18 AMENDMENTS AND ITS IMPACT ON POWER SECTOR

ENERGY DEPARTMENT29th SEPTEMBER , 2015

SEQUENCE OF PRESENTATION

PROVISIONS OF CONSTITUTION & 18TH AMENDMENT

SINDH-THE ENERGY HUB

CURRENT ISSUES

POTENTIAL

POLICY INCENTIVES

THAR COAL & INFRASTRUCTURE DEVELOPMENT

ISSUES WITH FEDERAL GOVT

WAY FORWARD

PROVISIONS OF CONSTITUTION & 18TH AMENDMENT

The Article 155, 157 & 158 of the constitution clearly spell out the jurisdiction of the federation and the provinces related to renewable, hydro & thermal power with electricity distribution and requirement of natural gas.

After the 18th Amendment, the subject of Energy is in Part II of Federal Legislative List, Thus CCI is the constitutional body to decide all policy matters after consensus.

Needless to say that still all matters are decided by a Cabinet Committee on Energy (CCoE) without any provincial representation, stakeholders consensus & Constitutional Cover.

SINDH –THE ENERGY HUB

“The reason for slow economic growth in recent years is mainly attributed towards

shortages of Energy in the country”

THE PROVINCE OF SINDH IS THE ENERGY HUB OF THE COUNTRY

Around 70% of the Country’s Gas production 42% of the country’s Oil production

CURRENT ENERGY ISSUES OF THE COUNTRY

• SHORTAGE IN ENERGY DEMAND & SUPPLY Electrical Power – Shortages up to 5000 MW (varying degree of shortages since 2004 & likely to continue for a few years) Gas – 1000 – 2000 MMCFD Shortage in winter

• UN-AFFORDABLE ENERGY PRICES Thermal based energy mix mostly dependent upon imported furnace oil/Diesal increases the cost of energy

CURRENT ENERGY ISSUES OF THE COUNTRY

NO EXCESS : 30% of the population in rural areas has no

access to grid electricity 75% population has no access to gas.

IN ADEQUATE FINANCIAL RESOURCES: Energy projects require huge investments. Public as well as private investments are

essential for sector development

MISSION OF THE GOVERNMENT

To make the province self sufficient in power generation

and export surplus to other provinces of the country within

five years•.

POLICY FOR FOREIGN INVESTMENTS IN ENERGY PROJECTS

Due to fiscal limitations, The

government is attracting Foreign Direct Investments FDIs.

An investor friendly policies, Security package for Guaranteed Returns on investments, Robust infrastructure, is in place.

SALIENT FEATURES OF RENEWABLE ENERGY POLICY 2006

Mandatory purchase of electricity by the State Owned Transmission Company, i-e: NTDC

Policy makes the purchaser responsible for extending grid to the point of production

Permits an investor to generate electricity based on RE resources at one location and receive an equivalent amount for own use elsewhere on the grid at the investors own cost of generation plus transmission charges (wheeling)

The policy allows net metering and billing

POTENTIAL

ENERGY POTENTIAL:

Sindh has large ,economically viable resources of energy; Coal 175 Billion MT proven

reserves Wind 55,000 MW (Only in

Thatta Distt & Jamshoro) Solar 10,000 MW Hydro (Small) 130 MW (Run of River) Bagasse Cogeneration 1,000 MW (32 Sugar Mills &

Agro

i-e:Cotton Sticks & Rice Husk) Waste to Energy (Municipal) 500 MW (Karachi 15,000

MTPD) waste)

Huge Oil & Gas Reserves On shore & Off Shore in Trillions of cubic feet.

On Shore Wind Energy Potential

VISION FOR DEVELOPMENT OF THAR COAL“To develop Thar Coal as a major source

of power generation for Energy & Economic Security of the country and as

a Hub of Petro Chemical Industry”

Goal : To generate at least 5,000 MW by 2020

Policy Priorities Develop Thar Coal as ‘core resource’ to achieve affordable and reliable energy security

Development of Coal Mining Sector leading to poverty alleviation

PAKISTAN COAL RESERVES & SINDHPAKISTAN COAL RESERVES & SINDH

Sindh Sindh 186 billion tonsPunjab Punjab 235 million tonsBalochistan Balochistan 217 million tonsKP KP 90 million tonsAJK AJK 9 million tons

Thar Coal can be compared with Open Pit Mines of the World

Stripping ratio & heating Value is feasible for successful Mine Operation (Hambach mine-Germany, producing 40 Mt/inferior lignite)

Can be used in mine mouth Power Plants as well as other locations- lignite can be transported (being practised in India, China & Germany)

Thar Lignite–World Lignite: A Comparison

Comparison of Thar Block II : International Mines

Deposit Heating Value

(Net) (KCal/kg)

Sulfur (%) Ash Moisture

Thar Block II 2770 1.07 7.8 47.46

Gujarat, India 2600-3000 3.4- 5.9 9-12 38-40

Central Germany 2150-2750 1.5 – 2.1 6.5-8.5 48-52

Maritza East - Bulgaria

1550 4.5 19-35 54

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Thar Coal based Power Projects

Block Investment Firm

Total coal Potential of Block Bn Tons

Power Projects Initiated/Planned MW

Expected COD

Block-I SSRL (China-Pak)

3.657 4X330 2018-19

Block-II SECMC Pakistan

1.584 Phase-I 2X330 2018

Phase-II 2X330 2019

Phase-III 4X660 2021

Block-III

Asia Power UK 2.007 2X660 2019-20

Block-IV

Harbin Electric China

2.572 2X660 2019-20

Block-V UCG Project 1.394 2X50 Phase I: 8-10 MW

2016-17

Block-VI

Oracle Coalfields (UK)

1.423 2X330 2018-1914

COMPARATIVE TARIFF AT DIFFERENT PLANT SIZES

80% Load Factor for all plants RFO & HSD are considered modular; Hence Tariff remains same irrespective of plant size For LNG, modular units of 600MW assumed and USD 200Mn for

terminal considered For Imported Coal, modular units of 600MW (super critical)

assumed and USD 700Mn For Thar, all infrastructure cost is included in the coal price

Thar Coal Block II Project Ground-Breaking

Physical construction activities initiated even before Financial Close

Following activities are being carried out:

Land Acquisition

Initial Overburden Removal

Engineering/Design works

16

Prime Minister Nawaz Sharif along with former President Asif Zardari performed ground-breaking for this mega project on 31st Jan 2014

Political leadership of Pakistan has reached consensus to jointly support this Project and has declared it a “Project of National Importance”PRIME MINISTER HAS DECLARED THAR AS PROJECT

OF NATIONAL IMPORTANCE & ASSURED GOP’S WHOLE HEARTED SUPPORT TO THIS PROJECT

MINING ACTIVITY AT BLOCK-II Work for 113Mn BCM overburden removal in Thar

Block II was started with local contractor on April 30 2014

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THAR - INFRASTRUCTURETHAR - INFRASTRUCTUREROAD NETWORK

COMMUNICATION •70 tonnes load carrying road up to Coalfield •Air-strip •Telephone & Internet

DRINKING WATER •R.O Plants for provision of potable water to the inhabitants of Thar as well as project staff free of cost

THAR LODGE•Thar Lodge : 20-bedded

RESCUE STATION•Rescue Station LIBRARY •At SCA

Thar Airport Runway work in progress

Thar Lodge Islamkot

RO Plants in Thar

ISSUES WITH FEDERAL GOVERNMENT

BAN ON WIND/SOLAR PROJECTS:

The Ban on Wind/Solar projects is one of the examples

The identified wind corridor is located in Sindh and CCoE decides ban on wind projects without any justification & representation. (At a time nation still suffers around 5000MW shortfall)The Price of Thermal electricity is already high, resulting trend of theft

ISSUES WITH FEDERAL GOVERNMENT

TARIFF IMPAIRITY:The cost of Minimum 50MW Wind project is about Rs.10 Billion.

The State Bank Policy allows maximum borrowing limit of Rs.3 Billion, ultimately the investors has to opt the foreign Debt. Insurance cover is a must on foreign funding.

Surprisingly, Only in wind tariff , The Insurance cover has been removed on the pretext of promoting local financing without change in local regulations.

Thus wind project should neither be developed on local financing nor foreign financing.

ISSUES WITH FEDERAL GOVERNMENT

POWER EVACUATION FROM PROJECTS of SINDH GOVERNMENT:

The Govt of Sindh initiated 100 MW Gas based national project in Nooriabad, (Based on the 50% share of newly gas fields, The HESCO refused to induct this power in National Grid, and ultimately GoS signed Agreement with K Electric subject to the condition of lying transmission line at provincial cost.

Similarly, Renewable Energy Policy 2006 ensures guaranteed purchase of power from all projects, but NTDC is not allowing NOC to new power projects in violation of the GoP Policy.

ISSUES WITH FEDERAL GOVERNMENT

NTDC is in continuous dialogue with Tajikistan, Kyrgyz Republic and Afghanistan under CASA-1000 MW Transmission line since 2008, without any physical progress on site at huge expenditures. Another Power Transmission Line project with India. The 3rd one with Iran for import of 1000MW power. The NTDC is not ready for evacuation of 4000MW Power from Sindh’s Wind and Solar energy projects in fulfillment of Pakistan Vision 2025 targets.

Similarly, IMPORTED COAL PROJECTS have been initiated despite investments in huge reservoirs of indigenous coal available in Thar. Railway Line project is initiated to carryout coal imported coal from Port , ignoring a railway line project to transport Thar coal for commercial & power plants utilization.

ISSUES WITH FEDERAL GOVERNMENT

AMENDMENTS IN THE LICENCING TERMS OF SSGCL BY OGRA

OGRA conducted a public hearing on 16.9.2015 and discussed the amendments proposed by Federal Government in the licensing terms of SSGCL. Government of Sindh has requested OGRA to incorporate Article 158 in the license terms.

USE OF IMPORTED LNG IN SINDH:The imported LNG is being consumed in Sindh , whereas the indigenous gas of the sindh is being imported to other provinces without consultation with the provincial Government.

ISSUES WITH FEDERAL GOVERNMENT

STOP THE PURCASE OF CAPTIVE POWER PLANTS WORKING IN SINDH EVEN AT CHEAPER RATES THAN NEPRA. UNDER GOP POLICY:

The province is suffering worst of energy crisis as 12-18 hours long duration load shedding faced by the consumers of HESCO & SEPCO.

The captive power policy was announced in 2009 purchase all surplus power available at any industry or facility . Accordingly 125 MW Power was supplied by sugar mills and industrial users at cheaper costs, which has been temporarily suspended by HESCO & SEPCO.

Despite repeated requests on above issues, the response from federal Govt and its allied departments is not encouraging.The prudent decision making based on merit is the need of the hour.

WAY FORWARD..Legislation by National AssemblyTransfer of Expertise from Federal to ProvincesEstablishment of Institutes at Provincial Level NEPRA (For Tariff/Generation License) PPIB (For issuance of LOI/LOS) NTDC (For transmission of Power) Resolving of Sovereign Guarantee by Federal Govt. Discos under Provincial Govt. Issues of Foreign Investors in Power Sector

THANK YOU!