Pakistan’s Future Energy Needs
Fahd Ali |
Introduction
Pakistan's economy is undergoing significant changes since 1998-99; the improvements made in the macroeconomic indicators are, in particular, noteworthy. The real GDP increased from 5.1 per cent in 2002-03 to 6.4 per cent in 2003-04 and was 8.5 per cent for the fiscal year 2004-05. The projected growth rate for the next five years is estimated to be 7-8 per cent1. One can assume that without significant expansion in the economic activity in the country, this growth rate will be difficult to sustain for the next five years. With expansion in economy the demand in energy will also increase. Government of Pakistan's (GoP) Medium Term Development Framework (MTDF) projects the growth in the demand of electricity, petroleum products, natural gas and coal at an average annual rate of 8.4%, 4.3%, 7.6%, 18.9% respectively2. Although, both the demand and supply of energy has been increasing for the last decade and a half, the per capita consumption of energy in Pakistan remains low. As compared to their counterparts in Malaysia and China -- where per capita consumption of energy stands at 92 MBTU and 34MBTU, respectively -- the per capita consumption in Pakistan is 14 MBTU3. Figures 1 and 2 show an upward trend in the supply and per capita availability of energy in tonnes equivalent of energy (TOE) in Pakistan since 1990.
Figure 1:Energy supply (million TOE) Source Economic Server 2004-05
Figure 2:Per Capita Availability in TOE
|
Pakistan’s Energy Sector
The energy sector in Pakistan consists of the following:
Pakistan's total primary energy supply in tonnes equivalent of oil (TOE) in the fiscal year 2003-04 stood at 50.8 million TOE. The primary energy supply has seen a constant increase since 2001. It increased by 4.4 per cent from 2001-02 to 2002-03 and by another 8 per cent from 2002-03 to 2003-04. Figure 3 shows the share of different energy resources in the primary energy mix supplies. The patterns of energy consumption have also registered an upward trend.
Energy Consumption
According to the latest economic survey, in the past 14 years -- from 1990-99 to 2003-04 -- the consumption of petroleum products, natural gas, electricity an coal increased by an annual average rate of 2.5%, 4.9%, 5.1% and 5.2%, respectively. However, one major change in consumption patter has been registered in the consumption of oil. The use of oil has reduced since 2001, particularly in the cement industry and power generation, because the cement industry has shifted to natural gas and the power generation sector is increasingly using gas. Similarly, the consumption of various petroleum products in household and agriculture registered marked decline of 16.2 and 16.8 per cent, respectively. This is primarily because of the availability of cheaper fuels like LPG and natural gas. However, the consumption of petroleum products have increased in transportation, industrial and other government sectors. In the last 14 years, the transport sector saw the largest use of petroleum products with a share of 48.7 per cent. The share of power sector, industry, households, other government sectors and agriculture stood at 31%, 12.1%, 3.8%, 2.5% and 1.5%, respectively. The sector wise consumption is given in Table 1.
Table 1: Sector wise natural gas consumption from 1990 2004
| Sector |
Natural Gas Consumption |
| Power sector |
35.4% |
| Fertilizer |
23.4% |
| Industrial |
18.9% |
| Household |
17.6% |
| Commercial |
2.8% |
| Cement |
1.5% |
The consumption of natural gas in the cement sector in the first nine (9) months of fiscal year 2004-05 registered a 100 per cent increase. Similarly, for the same time period the consumption for industrial, power, commercial and household sectors jumped up by 15.5%, 12.3%, 10.5%, 3.8%, respectively. 
In electricity consumption, the household sector has always been the largest consumer with a share of 41.4 per cent. The share for industrial, agricultural, other government sectors, and commercial consumers for the same time period (1990-04) has been 31.1%, 14.1%, 7% and 6%, respectively. Figure 4 shows the sector wise shares of electricity consumption for the period: 2004-05.
Future Energy Forecasts
According to the 2004-05 Economic Survey of Pakistan, the double digit growth in the large scale manufacturing sector has resulted in an increase in demand of electric power in some industrial sectors. The survey also projects that demand in electricity will grow at an average yearly rate of 7.9 per cent from 2005 to 2010. The table below summarises the sector wise power demand till the year 2010.
Table 2: Sector Wise Power Demand (2005-10)
| Year |
Domestic |
Commercial |
Agriculture |
Industrial |
Other |
Total |
2005-06
2006-07
2007-08
2008-09
2009-10
|
7,199
7,585
8,127
8,783
9,531
|
1,216
1,251
1,312
1,354
1,408
|
1,763
1,820
1,893
1,979
2,079
|
5,891
6,481
7,252
8,181
9,267
|
1,035
1,086
1,159
1,243
1,341
|
15,500
16,600
17,900
19,600
21,500
|
| Source:Planning Commission |
The recently approved 25 year ‘Energy Security Action Plan (ESAP)’ aims to increase Pakistan's reliance on indigenous fuels. Before that the Poverty Reduction Strategy Paper (PRSP) outlined similar measures. The paper aims to significantly improve Pakistan's energy mix. It envisages a hydel-thermal ratio of 39:61 from an existing ratio of around 28:72. The ESAP also envisages significantly reducing reliance on oil While increasing reliance on coal. Table 3 shows the energy mix plan for the next 25 years as proposed in ESAP4.
Table 3: Energy Mix Plan (MTOE)
| |
Energy Mix Plan Projections |
|
|
| |
Current |
Short Term |
Medium Term |
Long Term |
| |
2004 |
2010 |
2015 |
2020 |
2025 |
2030 |
| Total (MTOE) |
50.5 |
79.39 |
120.18 |
177.35 |
255.37 |
361.31 |
| Oil |
15.2 |
30.0% |
20.69 |
26.0% |
32.51 |
27.0% |
45.47 |
25.7% |
57.9 |
22.7% |
66.84 |
18.5% |
| Natural Gas |
45 |
50.0% |
38.99 |
49.0% |
52.98 |
44.0% |
77.85 |
44.0% |
115 |
45.0% |
162.6 |
45.0% |
| Coal |
3.3 |
6.5% |
7.16 |
9.0% |
14.45 |
12.0% |
24.77 |
14.0% |
38.3 |
15.0% |
68.65 |
19.0% |
| Hydro |
6.43 |
12.7% |
11.03 |
13.9% |
16.4 |
13.6% |
21.44 |
12.1% |
30.5 |
12.0% |
38.93 |
10.8% |
| Renewable |
0 |
0.0% |
0.84 |
1.1% |
1.6 |
1.3% |
3 |
7% |
5.58 |
2.2% |
9.2 |
2.5% |
| Nuclear |
0.42 |
0.8% |
0.69 |
0.9% |
2.23 |
1.9% |
4.81 |
2.7% |
8.24 |
3.2% |
15.11 |
4.2% |
In order to achieve these targets, the GoP is actively pursuing the extraction and commercialisation of vast Thar coal reserves. The Thar coal reserves are estimated to be at 185 billion short tonnes. It is estimated that with these reserves Pakistan can generate 100000 MW of electricity for the next 30 years5. In order to achieve the new targets, the Government of Sindh has signed MOU for a 600 MW Thar coal power project with a Chinese company. Another MOU has been signed with an Australina firm for a 1200 MW project at Thar that will utilise the new technology of ‘Underground Coal Gasification’6.
Natural Gas
Natural gas is also expected to play a crucial role in country's future energy needs. The government plans to make gas the ‘fuel of choice’ for future electric power generation. This is an important move as it will reduce the burden on national exchequer as natural gas is a suitable substitute for imported foreign oil7. This compels the government to increase the natural gas exploration activities in the country. It also prompts the government to look into various pipeline options from three different countries. The following options are being considered8:
Pipeline from Iran: 1638 kilometers in length, this pipeline will bring 1.6 billion cubic feet of gas from Assalyye in Iran to Gadani near Karachi, Pakistan.
Pipeline from Qatar: 1670 kilometers in length, this pipeline from Qatar's North field will bring 1.6 billion cubic feet of natural gas through Oman following a subsea route to Karachi.
Pipeline from Turkmenistan: this 1400 kilometer 48 inch diameter pipeline will fetch 2 billion cubic meters of gas every year from Turkmenistan's Daulatabad gas field to Multan in Pakistan.
The Government of Pakistan also aspires to change the hydel thermal ration in the national energy mix in favor of hydel power by the year 2025. To achieve this, the government intends to pursue ‘fast track development of hydel power generation dams’9. Similarly, ESAP also envisages to increase the share of nuclear energy in the national energy mix and the government plans to develop nuclear energy plants on sustainable basis. The plan envisages increasing the standard capacity of nuclear power plants from current 300 MW to 600 MW and eventually taking it to 1000 MW in coming years. These two options need to be studied in order to gauge their suitability to meet Pakistan's future energy needs.
According to ‘Policy for Power Generation Projects Year 2002’, Pakistan plans to construct and commission 12 large scale hydel power plants, besides other relatively small scale projects. Table 4 provides a list of these 12 large scale projects with their installed capacity (in MW) and their commissioning date.
Table 4
: Future Hydel Power Generation Projects
with Installed Capacities and Commissioning date
| Name of Project |
Installed Capacity (MW) |
Commissioning Date |
| Neelum Jehlum, AJK |
960 |
June 2010 |
| Doyian, NA |
425 |
June 2015 |
| Kalabag |
2400 |
Postponed until consensus is reached among all con |
| Kohala Jehlum, AJK |
740 |
June 2010 |
| Munda Dam, NWFP |
600 |
Dec 2015 |
| Suki Kinari |
652 |
Dec 2015 |
| Karrang, NWFP |
454 |
Dec 2020 |
| Tarbela 15
16, NWFP |
960 |
Dec 2008 |
| Spath Gah, NWFP |
851 |
Dec 2015 |
| Basha, NA |
3600 |
Dec 2012 |
| Dasu (Indus) NA |
2712 |
Dec 2015 |
| Pathan (Indus) NA |
1172 |
Dec 2015 |
| Thakot (Indus) |
1043 |
Dec 2015 |
| Bungi (Indus) |
1500 |
Dec 2015 |
| Chor Nallah |
1500 |
Dec 2020 |
| Total |
19569 |
|
| Source: 2002 Power Generation Policy) |
Large hydel power generation projects have a number of issues associated with them, such as resettlement and environmental issues. According to Khan10, the reduced outflow has resulted in visible Indus delta degradation. At same time the dammed rivers have also resulted in a four -fold reduction in the silt discharge from an original annual discharge level of 100 million tons. The subsequent effects of these have been felt by the mangroves, which are a foundation of the Indus Delta Ecosystem. Mangroves need freshwater to survive and grow and are natural hatcheries for a variety of fish. They also act as natural barriers to sea encroachments and bank erosions and are an important source of fodder and fuel wood to the fishermen living in the Indus delta along the Sindh coastline. At present, out of a total estimated outflow of 27 MAF, only 20 MAF reaches the sea. The rest is taken up by various diversion and absorption by soil and evaporation. It is estimated that for sustainable growth and maintenance of the Indus Delta Ecosystem 34 MAF of water is required, which is 7 MAF more than the current inflows into the sea11. The construction of more hydel power generation projects and dams on the Indus River will further aggravate the problem and will result in a complete destruction of the Indus Delta Ecosystem because of reduced inflows of freshwater into the sea.
Similarly, the promises of cheap hydel energy, if analysed from a sustainable development prism, are not reliable because of two reasons. First, the investment analysis of large hydel power projects and dams has come under great scrutiny. There is a vociferous demand to include the social displacement and environmental degradation costs in the up-front capital costs of such projects. However, this will only address one particular aspect of this problem. The financing of such projects remains the most important part of this problem. The funding from international donors for such a project is difficult to receive, considering their commitment to facilitate investments in private thermal based power plants. Second, if one assumes that government funding is available for such projects, the outlays involved in resettlement compensations are huge in case of large dams and hydel power generation projects. For example, the government intends to spend Rs. 2025 billion on the resettlement issues of Kalabagh Dam by constructing 20 model and 27 extended villages12. This proposition seems a far fetched idea in the light of the Government of Pakistan's defense and debt-servicing commitments.
The ESAP aspires to increase the nuclear energy share in the national energy mix from its current 0.8% to 5-6% by the year 2025. The current installed capacity of nuclear power plants in Pakistan is 425 MW. The government plans to increase it by another 8400 MW by the year 2025, which is a substantial increase in nuclear power generation capacity. Considering the country's vast unexplored coal and natural gas (particularly coal) reserves, nuclear energy may not be an appropriate investment to meet future energy needs. Furthermore, nuclear power plants tend to be capital intensive and have long gestation periods. The construction period in nuclear power plants may be seven to eight years as compared to natural gas or coal powered fired plant which may go on line with in 4 years. Also, nuclear power plants tend to be highly capital intensive. For instance the proposed CHASNUPP-2, a replica of CHASNUPP-1, will cost Rs. 52 billion or approximately US$ 900 million13 including a Chinese loan of Rs. 150 million14. On the other hand, a coal or natural gas power plant with three times the capacity of CHASNUPP-2 will require similar investment. Furthermore, the operations of CHASNUPP-2, like its predecessor CHASNUPP-1, will be dependant on the fuel supplied by China. This will increase Pakistan's dependence on foreign sources of fuels which goes against spirit of ESAP. There are many security and safety concerns attached to nuclear power plants. Safe disposal of nuclear waste and risk of potential accidents have become major issues. Compared to other cheaper options (coal and natural gas), nuclear energy option does not seem to be in the national interest.
Figures 5, 6 and 715 show the energy demand projections by fuel, indigenous supply projections, and energy gap coverage through imported gas for the next 25 years. The graphs also show the projected increase in the production of electric power in the country. The ESAP ambitiously envisages to increase Pakistan's power generation capacity from current installed capacity of 19540 MW of electricity to 162590 MW by the year 2030. Currently, only half of the Pakistan's population has access to electricity. Increasing urbanisation and industrialisation in the country warrants expansion of the power sector. This massive expansion in installed capacity will take place in many stages. The current demand and supply indicate that the country will face power shortages from year 2006, and these will grow to around 5500 MW in 2010 if no adequate measures are taken to bridge the gap. Figure 8 shows the indicative electricity demand and supply curve till the year 2010. The curve clear shows gaps beginning to appear in the demand and supply of electricity after the year 2006. To cover this gap, the MTDF outlines the increases in the installed capacity in the country in Table 5.
Figure 8: Electricity Demand - Supply Curve of Pakistan (Indicative)
Source: Private Power Infrastructure Board
Power Demand and Firm Supply Position
Table 5: Installed Capacity and Projected Demand During MTDF (MW)
| SI |
|
Benchmark
2004-05 |
Targets |
Addition
MTDF |
| 2005-06 |
2006-07 |
2007-08 |
2008-09 |
2009-10 |
| 1 |
Installed Capacity (MW) |
20289 |
20753 |
22594 |
2594 |
24899 |
27389 |
7880 |
| |
hydro |
6459 |
6540 |
7021 |
7021 |
7476 |
7719 |
1260 |
| |
gas |
5940 |
6230 |
7130 |
7130 |
8630 |
10620 |
4680 |
| |
oil |
5940 |
6400 |
6560 |
6560 |
6560 |
6560 |
160 |
| |
coal |
150 |
150 |
150 |
150 |
600 |
1050 |
900 |
| |
Nuclear |
462 |
150 |
462 |
462 |
462 |
462 |
0 |
| |
Renewable |
|
180 |
480 |
480 |
680 |
880 |
880 |
| |
Growth Rate % |
|
2.3 |
5.6 |
5.6 |
10.2 |
10 |
6.2 |
| 2 |
Maximum Demand (MW) |
14621 |
15511 |
17904 |
17904 |
19534 |
21462 |
21426 |
| |
Growth Rate % |
3.4 |
6.1 |
8.3 |
8.3 |
9.1 |
9.7 |
7.9 |
Conclusion
Development and growth demand readily available energy resources. The Government of Pakistan aim at energy resources maintaining a high growth rate of energy sources in the coming years. However, the implementation of these objectives require careful policy formulation. The energy sector in Pakistan has experienced a considerable change since 1994. The experience with Independent Power Producers (IPPs) suggests that new polices should be formulated by keeping long term scenarios in mind. Although the 1994 power policy was instrumental in bridging much needed power shortages in the country, it failed to deliver inexpensive power to the masses. Electricity tariffs have seen a constant upward trend since 1994. The bulk power tariff again was a major incentive to attract foreign investment in this sector. However, it proved to costly in the medium term for the consumers. The switch to competitive bidding in the last power generation policy (2002) is, therefore, a step in the right direction. As the government further privatises the energy sector in Pakistan under the influence of various international lending agencies, there is a strong need to strengthen the regulatory mechanism in the country. At present both National Electric Power Regulatory Authority (NEPRA) and Oil and Gas Regulatory Authority (OGRA) operate in an extremely centralised manner. Establishing offices for NEPRA and OGRA in cities where the DISCOS exist will vastly improve their functioning, since the public will have more accessibility to them.
Besides restructuring various government departments. Pakistan needs to bring in the following in its future energy strategies:
- The government must improve the functioning of the state utilities, namely: Water and Power Development Authority (WAPDA) and Karachi Electricity Supply Corporation (KESC). The energy losses in the two utilities were one per cent of the GDP in the year 2003, whereas the financial support offered to them during the same year stood at 1.8 per cent.
- Private and public partnership in exploration of oil, gas and coal reserves in the country to meet energy demands
- Renewed stress and active support to promote renewable energy resources in Pakistan. Renewable energy resources can prove vital in the electrification of remote areas in the provinces of Balochistan and Sindh, in particular, and in other areas, in general.
- The government must also actively promote energy efficiency and conservation. A right step in this direction will be the enactment and implementation of laws that promote energy efficiency and conservation.
As stated in the previous sections both large scale hydel power projects and nuclear energy are inappropriate to meet future energy needs. The issues attached to large scale hydel power projects are not environmental and social in nature only. Projects like Kalabagh Dam and other such massive projects have political connotations as well. Any urgency on the part of GoP in this regard can prove costly to the federation of Pakistan. GoP should actively pursue coal, natural gas and renewable energy options to meet future energy demands. Similarly, at the same time GoP should also invest in public sector energy projects. The projects should be both in power and other energy sectors. This is important to ensure supply of energy be it natural gas or electricity at cheaper and affordable prices to its consumers.
(Fahd Ali is a Mechanical Engineer, working with Sustainable Development Policy Institute as a consultant. His main focus has been the marketability of renewable energy resources particularly wind and solar energy and Pakistan's power sector. He may be contacted at: fahdali@gmail.com)
End Notes
1. Pakistan Economic Survey 2004-05, Chapter 15, Energy, Government of Pakistan , Finance Division, Economic Adviser's Wing, Islamabad, Pakistan
2. Data obtained from ‘National Energy Needs’, presentation to Pakistan Development Forum by Secretary, Planning and Development Division, 26-04-2005. Http://siteresources.worldbank.org/PAKISTANEXTN/Resources/293051-1114424648263/Session-VII-Energy.pdf
3. MBTU = Million British Thermal Units
4. ibid, 2
5. ‘Pakistan Coal Power Generation Potential’, June 2004, Private Power Infrastructure Board.
6. ibid, 5
7. Pakistan, Country Analysis Briefs, EIA, Department of Energy , Government of United States of America, http://www.eia.doe.gov/emeu/cabs/akistan.html
8. Niaz A. Naik, ‘Energy Scenarios in South Asia’, Nuclearisation of South Asia, UNESCO, LNCV & USPID, 20-22 May 1999.
9. ibid, 2
10. Shaheen Rafi Khan, ‘The Case Against Kalabagh Dam’, Kasier Bengali (ed.), ‘The Politics of Managing Water’, (Islamabad: Sustainable Development Policy Institute and Karachi: Oxford University Press, Pakistan, 2003).
11. ibid, 10.
12. ibid, 10.
13. Assuming a conversion rate of Rs. 58 to 1 US Dollar.
14. Hussain Ahmad (Engr.) Siddiqui, ‘N-Power Generation needs least priority’, Dawn Economic and Business Review, June 27 - July 3, page 5.
15. ibid, 2.
