Pakistan Power Sector Need for Reforms. By Kalim A. Siddiqui President-Petroleum Marketing Byco Petroleum Paksitan Limited

Transcription

1 Pakistan Power Sector Need for Reforms By Kalim A. Siddiqui President-Petroleum Marketing Byco Petroleum Paksitan Limited 3 rd Pakistan Oil & Gas Conference 2011 January 29, 2011

2 Outline Overview of Pakistan Energy Sector Reasons for Power Crisis Need for Reforms Roadmap towards reform

3 Pakistan Power Sector Need for Reforms Overview of Pakistan Energy Sector

4 Overview of Pakistan Energy Sector Energy Mix Energy Consumption of 37.4 Mn TOE in Source: Economic Survey of Pakistan

5 Overview of Pakistan Energy Sector Energy Mix - Comparison with global trend World Pakistan Source: Economic Survey of Pakistan , EIA

6 Overview of Pakistan Energy Sector A Profile Total KESC Energy Generation 90 TWh 9 TWh No. of Customers 20.7 Mn 2.0 Mn T&D Losses 21% 34% Transmission System: NTDC : 5,177 km; 500kV 7,500 km; 220kV DISCOs: 31,000 km; 132kV 7,800 km; 66kV Source: Nepra

7 Overview of Pakistan Energy Sector Power Sources Total Installed Generation Capacity of 20, 190 MW in Source: Economic Survey of Pakistan, WAPDA

8 Overview of Pakistan Energy Sector Energy Consumption & Output Average annual Consumption of electricity in the last 10 years has increased by nearly 5%, 73 Mn MWh of electricity being consumed in FY 2010 (-1.7% growth from FY 2009). Source: Economic Survey of Pakistan , Hydrocarbon Development Institute of Pakistan

9 Overview of Pakistan Energy Sector Supply and Demand Gap Source: Websites of Wapda, Nepra

10 Pakistan Power Sector Need for Reforms Reasons for power crisis

11 Major Reasons for Power Crisis Planning Lack of long term sustainable roadmap of power generation Plan to produce low cost power due to better mix of power generation sources Ineffective utilisation of installed power generation capacity Technical Losses Inefficiency due to ageing power generation equipment and old technology Waste of energy due to line losses (technical and theft) Up -gradation of distribution network Alternate Energy Lack of utilisation of alternative energy sources like coal, solar, wind, gas and nuclear Less emphasis and awareness regarding use of renewable sources of energy (wind, solar, waste to energy, etc) Availability and supply for natural gas for power generation

12 Major Reasons for Power Crisis Electricity price High cost of furnace oil (price volatility) Circular Debt Poor mix of power generation sources linked to high cost Development issues No major water reservoirs/dams developed in over 3 decades Coal reservoir not developed timely Slow development of Hydrocarbon projects Mismatch of economic progress and increasing power generation capacities Investment Crisis Uncertain law and order situation Political stability and continuity of government policies is vital Alternate gas availability projects not materialized ( e.g. LNG, QP, IPI and TAPI) and need to expedite local exploration activities

13 Pakistan Power Sector Need for Reforms Need for Reforms

14 Need for Reform Global Trends Observed Ever increasing energy demands creating shortfalls in developed and emerging economies Increased competition between strategic players for energy Volatility/rise in furnace oil prices directing the development on alternative energy sources Increasing correlation between energy use and environmental impact such as carbon emissions, conservation and protection

15 Need for Reform The Challenge

16 Need for Reform Drivers of Power Sector Reform Capital Scarcity Economic Inefficiencies Industrial Development Debts and Deficits The power sector is a direct victim of lack of capital. Governments have been unable to spend on this sector over the years The challenge is reforming the power sector to attract the needed private investment The power sector has been troubled by high technical losses, a lack of power generating cost recovery, poor maintenance, low equipment reliability, high staff levels, low productivity, corruption, a crippling nonpayments problem, and mounting debt Lack of power generation has adversely affected industrial activity in Pakistan The power sector in Pakistan is saddled with large debts accumulated from years of not charging cost recovery tariffs, not collecting from all consumers, not disconnecting consumers who do not pay, and using the utility as a vehicle for subsidies and political patronage for jobs and other favors

17 Need for Reform Energy Threats and Opportunity - Pakistan Threats Opportunity Imported oil constitutes over 29% of energy consumption, at a very high cost due to import dependency. The depletion/decline of Pakistan s natural gas reserves/production Energy prices are expected to increase over the next few years. To reduce poverty and increase prosperity the energy consumption in Pakistan has to increase. The price and availability of natural gas and oil have grave impacts welfare and national security. India s appetite for energy is escalating natural gas pipelines from either Iran or Central Asia will have to pass through Pakistan. LNG for India is an option but at a much higher price. Develop energy corridor by partnering with China to provide energy to its western regions. Pipeline option can be attractive. Utilisation of Pakistan s coal reserves could a big step towards solving Pakistan s energy crisis.

18 Pakistan Power Sector Need for Reforms Roadmap Towards Reform

19 Roadmap Towards Reform Major Potential Areas Investment Governance Diversificatio n Infrastructur e Efficiency R & D Fostering the environment to bring in foreign Investment in the power sector Resolve governance and organizational issues to streamline institutions and reduce flaws Stability in policy making and proper planning Developing sources of alternate Energy and encouraging diversification of energy mix Improve existing infrastructure and upgrade it with latest technology for efficiency enhancement Reduction of inefficiencies Collection of dues Efficiency in transmission systems Encourage research and development Spending on new technologies

20 Roadmap Towards Reform Incentives to invest in Pakistan Power Sector Vibrant economy with increasing demand for power. One window Attractive and Proven coal facility competitive provided return by reserves Balanced Private on risk Power Confirmed of 175 wind investment billion tons Independent profile Infrastructure for energy in Thar potential of generating Track record regulator investors, of Board lenders for Private more a than 346,000 Identified potential successful balance private and interest Projects government of MW of and solar hydropower 100,000 sector consumers agencies and power potential potential of participation power over 536 million (5599 sector of over tons 2.9 million 54,000 MW MW ;US$ per year companies 6 billion) MW Source: PPIB Website

21 Roadmap Towards Reform Governance & Organizational issues Ministry of Energy be formed by consolidating MoPNR and MoWP One window operations for investors to facilitate investment in power sector Need for continuity in government policies and reforms Reforms to strengthen good governance Decentralize WAPDA/PEPCO system and privatize distribution companies

22 Roadmap Towards Reform Alternate Energy Availability of low cost power generation mix Increase share of nuclear, hydel and coal based power projects in the country s energy mix Encourage and facilitate private sector participation Foster development of renewable energy sources such as Wind, Solar, Ocean Waves, etc Policies to establish alternate energy sources so that market potential is clearly visible to MNCs and International investors Develop Global alliances for energy security

23 Roadmap Towards Reform Alternate Energy - Examples Thar Desert contains the world s 7th largest coal reserves: 175 Billion Ton = 50 Billion TOE = 2000 TCF Total Thar Coal Reserve More than Saudi Arabia 68 times higher than & Iranian Oil Reserves Pakistan s total gas reserves Initial development alone could bring in investment of USD 12 Billion Entire Thar Coal Reserves can be used to generate 100,000 MW of electricity for over 200 years with cost and environmental benefits Source: Thar Coal Mining & Power Generation Project Engro Powergen 1% = 25% Thar Coal Reserve Pakistan s Power Generation Capacity in 2010

24 Roadmap Towards Reform Alternate Energy - Examples Total Area of Sindh suitable for wind farms = 9,749 km 2 Gross wind power potential of Sind Coast is 43 kmw Exploitable electric power generation potential of this area is 11 kmw Landhi Bio Gas Project Landhi Cattle Colony (spread over an area of 18,500 hectares) is expected to produce MW of renewable energy for KESC From 3,000 MT of manure (daily being discharged into the Sea). Pakistan has about 1000 km long coastline of with complex network of creeks showing relevance of strong wave energy, which could be harness for the generation of electric power for rapidly developing coastal cities Pakistan is the 6th luckiest country in the world where sunavailability is up to 16 hours on average Sources: KESC, Pakistan Meteorological Dept, Other media sources

25 Roadmap Towards Reform Alternate Energy Nuclear Energy Sites

26 Roadmap Towards Reform Infrastructure Effective and efficient utilization of existing power generation infrastructure Capacity Additions through thermal and hydro power projects Expedite projects such as power projects (nuclear, coal, solar, wind, etc) pipelines (Qatar, IPI and TAPI) and large as well as small and medium sized dams

27 Roadmap Towards Reform Infrastructure Proposed Dams in the country

28 Roadmap Towards Reform Infrastructure Transmission Projects need to be developed for evacuation of power from hydro projects in the north and from thermal projects in south Distribution system needs to be modernized by use of smart metering systems

29 Roadmap Towards Reform Infrastructure Example of Power Parks To facilitate investment on fast track basis, there is a need to establish Power Parks These will be located at 4-5 strategic locations near river or canal head for availability of water, and near main highway or rail link for transportation of fuel in addition to the availability of utilities These Parks will house MW capacity plants which serve as base load plants These will be based on coal and gas, local or imported Source: Nepra

30 Roadmap Towards Reform Efficiency Transmission and distribution losses to be curtailed to reduce cost of generation Reducing illegal use and theft as well as encourage efficiency in usage and savings Improving efficiencies through latest technologies and better governance Recovery of billed amounts and financial discipline

31 Roadmap Towards Reform Research & Development Integrated energy plan for the country Roadmap for progression Develop R&D mechanisms in the country Synergy between nuclear, hydel and coal/gas energy and environment policies Foster niche markets for early commercialization of new technologies and development of alternative energies such as Wind, Solar, Ocean Waves, Bio-technology, etc

32 Thank You