Monday, January 28, 2008

Pakistan's Energy Crisis

Pakistan’s economy has recently been growing at 7-8% per year, doubling its GDP over the last 7 years. The industrial growth rate has been closer to 12.5% per year during this period, contributing 38% of the total economic output of Pakistan. Per capita energy consumption of the country is estimated at 14 million Btu, which is about the same as India's but only a fraction of other industrializing economies in the region such as Thailand and Malaysia, according to the US Dept of Energy 2006 report. To put it in perspective, the world average per capita energy use is about 65 million BTUs and the average American consumes 352 million BTUs. With 40% of the Pakistani households that have yet to receive electricity, and only 18% of the households that have access to pipeline gas, the energy sector is expected to play a critical role in economic and social development. With this growth comes higher energy consumption and stronger pressures on the country’s energy resources. At present, natural gas and oil supply the bulk (80 percent) of Pakistan’s energy needs. However, the consumption of those energy sources vastly exceeds the supply. For instance, Pakistan currently produces only 18.3 percent of the oil it consumes, fostering a dependency on imports that places considerable strain on the country’s financial position. On the other hand, hydro and coal are perhaps underutilized today, as Pakistan has ample potential supplies of both.

Pakistan’s rising energy demand, according to the U.S. Department of State’s Paul Simons, creates opportunities for regional cooperation. To this end, the U.S. Trade and Development Agency convened a meeting a couple of years ago in Istanbul that produced an agreement on examining options for exporting Central Asian electricity to Pakistan. It should be noted here that US does not favorably look upon any Iran-Pakistan cooperation in the energy sector. At an Asia Program event organized by Wilson Center in 2006, Vladislav Vucetic of the World Bank provided a troubling assessment of the state of Pakistan’s electricity sector—demand is approaching maximum production capacity, while institutional capacity for policy development and implementation remains low. Worse, failing to resolve these problems may cause investment delays and hamper Pakistan’s economic growth. Sanjeev Minocha of the IFC, a major source of private sector financing, noted the paucity of domestic private sector initiatives in Pakistan. The IFC has sought to raise investor confidence through its funding of private Pakistani energy companies, including the new firm Dewan Petroleum. Ultimately, stated Minocha, it is crucial that investment projects take into account the interests of local communities.

In early 2008, Pakistan's industrial consumers are facing an electric power deficit of up to 3,600 megawatts (MW)due to low water levels at hydroelectric dams and damage to two main power lines attacked during the three days of violence following Bhutto's assassination. More than anything, this represents the failure of long term energy planning to go with the economic growth forecasts.

Among the temporary issues exacerbating the larger power crisis, the two main power transmission lines were blown up in January 2008 in Sind, creating a shortfall of 1,000 MW. The business community complain that lopsided and unplanned shutdowns have resulted in closures in almost all industries. Subsequent production losses will be reflected in further pressure on exports and lead to increased imports.

Water levels have fallen by 32% compared with last year, according to the Pakistan Electric Power Company (PEPCO). Pakistan's current installed capacity is around 19,845 MW, of which around 20% is hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil. PEPCO also blames independent power producers (IPPs) for the electricity crisis, as they have been able to give PEPCO only 3,800 MW on average out of 5,800 MW of confirmed capacity. Most of the IPPs are running fuel stocks below the required minimum of 21 days.

While there are many economic successes of the Musharraf-Aziz administration in terms of reviving the Pakistani economy and putting it on a growth path again, the energy sector represents its biggest failure. This failure has the potential to threaten Pakistan's economic future, unless immediate steps are taken to bring this crisis under control over the next few years.

10 comments:

Riaz Haq said...

Here's a recent Daily Times report about Bhasha Dam in Pakistan:

ISLAMABAD: Deputy Chairman Planning Commission, Sardar Asef Ahmad Ali on Thursday said some changes had been made in Bhasha Dam project, particularly in its power component. In an exclusive interview with Daily Times he said the power component of Bhasha Dam would be run on Public Private Partnership basis so that burden on the government kitty might be reduced. In this regard he said that a ‘Company’ would be established, which would be converted into an international consortium. The consortium would be able to get equity as well as funds from the International Financial Institutions (IFI), Kuwait Funds and others.

Once the Company is established, he said that there would be no problems for funding, as it would be able to borrow from the market and repay the loan. “The government has assigned me to structure the Company,” the Deputy Chairman said and added that he would invite all power distribution companies including KESC to purchase its shares. The government and WAPDA might also purchase its share and later, expatriates would also be offered shares in it. In this manner, it would enjoy the status of an International Company. Its marketing plan would be carried out at world-class top companies and arrangements would be made to conduct internationals show for it. In this way, all requirements for making it an ‘Equity’ would be fulfilled, he added. All these measures have been carried out for the first time in Pakistan.

About PSDP (Public Sector Development Programme) he said that as a routine, the government releases 19 to 20 percent developmental funds in first quarter of the current fiscal year (July-September 2009). Reason for low allocation was the slow process of revenue generation through new measures adopted in the annual budget. PSDP releases for second quarter (Oct to Dec 2009) was already in progress. If the funds are released in time, he expressed hope that the government would be able to achieve its targets. At present, he said there was no indication by the ministry of finance regarding cut in PSDP 2009-10.

Currently the country’s revenue generation remained stagnant at 8.5 percent of the GDP, which he termed as lowest in the world. The government wanted to increase it to the level of 11 percent of the GDP. “Finance Minister Shaukat Tareen informed me that the government identified 2 million new taxpayers in the existing system and if it remains successful, then the PSDP will be remain as it is”, he maintained.

Riaz Haq said...

ADB targets solar power projects in Pakistan: Daily Times:

ISLAMABAD: Asian Development Bank (ADB) will launch the Asia Accelerated Solar Energy Development Fund with $2.25 billion as it targets solar power projects in countries including China, India, Pakistan, Uzbekistan and Thailand to add another 1,000 megawatts next year and 1,500MW in 2013, said a statement of the ADB.

“By providing an enabling environment for commercial lending and private investment in the solar energy market, we hope to encourage its rapid growth and bring solar energy nearer to grid parity-making solar energy competitive in price to conventional sources,” ADB President Haruhiko Kuroda said at a clean energy forum in Manila.

Asia needs to invest around $10 billion in the next few years to make solar power generation competitive with conventional energy sources and called for radical steps to fight climate change.

ADB wants Asia, home to about two-thirds of the world’s population to add 3,000 megawatts of solar energy capacity by the end of 2013, he added.

Already this year, it has helped countries add 500 megawatts, doubling the region’s solar capacity. Fast-growing Asian economies rely heavily on fossil fuels. ADB has forecast Asia-Pacific imports of fossil fuels will more than double between 2005 and 2030, with oil accounting for more than 90 percent of such imports.

“The total cost of this 3,000 MW is about $10 billion, of which we are planning to commit $2.25 billion,” sais S Chander, Principal Director at ADB’s Office of Information Systems and Technology.

“Our job is to catalyse enough projects to increase volumes and to make sure that the manufacturers (of low-carbon technologies) have an incentive to invest in research and development,” Chander said.

ADB invested $1.76 billion in clean energy across 29 projects last year and said it is on track to meet a goal of $2 billion in clean energy investments annually by 2013. It plans to inject $60 million into three venture capital funds that will provide early-stage financing support for new climate technology products. It expects this initiative to leverage over $400 million in private sector investment.

Kuroda said Asia had a lot to lose from climate change and needed to act quickly to develop alternate energy source. “A big push is needed to accelerate this transition,” he said. “The climate fight will be won or lost by decisions made in this region.” app

Riaz Haq said...

Here's an update on Thar coal power plans as reported by Steelguru:

Business Recorder reported that the government will launch Interconnection of Thar Coal based 1200 MW Engro Power Plant with National Transmission & Despatch Company system' project at a cost of PKR 22.04 billion with the objective of providing consistent power supply to industrial, agricultural, commercial and domestic consumers.

The cost includes PKR 14.845 billion Foreign Exchange Component and PKR 7.19 local component. The project is likely to be financed by Japan International Cooperation Agency or through Irish Credit Bureau on buyer's credit basis and sponsored by the NTDC.

The location of the project is District Matiari, Sindh and it is aimed at providing adequate facilities for reliable and stable transmission of electrical power, keeping in view the growing demand of domestic, commercial, industrial and agricultural customers of Discos.

The project would disperse bulk power from 1200 MW Engro Power at Thar to up country by constructing 500kv D/C transmission lines, 250 kilometers long from the power plant at Thar to Matiari with extension at existing 500 KV grid station of Matiari.

Thar Coal Energy Board has been established to promote and facilitate the public and private sector coal industry. Thar coal deposits have been rapidly recognized as a major energy resource with the potential to transform the energy equations in the country. Therefore, initially the intent is to develop Thar coal mine for generation of electricity from two 1200 MW Power Plants one by Engro in private sector and another in public sector by PEPCO.

Ministry of Water and Power had decided in a meeting of Thar Coal Energy Board that NTDC would immediately prepare a work plan for providing the inter connection arrangements for dispersal of power of these power plants.

According to the document the NTDC has planned a transmission scheme for evacuation of power from 1200 MW Engro Power Plant with the following scope: considering that the proposed third 500 KV Jamshoro Moro RY.

Khan Transmission Line and 850 MW Wind Power plant is constructed before its completion. A MoU between PEPCO and Sindh Engro Coal Mining Company for detailed feasibility study had been signed.

Sindh Engro Coal Mining Company has carried out detailed feasibility study for coal mining for both power plants. The expected date of completion of the coal mining project is December 2015 while the two Thar coal based power plants of 1200 MW each is 2015 to 2016.

According to official sources, High Voltage Direct Current transmission lines will be required for evacuation of additional generation at Thar in the year 2015 to 2016 and onward as well as the power generated from the proposed power plant.

They said that in case future generation at Thar does not mature during the next two years while AES imported coal power plant and 1000 MW import of power from Iran does mature then 525km single circuit AC transmission line from Matiari to RY Khan would be required in future for the dispersal of this power.


http://www.steelguru.com/middle_east_news/Pakistan_government_to_launch_interconnection_of_Thar_Coal_with_NTDC/252709.html

Riaz Haq said...

Here's a News story of how the worst-hit Punjab industries are switching to alternate power and gas generation:

The Punjab industries are converting on alternative energy due to uninterrupted power and gas outages of six to eights hours daily, besides improving their efficiency to reduce costs and stay competitive domestically and internationally, analysts said on Tuesday.

“We are unable to compete with similar industries in other provinces that enjoy full gas supplies and lower electricity load-shedding, said Syed Nabeel Hashmi, Chairman Punjab Economic Forum.

The majority of industries are suffering from power and gas load-shedding, but some have managed to reduce the operating cost through improvement in their efficiencies.The manufacturing sector in Punjab is now using biomass (agricultural waste), solid municipal waste, coal gasifiers, liquefied petroleum gas (LPG), used tyres, rejected leather soles as alternative fuels to gas, furnace oil and diesel, he said.



In addition, Punjab industries have upgraded technology and their human resource to improve productivity, said Hashmi.Gohar Ejaz, group leader All Pakistan Textile Mills Association, said, “We would never have realised the quantum of savings that could be made through energy audits.”



German non-government organisation GIZ and Small and Medium Enterprises Authority (SMEDA) have facilitated APTMA member mills by providing free services of highly qualified foreign energy audit and management system experts, he said, adding that only through energy audit and the resultant cost-free changes in the manufacturing system 25 APTMA members gained a cumulative benefit of Rs258 million per annum.



The benefits doubled for those mills that agreed to make some minor investments, he said, adding that savings made through improvement in efficiencies did provide some relief to the mills when they used alternative energy resources.



Lahore Chamber of Commerce and Industry (LCCI) Senior Vice President Kashif Yunus Mehr, who is associated with the steel melting industry, said that larger steel melting units have imported coal gasifiers from China.



The gas produced is use to heat the furnaces, he said.“It costs 20 percent higher than the natural gas as it was the only alternative to keep the industry running as natural gas is mostly unavailable.”

These gasifiers require investment of Rs25 million that mills with small capacities cannot afford, he said, adding that the small steel melting units are using locally-fabricated small gasifiers that are highly inefficient, but serve the purpose of keeping the production intact.



Among the larger corporate sector, Nishat Group has established a 12MW biomass and solid municipal waste-run power plant at its textile processing unit in Lahore, he said.To cut its cost, it is recovering the caustic soda used in its processing mills by installing a recovery plant at its water treatment facility, said Mehr.



At its cement factory in Kalar Kahar, it is using solid municipal waste, used tyres, rubber chappals, rice husk, wheat straw, corn cob, as fuel for heating purposes.“We are not using power supplied by the Pakistan Electric Power Company (PEPCO) in most of the manufacturing facilities of our group,” said Nishat Group Chairman Mian Mohammud Mansha.



Engineering sector entrepreneur Almas Hyder said, “Unfortunately our industrial sector grew initially on protection that gave rise to huge inefficiencies.”By improving efficiencies the increase in cost of production could be absorbed to a large extent, he said.


http://www.thenews.com.pk/Todays-News-3-99810-Punjab-industries-converting-to-alternative-energy

Riaz Haq said...

Here are some excerpts of a News interview with Pak industrialist Mian Mansha:

Q: Do you think the decisions taken at recent energy summit would resolve the power and gas crisis? Is it the most burning issue impacting Pakistan’s productivity?



Mansha: Short-term decisions are no solution to a problem that requires long term planning. The government could save a trillion rupees if the power plants using furnace oil were run on coal.



In fact about a year back I proposed to the government to allow me to convert Nishat group furnace oil power plants to coal. The investment plan and revenue sharing formula to cover the cost was also outlined. I regret that things have not moved painfully slow on this proposal of vital national importance. Converting these plants to coal would wipe out entire circular debt in a year and generate resources for alternate energy and hydroelectric projects.



Q: How do you propose to reform the power sector?



Mansha: The deteriorating fuel mix is increasing the base cost. We are producing over 50 percent of power using the most expensive furnace oil as fuel. The losses and theft in electricity distribution are alarmingly high at 35 percent. The public sector power projects are operating a very low efficiency. Sensible solution to the crisis is to privatise and deregulate this sector.



The power distribution companies should emulate KESC that ensures most productive use of electricity by exempting industries from load shedding.



Q: You are pioneer in alternative energy projects, are they feasible?



Mansha: We have been seeking cheaper energy solution. Our cement plant first shifted to coal from furnace oil and then to biomass and municipal solid waste that were even cheaper alternatives.



Pakistan is blessed with large quantity of biomass that has a potential to produce 6000 MW of electricity. Our companies are using corncob, rice husk, wheat straw, cotton plant sticks and other agriculture residue, solid municipal waste, slippers, sandals, and used tyres to generate energy.


http://www.thenews.com.pk/Todays-News-3-102987-India-offers-bigger-trade-opportunities-than-China-Mansha

Riaz Haq said...

Here's a Gulf News story on Pakistan's plan to import power from neighbors:

Dubai: Talks with India and Iran on power exports are under way and likely to be settled soon, Pakistan's Minister for Water and Power Syed Naveed Qamar, told Gulf News.

Iran currently provides 72 megawatts to Pakistan which is likely to be increased to 1,100MW.

"It is our desire that the modalities, tariff and terms and conditions may be finalised at the earliest so that the project can be started soon."

He said the transmission line between Pakistan and India is around 100 kilometres compared with the Kyrgyz Republic and Tajikistan transmission lines which are around 1,000km.

"As we look into the future, the power demand is going to be robust coupled with the growth in the economy. The electricity trade with India is beneficial for both countries and it will open new avenues of economic ties," Qamar said.

Pakistan may import up to 500MW which may be supplied with the construction of small transmission lines from both sides.

Wind projects

He said that the major share of power production is through oil which is expensive, and therefore the government is considering running the power plants on coal. Special attention would be given to the power sector and in this regard more funds would be allocated for the power sector during the coming development budget.

The government has plans to produce 1,000MW of cheaper power from wind projects next year, Qamar said.

"Russia, Uzbekistan and Turkmenistan have also offered Pakistan to export their surplus power to Pakistan," A.U. Rahman, acting executive director of Central Asia, South Asia (CASA-1000) project, told Gulf News.

He said Russia is also keen to join the project.

Pakistan has an installed capacity of around 20,000MW, but the production capacity is around 16,000MW. Right now "the shortage of power is around 4,500MW," Rahman said.

He said the current load shedding will be "reduced gradually" with the new projects expected to come online soon.

In certain parts of the country current load shedding continues for more than 12 hours.


http://gulfnews.com/business/economy/pakistan-negotiates-for-indian-and-iranian-power-1.1025096

Riaz Haq said...

Here's a News story on oil leading Pak imports:

Pakistan has spent 43.5 percent (or $3.815 billion) more dollars during the July-April 2011-12 period on import of petroleum products as during the ten-month period the country imported petroleum products worth $12.58 billion against $8.76 billion in corresponding period last year, according to official data.



During the period petroleum imports were one-third of the country’s total imports of $37.04 billion. Petroleum group was followed by agricultural and other chemical group imports of $5.98 billion showing an increase of 16.77 percent over $5.12 billion last year.



Machinery imports also secured a sizable share in country’s total imports during the period under review and it stood at $4.567 billion against $4.41 billion last year, showing a rise of 3.5 percent.



Pakistan Bureau of Statistics (PBS) bulletin indicates that under the petroleum group, petroleum products import stood at $8.35 billion against $4.92 billion last year, showing an increase of 69.8 percent. Besides, crude petroleum import also showed an increase of 49.9 percent to $4.23 billion during these ten months from $3.85 billion in same period last year.



Under the agricultural and other chemical group, manufactured fertilizers import up by 116.5 percent to $1.082 billion, plastic materials by 1.88 percent to $1.28 billion, while imports of insecticides were down by 9.76 percent to $110.39 million and medicinal products reduced by 3.1 percent to $548.66 million over July-April 2010-11.



In the machinery group, textile machinery import declined by 15.11 percent to $339 million against $399.4 million same period last year. Telecom sector import was up by 22.85 percent to $1.05 billion; power generation machinery import increased by 1.3 percent to $877 million; electrical machinery and apparatus import increased by 0.07 percent to $675.3 million; agriculture machinery by 32.7 percent to $103 million; office machinery by 22.6 percent to $239.8 million; construction and mining machinery by 12.6 percent to $111 million over same period last year. During the period, Pakistan spent $568.75 million which was 29 percent more than last year imports of $441.05 million.



In the transport group, imports reduced by 7.26 percent to $1.67 billion from $1.8 billion last year. However, under the completely built units (CBU) during July-April 2011-12 imports of buses, trucks and other heavy vehicles imports increased by 91.3 percent to $122 million and motor cars 161 percent to $285.4 million.



While, under the completely knocked down/semi knocked down category, imports of buses, trucks and other heavy vehicles imports up by 27.1 percent to $120.47 million, motorcycles 27.1 percent to $74.92 million, however, motor cars imports down by 1.14 percent to $389.78 million over same period last year.



The food import declined by 1.73 percent to $4.23 billion from $4.31 billion in July-April 2010-11. In this group, on palm oil import economy spent $1.89 billion which is 18 more than last year. Tea imports up by 4.76 percent to $301.9 million, while pulses import down by 7 percent to $320.27 million and spices imports down by 5.16 percent to $86.57 million over same period of last year.



In textile group, total import was of $1.98 billion against $2.42 billion depicting 18.26 percent decline over corresponding period of last year.



Under this head, raw cotton imports down by 56.68 percent to $369.4 million, synthetic and artificial silk yarn by 6.36 percent to $434.6 million, while synthetic and artificial silk yarn has up by 13.3 percent to $503.87 million and worn clothing import up by 16 percent to 122.48 million over last year...


http://www.thenews.com.pk/Todays-News-3-109601-Pakistan-imports-petroleum-products-worth-$126bn

Riaz Haq said...

Here's an ET story on decline in circular debt:

The good news is that circular debt in the energy sector is going down. The bad news is that it is doing so for all the wrong reasons.

Circular debt has now become shorthand for the crippling string of financial liabilities that energy companies owe each other because the federal government fails to live up to its promise to pay out energy subsidies that it announces as vote pleasers. This debt has resulted in a massive cash shortage virtually all along the energy chain and significantly reduced the ability of power companies to operate at full capacity, which in turn causes massive power outages throughout the country, particularly during the summer months of peak demand.

But now at last, it appears that the government is paying out what it owes in subsidy payments. Azfar Naseem and Sateesh Balani, research analysts at Elixir Securities, an investment bank, estimate that total circular debt throughout the energy chain has not only stopped growing, but has shrunk by about Rs137 billion during the first six months of the fiscal year ending June 30, 2013.

Part of this reduction has come from higher subsidy payouts to the energy sector from the finance ministry, which rose to Rs160 billion between July 1 and December 20 of this year, about 5% higher than the net payouts throughout the whole previous fiscal year that ended June 30, 2012.

Another significant chunk came when the government effectively forced the state-owned Oil & Gas Development Company (the largest company in Pakistan by market capitalisation) to buy about Rs82 billion in government bonds meant to clear out the outstanding liabilities. The bonds do not mean that the government has paid out its liability: they just mean that they forced OGDC to pay the rest of the energy chain and promised to pay OGDC back.
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The government was given this fiscal breathing room by the inflow from the United States in the form of $1.1 billion in outstanding dues on account of the Coalition Support Fund. That entire amount, by some accounts coming out of the finance ministry, was spent on power subsidies. Yet the government may well be running out of accounting tricks to patch up the power sector before the elections.

The reason the government has tried to juggle around its scarce cash reserves is because it wants to make sure that the power companies have enough cash to buy the fuel they need to keep the lights on in the country, at least most of the time, in the run-up to the elections, expected around May 2013.

These techniques appear to be having at least some positive impact: the outstanding receivables at Pakistan State Oil, the largest oil retailer in the country, are down by almost 40% to around Rs120 billion. Receivables at Hub Power Company and Kot Addu Power Company (which supplies politically important regions of southern Punjab) are also down substantially....


http://tribune.com.pk/story/485765/energy-crisis-circular-debt-is-going-down-but-not-for-the-right-reasons/

Riaz Haq said...

Here's ET on ADB not objecting to Thar coal:

ISLAMABAD:

Engro Corporation President and CEO Muhammad Aliuddin Ansari has stated that the Asian Development Bank (ADB) does not object to financing the switchover of thermal power plants to Thar coal.

“The directors of ADB have met me and the chief minister of Sindh and said that they had no objection to the conversion of power plants to Thar coal and are ready to finance [such projects],” he told The Express Tribune.

The revelation comes on the heels of the Ministry of Water and Power’s claim that the ADB is not ready to finance the conversion of power plants to Thar coal, and that the lending authority would finance power plants that run only on imported coal.

Ansari also said he is ready to travel to Manila along with a delegation from the water and power ministry to meet ADB officials and negotiate a financing deal for such projects.

Ansari recalled that it had been decided in a special board meeting of the Thar Coal Energy Board (TCEB) on October 3, 2012, chaired by the prime minister of Pakistan, that existing oil-based power plants should be modified and redesigned to Thar coal specifications, and that new coal-based plants should also be designed keeping the same specifications in mind.

It was also decided in the meeting that agreements would be signed between power generation companies and the Sindh Engro Coal Mining Company (SECMC) for the supply of coal for an existing 420 megawatt (MW) power plant in Jamshoro, as well as a new 600MW power plant to be built in the same location. These agreements were to be finalised and signed within a week, but never materialised.

Ansari said that Pakistan was facing a circular debt issue due to the poor energy mix employed by generation companies, and that conversion of power plants to run on Thar coal could address this issue. He claimed that Thar held the future of Pakistan, and reiterated that all future power plants should be designed on Thar coal specifications.

“Not only has the fuel mix shifted from gas to furnace oil, the price of furnace oil has increased four times in the last five years. This has increased the furnace oil bill by 461%, whereas power generation through furnace oil has increased by only 79%,” said a handout provided by Engro Corp as part of the interview.

Ansari said that Indonesia and India both held coal reserves that were similar in specification to the coal available in Thar. He remarked that India is expected to become a major market for coal by 2016: it already imports significant quantities to meet its needs....


http://tribune.com.pk/story/498215/engro-says-adb-has-no-objections-to-thar-coal-project/

Riaz Haq said...

Here's a summary of BMI report on Pak power sector:

Boston, MA -- (SBWIRE) -- 01/03/2013 -- BMI View: In spite of chronic and persistent power shortages, reflecting under-investment and system inefficiencies, Pakistan has a plethora of potentially varied and rich power options from which to choose. There is vast untapped hydro and renewables capacity available, but it remains to be seen if the investment will actually materialise. Thus, this is likely to increases the country's reliance on growing its gas-fired, coal-fuelled capacity, as well as its modest nuclear programme, although controversial import deals with Iran could cause political backlash. While these opportunities exist for the thermal generation, delays in payments by state-owned transmission companies to independent power producers limit the profitability of the sector, and could cap its growth.

View Full Report Details and Table of Contents

The country continues to suffer from a shortfall of electricity of more than 3 gigawatts (GW) daily, and while this has fallen from the highs of 7GW, permanent resolutions and solutions to the situation remain out of sight. While the shortfall is caused by poor performance from existing generating assets, the lack investment in generating capacity, and an inefficient grid, the government also faces difficulty in sustaining subsidies. This, in turn, drains the profitability of power generation companies, forcing them to cut back on much-needed investment in the sector.

The key trends and recent developments in the Pakistani electricity market include:

- The constructions of the various dams have met with increasing environmental concerns and financing issues, which threaten to stall works. In particular, the World Bank and other international aid agencies have withdrawn their support for the Diamer-Basha dam project due to environmental concerns raised by India. Given the growing demand for electricity, a delay in the completion or cancellation of the project could mean ,the electricity shortfall is likely to persist beyond the government's original timeline.
- Progress of talks between India and Pakistan regarding the sale of electricity and petrol remains slow, with Indian officials citing their Pakistani counterparts keeping a cautious stance. While several suggestions have been raised during the talks, including building of a pipeline directly to Lahore, the Pakistan government remains wary of issues such as security and dependability of oil imports from India. However, worsening energy shortage in Pakistan may push Pakistani authorities to push ahead with negotiations, although imports from India are unlikely to exceed supplies from Kuwait.


http://www.sbwire.com/press-releases/recently-released-market-study-pakistan-power-report-q4-2012-191192.htm