant and that was only after prompted by the anchor himself.

This is definitely a case of theft. Purchase Manager at Kot Addu plant and transporter of the fuel oil from Karachi are obviously in cohorts; fuel oil is stolen on the way and water pumped in to make up the volume. Stolen oil is then sold to private sector and the money divided. 8% water means that Kot Addu Power is losing approx. $50/- for each metric ton furnace oil purchased.

PSO is a wholly Gov’t owned company and it is hard to visualize why their top management would supply off spec fuel to a power company. IMHO PSO spokesman should have been asked to reply to the charges as this is very strong accusation against the largest Petroleum Company of Pakistan. May be Hamid Mir has a grudge against the MD & CEO of PSO, Mr Naeem Yahya Mir.

Dr Yasmeenzai may be a great academic but his knowledge about power generation is severely limited. Has no one ever explained the difference between bituminous coal and lignite to Dr Yasmeenzai?

Producing ethanol from molasses is no rocket science; however ethanol is used mostly in internal combustion engines, especially in petrol engines; not in power plants and this discussion was specifically for power shortage. Besides, once we start producing large quantities of ethanol, spurious alcohol sellers will have a field day. Wonder what our Mullahs have to say about that!

For the record, 56% of Indian electricity is produced by coal because India has about 250-billion tons located mainly in Orissa, Jharkhand & Chhattisgarh, a lot of it bituminous & semi bituminous. Despite this India imports thermal coal from Indonesia, Australia & South Africa.

On the other hand, Dr Sulehry as well as Mr Cheema knew what they were talking about and all of their comments were thoroughly professional. Dr Sulehry correctly cleared the misconception about the 185-billion tons of Lignite Thar coal that Dr Yameenzai had been harping about.

 

[ejaz007]

Look up the last 20 minutes of yesterday's Capital Talk, it is also available online.

He said that the normally accepted content is 0.5, but due to sub-standard practices and all the water rises to 8%...due to this the machinery is severely affected and the maintenance cycle is affected.

Unfortunately you tube is banned and I do not have access to it and have not seen the capital talk.

Even then I have my reservation about the claim by whoever claimed it. 8% is too high and no sensible organization shall accept the product with such a water content. If an organization is accepting this than they are to be blamed.

 

[ejaz007]

New govt plans $5bn debt issue to switch lights on

ISLAMABAD: The new government plans to sell $5 billion in treasury bills to pay off a chain of debt choking the country’s power sector and its economy and boost electricity output by a quarter –all within its first 100 days in power.

The incoming administration of prime minister-elect Nawaz Sharif has identified widespread blackouts that last up to 20 hours a day in some areas as its top political and economic challenge. The deepening power shortages have sparked violent protests and cost hundreds of thousands of jobs in a country already beset by high unemployment, a failing economy, widespread poverty, sectarian bloodshed and a Taliban insurgency.

Several key members of the incoming government’s energy team interviewed by Reuters over the past few days said that out of a long list of challenges ranging from lack of investment to electricity theft, plugging a 500 billion rupee ($5.08 billion) financing hole was the most pressing task. Sources in the new administration said these funds would be raised through sales of 3-month, 6-month and 12-month treasury bills.

By breaking a vicious cycle of withheld payments running through the entire power-generation chain from end consumers to electricity distributors, power plants to refiners who can’t import enough oil because of unpaid fuel bills, the team hopes to bring immediate relief. “In the first three months of our government, we plan to add 2,000-3,000 megawatts to the national grid and at least 16,000 megawatts in the medium term,” said Khawaja Asif, who is due to take the energy portfolio in Nawaz’s cabinet that will be sworn in on June 5.

Pakistan’s power sector now generates about 8,000 MW, with needs estimated at 15,000. A “100-day roadmap” for the energy sector, due to be unveiled by Nawaz on June 5, and made available to Reuters, also calls for an overhaul of a decades-old system of subsidies that is considered one of the root causes of the crisis. “It makes no sense that you subsidise electricity at the same rate for the person who drives a Mercedes and the poor guy who rides a bicycle to work,” said Asif, who briefly served as minister for petroleum and natural resources in 2008.

“People who can pay more for power will pay more. That will be the hallmark of our government’s energy policy.” That, alongside a promised push to tackle electricity theft and a growing mountain of unpaid electricity bills, can set the new government on a collision course with the country’s rich and influential elite. reuters

Daily Times - Leading News Resource of Pakistan

EXIM Bank of China to provide $448m for Neelum-Jhelum project


LAHORE: EXIM Bank of China has signed an agreement with the government of Pakistan to provide $448 million for 969 MW-Neelum Jhelum Hydropower Project. This agreement is a significant development in the efforts to secure requisite financial resources for the remaining works of under construction Neelum Jhelum Hydropower Project. Neelum Jhelum Hydropower Project is being constructed on River Neelum in Azad Jammu and Kashmir. In addition to generating much needed low-cost hydel electricity to help mitigate power shortages in the country, the project is also equally important for Pakistan to establish priority water rights. In view of its significance Water and Power Development Authority is making all possible efforts to complete Neelum Jhelum Hydropower Project by 2016 according to its construction schedule. At present the construction work on all sites of the project is progressing satisfactorily. Out of total 67-kilometre (km) tunnels, 34.24 km long tunnels (51%) have so far been excavated, while excavation of underground power house stands at 75.24 percent and transformers hall at 96.33 percent. De-sander of the project is 95 percent complete and Nauseri Bridge over River Neelum is 100 percent complete. Second stage diversion of the River Neelum has also been completed. staff report

http://www.dailytimes.com.pk/default.asp?page=2013\05\29\story_29-5-2013_pg5_3

 

[Jango]

Now that the video is being discussed, I agree with Tahir CHeema that the state should squeeze the affluent class and the state owned machinery and make them cough up the bills.

Again, it's as much mismanagement as much as technical.
@niaz, sir do you think that exempting a city which has a power generation house is viable? Like Mirpur consumes about 50MW of electricity, so exempting Mirpur and Mangla and adjoining areas such as Dina etc will amount to about 70-80MW...so is it viable?

And the Dr Sulehry said that a power station on-site would be viable...so what would be the downside of that? Line losses while moving it in form of electricity from Thar to some plant in Punjab or Sindh?

 

[muse]

There is always some moisture trapped in oil and that is why limit in most cases is 0.5% by volume. Oil & water are not miscible; it takes a few chemical additives to form an oil /water emulsion.

When the tanks are nearly empty, water is pumped in to raise the normally un-pumpable stock up so that it can be pumped out. This water will form a layer at the bottom of the tank lorry transporting the fuel. If the sampling is done incorrectly; more of the bottom layer containing water comes into the sample; only then water will show up to such an extent. Water can get into furnace oil during winter if the steam coils for heating the oil leak. However, most of the excess water can be drained out thru the valves specially built in for this purpose in the above ground storage tanks.

Buyers don’t like access water because you are paying about $650/- per metric ton for water which does not burn and use all kinds of tricks to ask for reduction in the invoice compensating for the water above 0.5%.

8% water is a huge exaggeration and definitely a ruse to get price relief from the Seller. In my time as Sales Engineer for Esso; I was often called to petrol stations complaining of excess water in diesel and petrol. However when sampling was done in my presence, it turned out that petrol station owner was only taking the sample from the bottom most layer of the tank.

Originally Posted by Argus Panoptes

Quote

No Sir, gas, oil and coal is available aplenty. What is not available is the money to pay for their use. That is an important difference.

Unquote.


Pakistan is short of oil, gas and coal as well as electricity. That is why GOP is spending about $12-billion to import it. It may be available a plenty in the Arab Gulf, but not in Pakistan.

Money is without doubt the main problem. However, even if all the circular debt is cleared and PSO has sufficient funds to import as much as they want; there will still be shortage of gas and load shedding will still be with us; albeit a lot less than it is now.

WHY is money a problem? What is the role of subsidy in this fiasco?

 

[niaz]

Mangla Dam is located in Azad Kashmir and Hydel power is the cheapest power in the world. On this basis do Mirpur residents have a right to ask for priority share of electricity & refuse to pay for the cost of electricity produced from imported fuel? Secondly, if FATA get free electricity, why can’t Azad Kashmir? Same as FATA, Azad Kashmir is not a part of Pakistan proper at least on paper, and Mangla Dam is located in Azad Kashmir.

I am not advocating different power rates to different provinces or cities, but my point is that “Subsidy” is not related to engineering but is purely a political question.

One of the reasons of circular debt is that total cost of production of electricity (sum total of line losses, theft and unpaid bills added on to actual generation cost) is higher than the power tariff charged to the consumers. Thus if power companies such as PEPCO, can’t recover actual cost, they have no money to buy furnace oil and need subsidy from GOP to survive.

Another problem is that GOP had guaranteed 18% return on investment to the entrepreneurs and contracted to buy all the electricity IPP could produce. If GOP is not in position to pay the bills; Federal gov't owe Rs7-billion, Punjab Rs 25-billion, Azad Kashmir Rs 23-billion and so on; GOP is contractually committed to pay IPP’s enough money for generating 18% ROI. Pray tell me, why would IPP bother about problems of power generation and collecting bill when the profit is being earned regardless? Money paid out to IPP's reduces the limited funds available with the gov't for paying bills and funding new projects. Thus a catch 22 situation.

I had previously posted that for a short period I was consultant to Jamaica Power. I found similar problems there as well. Jamaica has no oil and depends on imported fuel. No matter how many so called consultants or experts are appointed; Jamaica Power will remain in the red. No circular debt but cost of power production is more than the revenue. Primarily because despite the fact that several studies, including one by me suggested increasing the power tariff: politicians won’t do it as raising electricity prices is highly unpopular. Jamaica Power was therefore always asking for money from the government thus a constant drain on the national exchequer.

Money doled out as subsidy has to be generated thru deficit financing, increased taxation or borrowing from IMF, in actual fact Tax Payer is paying for actual cost any way. Subsidies in turn leave no money to develop power sources such as Thar Coal. FDI has dried up due to
Taliban/Khilafat lovers supporting sectarian killers and other extremists creating law & order problem.

Since Pakistanis don’t want to pay taxes and don’t agree to pay real cost of electricity also continue to support TTP & other criminals in the name of Islam resulting in adverse law & order situation; they will have to learn to live with long power outages in this world.

Alternatively, Pakistan would remain a vassal state and live on hand outs from other nations; be in United States or Saudi Arabia or China; forget about “Sovereignty” and national pride. Life sucks

 

[ziaulislam]

Govt drags feet on cost-effective coal-fired power projects


Mansoor Ahmad
Thursday, February 21, 2013
From Print Edition




LAHORE: The government is yet to give go-ahead to conversion of 12 furnace oil-fired power plants into coal-combusted power plants that could result in net saving of over Rs790 billion per year.



The ministry of water and power admitted that 12 steam based thermal plants having power generation capacity of 4347 megawatts could be run on coal in about a year. The total conversion cost would be $1.565 billion and annual saving in fuel cost (which is borne by the government) would be $8.04 billion per year equivalent at current dollar rate to Rs790 billion. This saving could wipe out the total annual subsidy that the government pays to the power sector besides sparing over Rs400 billion per year for further investments.



The first proposal in this regard was initiated by a Sheikhupura-based independent power producer (IPP) in November 2011 that sought permission for converting of its furnace based plant to coal, which would reduce fuel cost component by Rs5.5 per unit. Since this plant had adequate area available, it was proposed to install coal-fired boilers at the other side of steam turbine, which would ensure regular supplies from the furnace oil boilers yea round.



The power generation would have to be stopped for six months only for connecting coal-run boiler with steam turbine.



The proposal suggested that during these six months government continues to pay the capacity payment charges to enable the sponsor to service its past debt. The payment could be recovered by the Water and Power Development Authority (Wapda) after operation of coal converted plant in 12 equal installments. The sponsors will make entire investment for the conversion and share the benefit of fuel cost in a ratio of 40:60, it said. The net saving to Wapda was calculated at Rs5.15 billion per year. The final approval from the government is still awaited.



The Private Power and Infrastructure Board (PPIB), operating under the ministry of water and power, after receiving this request carried out its analysis on conversion of existing thermal power stations on cheaper fuel.



It has identified eight public sector and four IPPs that could be converted from furnace oil to coal based steam generation. Its analysis is based on imported coal.



According to the board’s document, power generation thermal units in public sector include 205 MW Jamshoro unit 1, 470 MW Jamshoro units 2,3,4, 300 MW Guddu units 3, 4, 545 MW Muzaffargarh units 1, 2, 3, 320 MW Muzaffargarh unit 4, 420 MW Muzaffargarh units 5, 6 , 132 MW SPS Faisalabad, and 195 MW NGPS Multan units 1, 2, 3. The total available capacity of these steam power generation units comes to 2,325 MW. The total yearly savings from these eight units after conversion to coal would be Rs486.56 billion or $5.72 billion at dollar rate in 2011. Among the independent power producers, the projects that could be converted to coal include 1200 MW Hubco Karachi, 348 MW AES Lalpir, 348 MW Aes Pakgen, and 126 MW SABA Power.



The total fuel cost saving from these projects has been estimated by PPIB at Rs196.81 billion per year. The PPIB document further stated that each of these projects if converted into coal based technology would stop power generation for at least a year. It also recommended paying capacity charges to the idle units during the period when they are closed for technology up-gradation so that they could service their past debts.



Power sector expert Mohsin Syed said that currently about 4000 MW of thermal power generation capacity remains idle throughout the year. He said the government should shift 2000 MW projects in one-go. “The saving from these projects will be five times higher.”

Govt drags feet on cost-effective coal-fired power projects - thenews.com.pk

 

[fatman17]

Tuesday, June 04, 2013



E&P drilling activities increase by 50 percent


* 90% drilling target of FY 2012-13 achieved so far

By Abrar Hamza

KARACHI: Manzalai-10 in Tal Block has successfully tested for gas reserves while the exploration and production (E&P) industry has drilled 50 percent more wells in 11 months of fiscal year (FY) 2012-13 as compared to drilling in FY 2011-12, said Pakistan Petroleum Information Service (PPIS) activity report on Monday.

Progress on drillings of important wells promises further production additions as the industry has moved closer to FY 2012-13 target. The E&P industry has drilled 82 wells till the end of May, which includes 29 exploration and 53 development wells. This translates into 90 percent of FY 2012-13 drilling target in the first 11 months, PPIS report stated.

The latest PPIS activity report indicates successful testing of gas reserves at Manzalai-10, located in the Tal Block in NWFP and Gyorgy Mosonyi, while testing at Manzalai-10 is still underway.

On the other hand, Nashpa-IV’s drilling bid has been fixed as industry sources suggested that Drill Stem Test (DST) on the well is likely to start in the next two weeks. First three wells on Nashpa are producing cumulatively 15,000 barrels per day (bpd) oil and 50 million cubic feet per day (MMCFD) gas.

Moreover, another production well, Kadanwari, on the field has been completed with flow of 30 MMCFD. Oil and Gas Development Company (OGDC), which carries 50 percent stake in the field, stands to benefit.

JS Research’s Syed Atif Zafar said that a relatively modest gas discovery of 25-35 MMCFD has been discovered, which will be 20 percent of total Manzalai gas flows, 12 percent of Tal Block gas flows and 1.0 percent of country’s gas flows.

OGDC, Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL) have respective stakes of 27.8 percent, 27.8 percent and 21.1 percent, respectively in the block. Zafar said that production from Manzalai-10 is likely to provide annual earnings upside of two paisas per share for OGDC, five paisas per share for PPL and Rs 2.5 per share for POL. He expects the field is likely to be tied-in over the next three to six months. The E&P space has seen renewed interest in recent times, where OGDC, PPL and POL have gained 19 percent, 21 percent and 5.0 percent, respectively in the past one month.

Meanwhile, the latest industry updates on drilling are largely encouraging and suggest positive production outlook for the listed E&P companies. The industry has already drilled more production wells than envisaged at the start of the year though exploration drilling has relatively lagged behind.

Mohammad Fawad Khan of Foundation Research Equities said that a key highlight of FY 2012-13 activity is contribution from private sector and healthy success ratio. Overall private E&P companies (OGDC and PPL) have drilled 21 exploration wells. United Energy Limited contributed the lion’s share with two thirds of drillings. Altogether, private sector enjoyed a success ratio of 50 percent. Most of the finds are in Badin block and in terms of size can be termed as small to modest.

Khan further said that Manzalai-10 has been completed though production numbers on development well are not known but should range between 10-15 MMCFD gas. Manzalai-10 will help in arresting the production decline on the field, he added.

Tal drilling on a new exploration well, Kot-01 has started with total target depth of 5,488 metres, highest among all eight wells drilled so far. Kot-01 is the first exploration well since completion of drilling on Tolanj in 2011-12 and highlights operator’s focus on scanning the remaining potential in Tal block.



modest gas field discoveries...

 

[niaz]

Finally a professional article on the power shortfall.

Quote

How the crisis happened


Dr Ashfaque H Khan
Tuesday, June 04, 2013


Pakistan is currently facing the worst power crisis in its history, resulting in power cuts through loadshedding, which frequently last between 12-18 hours. These power cuts have served to constrain economic growth and development and adversely affect the lives of the people – rich or poor.

Why has the power crisis worsened in recent years? First, the cost of generation increased drastically in 2007-08 with an unprecedented surge in international fuel prices. Fuel prices have remained at an elevated level since 2009-2010. Sharp depreciation in the exchange rate (the Shaukat Tarin phenomenon) has also increased the rupee value of imported fuel. Heavy reliance on the petroleum sector for tax revenue, after the NFC Award, has further compounded the difficulties.

The price of furnace oil (fuel for power generation) increased from Rs21,259 per ton on July 2, 2007 to close to Rs75,000 per ton today. It takes about 215 grams of fuel (on average) to produce one unit of electricity. Accordingly, the fuel cost of generating one unit of electricity increased from Rs4.57 per unit to Rs161 per unit – an increase of 253 percent. The government did not allow the price of electricity to rise proportionately.

Second, the increase in generation, transmission and distribution (T&D) losses along with power theft have also contributed to the building up of the crisis. Third, growing circular debt incurred largely due to exchange rate depreciation and decline in the recovery of electricity bills has reduced the production of electricity.

Fourth, and most importantly, the substantial decline in the availability of gas for power generation significantly lowered the production of electricity and at the same time increased the cost of generation manifold. In 2005, 504 billion cubic feet (BCF) or 43.5 percent gas was allocated to power generation but the share declined to 358.4 BCF or 27.8 percent in 2012. Gas allocated to the transport sector, on the other hand, increased from 24.4 BCF (2.1 percent) to 119 BCF (9.24 percent) during 2005-2012.

What have been the implications for electricity generation? Due to sharp reduction in the availability of gas to the power sector, 15.9 billion units less of power were generated from natural gas in 2012 as compared to 2005. Electricity generated from furnace oil stood at 13.5 billion units in 2005, which increased to 33.5 billion units in 2012.

On the other hand, electricity generated from gas stood at the peak of 43.5 billion units in 2005 but declined drastically to 27.6 billion units in 2012. In other words, Pakistan moved from relatively low cost of electricity generation (Rs5-6 per unit from gas) to high cost generation (Rs16-17/ unit from furnace oil) in the last seven years, thus multiplying problems manifold. As power generation from natural gas is about Rs10-11 per unit cheaper than furnace oil, a decrease of 15.9 billion units from natural gas translates into an annual incremental cost of Rs150-175 billion.

The higher cost of generation had forced the previous regime to increase the price of electricity by more than 100 percent. Empirical evidence suggests that a strong positive relationship exists between the rise in power tariff and power theft. Increase in power tariff in badly governed utilities has encouraged power theft with little impact on revenue of the utility companies. My position has always been that raising power tariff alone is not a solution and will never be a solution. Hike in power tariff, if required, must be accompanied by improving governance in utility companies.

What can be done in the short-run to address power crisis? First, as we have seen that the diversion of gas from the power to transport sector has aggravated the power crisis, it is therefore essential that we discourage the use of gas in the transport sector either through administrative measures or through price mechanism.

In budget 2013-14, the government may impose heavy central excise duty to bring the price of CNG slightly above the motor gasoline price. People will have no incentive to use CNG in their vehicles. Second, the gas so retrieved from the transport sector must be diverted to efficient power plants operating at over 50 percent efficiency level. In so doing, the country can add an additional 17.5 billion units of electricity.

Third, about 500 million cubic feet per day of gas – nearly12 percent of the country’s current gas output and equivalent to production from Sui, has failed to enter the system due to long outstanding litigation involving the OGDC. It is recommended that the new government must resolve such cases commercially at the earliest so that additional gas, equivalent to the production of Sui, can be brought into the system to produce relatively cheaper electricity.

Fourth, there are 3500 CNG stations in the country. The government may consider buying out all the stations at Rs10-20 million each. It will cost the exchequer between Rs35-70 billion but such measures alone could yield a saving of over Rs100 billion in power subsidies annually.

Fifth, the provision of free electricity to the employees of utility companies must be withdrawn forthwith as this has become a major source of power theft. Sixth, the government must bring a new team of professionals in as directors and heads of Discos with clear performance targets. Seventh, Nepra, a regulatory body of the power sector must be revamped by bringing in professionals who are tasked to undertake the technical audit of the IPPs and KESC. Finally, the finance department of Pepco/Wapda must be strengthened by inducting professional finance experts.

All these measures can be implemented in 100-180 days to reduce loadshedding, if there is a strong will. Thus far, the new government has expressed its strong willingness to address the power crisis on a war footing. Those assigned the task may find these recommendations useful.

The writer is principal and dean at NUST Business School (NBS) Islamabad.

Email: ahkhan@nbs.edu.pk
How the crisis happened - Dr Ashfaque H Khan

Unquote.

 

[Jango]

The price of furnace oil (fuel for power generation) increased from Rs21,259 per ton on July 2, 2007 to close to Rs75,000 per ton today. It takes about 215 grams of fuel (on average) to produce one unit of electricity. Accordingly, the fuel cost of generating one unit of electricity increased from Rs4.57 per unit to Rs161 per unit – an increase of 253 percent. The government did not allow the price of electricity to rise proportionately.

That is new to me and a complete shocker! That is a increase of 3 times per ton! Astounding.

So sir what do you think, is this solely due to the incompetence of the PPP government or just something that was bound to happen?

The elimination of CNG from transport sector is something which almost all of the petro-chemical and power generation experts have been saying. Our country simply doesn't have enough gas to facilitate both the power and transport sector and give a subsidy on top of it...this is something which the new government can do immediately within a month.

Another suggestion being floated around is that only the private vehicle CNG should be stopped, the public sector should keep on running on CNG to keep the costs of transportation low.

 

[niaz]

Govt drags feet on cost-effective coal-fired power projects


Mansoor Ahmad
Thursday, February 21, 2013
From Print Edition




LAHORE: The government is yet to give go-ahead to conversion of 12 furnace oil-fired power plants into coal-combusted power plants that could result in net saving of over Rs790 billion per year.



The ministry of water and power admitted that 12 steam based thermal plants having power generation capacity of 4347 megawatts could be run on coal in about a year. The total conversion cost would be $1.565 billion and annual saving in fuel cost (which is borne by the government) would be $8.04 billion per year equivalent at current dollar rate to Rs790 billion. This saving could wipe out the total annual subsidy that the government pays to the power sector besides sparing over Rs400 billion per year for further investments.



The first proposal in this regard was initiated by a Sheikhupura-based independent power producer (IPP) in November 2011 that sought permission for converting of its furnace based plant to coal, which would reduce fuel cost component by Rs5.5 per unit. Since this plant had adequate area available, it was proposed to install coal-fired boilers at the other side of steam turbine, which would ensure regular supplies from the furnace oil boilers yea round.



The power generation would have to be stopped for six months only for connecting coal-run boiler with steam turbine.



The proposal suggested that during these six months government continues to pay the capacity payment charges to enable the sponsor to service its past debt. The payment could be recovered by the Water and Power Development Authority (Wapda) after operation of coal converted plant in 12 equal installments. The sponsors will make entire investment for the conversion and share the benefit of fuel cost in a ratio of 40:60, it said. The net saving to Wapda was calculated at Rs5.15 billion per year. The final approval from the government is still awaited.



The Private Power and Infrastructure Board (PPIB), operating under the ministry of water and power, after receiving this request carried out its analysis on conversion of existing thermal power stations on cheaper fuel.



It has identified eight public sector and four IPPs that could be converted from furnace oil to coal based steam generation. Its analysis is based on imported coal.



According to the board’s document, power generation thermal units in public sector include 205 MW Jamshoro unit 1, 470 MW Jamshoro units 2,3,4, 300 MW Guddu units 3, 4, 545 MW Muzaffargarh units 1, 2, 3, 320 MW Muzaffargarh unit 4, 420 MW Muzaffargarh units 5, 6 , 132 MW SPS Faisalabad, and 195 MW NGPS Multan units 1, 2, 3. The total available capacity of these steam power generation units comes to 2,325 MW. The total yearly savings from these eight units after conversion to coal would be Rs486.56 billion or $5.72 billion at dollar rate in 2011. Among the independent power producers, the projects that could be converted to coal include 1200 MW Hubco Karachi, 348 MW AES Lalpir, 348 MW Aes Pakgen, and 126 MW SABA Power.



The total fuel cost saving from these projects has been estimated by PPIB at Rs196.81 billion per year. The PPIB document further stated that each of these projects if converted into coal based technology would stop power generation for at least a year. It also recommended paying capacity charges to the idle units during the period when they are closed for technology up-gradation so that they could service their past debts.



Power sector expert Mohsin Syed said that currently about 4000 MW of thermal power generation capacity remains idle throughout the year. He said the government should shift 2000 MW projects in one-go. “The saving from these projects will be five times higher.”

Govt drags feet on cost-effective coal-fired power projects - thenews.com.pk

There has always been a debate as to which fossil fuel for power generation is cheaper.

The article only mentions the coal is cheaper without giving any concrete figure. A very rough guide is noted below:


- Amount of fuel used to generate one kilowatt-hour (kWh):
- Coal = 0.00053 Short Tons or 1.07 Pounds
- Natural Gas = 0.00798 Mcf (1,000 cubic feet)
- Residual Fuel Oil = 0.00184 Barrels (or 0.08 gallons)


- KWh generated per unit of fuel used:
- 1,870 kWh per Ton of Coal or 0.9 kWh per Pound of Coal
- 125 kWh per Mcf (1,000 cubic feet) of Natural Gas
- 542 kWh per Barrel of Petroleum, or 13 kWh

The above assumes:

Coal = 19,530,000 Btu per Short Ton (2,000 lbs) Note: heat contents of coal vary widely by types of coal

Natural Gas = 1,021,000 Btu per 1,000 Cubic Feet (Mcf)

Petroleum Fuel Oil = 5,871,390 Btu per Barrel (42 gallons)


Most of the coal for power production will be imported and I don’t have pricing data for landed coal price in Pakistan. Fuel oil (Furnace oil) costs approx. $650 per metric ton or about $100 per barrel. Besides prices of commodities change over time and unless we can correctly predict coal versus oil economics over next 10 years, huge investment for conversion into coal does not appear to be a good decision. Let us also not forget that only the plants using steam turbines for power generation can be converted.

In my humble opinion for whatever it is worth; unless we use indigenous coal such as Thar lignite; conversion to imported coal is not a feasible option.

 

[niaz]

That is new to me and a complete shocker! That is a increase of 3 times per ton! Astounding.

So sir what do you think, is this solely due to the incompetence of the PPP government or just something that was bound to happen?

The elimination of CNG from transport sector is something which almost all of the petro-chemical and power generation experts have been saying. Our country simply doesn't have enough gas to facilitate both the power and transport sector and give a subsidy on top of it...this is something which the new government can do immediately within a month.

Another suggestion being floated around is that only the private vehicle CNG should be stopped, the public sector should keep on running on CNG to keep the costs of transportation low.

Crude prices have been rising steadily over last 10 years. Crude was priced at $50 per barrel in 2005. Prices shot up to $137 per barrel in 2009 then dropped back to $70 per barrel for a brief period before going back up to $100 -$110 per barrel range. With the advent of Fracking & increased Shale oil production, unless we see another Mid East war, Crude oil prices are expected to drop slightly over next 5 year period.

Prices of all petroleum products are linked to crude prices and furnace oil (fuel oil) is no exception. Thus fuel oil prices have risen in proportion to the crude oil. Additionally, since fuel oil is the cheapest of all petroleum products;all new refineries are with Cokers which produces virtually no fuel oil and all old refineries are adding upgrading facilities which drastically reduces fuel oil production. For example India’ Reliance refinery which at 1.2-million barrels per day is the largest state of the art refinery in the world does not produce any fuel oil. Instead they produce petroleum coke and export small quantities of Carbon Black Feedstock (CBFS); a highly aromatic slurry with density higher than 1 (it is heavier than water). All this has resulted in world fuel oil prices rising more sharply than crude oil prices.

Incidentally, delayed petroleum coke exported by Reliance is also used for power production and is cheaper than coal because of its higher BTU value.

 

[Jango]

I was watching TV and the Caretaker Minister for Power said that if the oil fired plants are converted to coal, the cost of electricity will come down from 18 to 8 Rs per unit.

In this sort of a situation, what if the government keeps the price of the unit at around 12-15 for a few months, just to recover some money...the cost of production will be much less than the cost that a consumer has to pay, but it would ensure that the government is getting some extra money.

Is this theory applicable? @niaz...