Pak Virtual U Wins Top OCW Award

Pakistan's Virtual University (VU) has won the Outstanding New Site Award 2012 for an Open CourseWare website which was created last year, according to media reports.

The Awards for OpenCourseWare Excellence provide annual recognition to outstanding courseware and OpenCourseWare sites created in the OCW Consortium community. They also recognize individual leadership in moving the ideals of OpenCourseWare and Open Educational Resources forward. The awards are announced each year at the global OpenCourseWare Consortium's annual conference.

In 2001, the Massachusetts Institute of Technology launched the world's first open courseware program, which inspired many other universities, including Pakistan's Virtual University, to join the Open CourseWare (OCW) movement.


Founded in 2002, Virtual University of Pakistan has so far contributed 138 courses on a wide range of subjects since joining the OpenCouseWare consortium. These courses include free and open digital publications of high quality educational materials for colleges and universities.





Enabling virtual education is the high-speed broadband expansion led by PTCL which has propelled Pakistan to become the fourth fastest growing broadband market in the world and the second fastest in Asia, according to a recent industry report. Serbia leads all countries surveyed with a 68% annual growth rate from Q1 2010 to Q1 2011. Thailand (67%), Belarus (50%), Pakistan (46%), and Jordan (44%) follow Serbia. India is in 14th place worldwide with a 35% annual growth rate.

 The quickest and the most cost-effective way to broaden access to education at all levels is through online schools, colleges and universities. Sitting at home in Pakistan, self-motivated learners can watch classroom lectures at world's top universities including UC Berkeley, MIT and Stanford. More Pakistanis can pursue advanced degrees by enrolling and attending the country's Virtual University that offers instructions to thousands of enrolled students via its website, video streaming and Youtube and television channels.

The concept of virtual instruction is finding its way to K-12 education as well. Increasing number of Pakistanis are drawn to the Khan Academy channel on YouTube making Pakistanis among its top users. Virtual Education for All is a local Pakistani initiative extending the concept to primary level. 



All of these technological developments and open courseware initiatives are good news for making education available and accessible to satisfy the growing needs in Pakistan and other emerging countries around the world seeking to develop knowledge-based economies of the 21st century. Virtual University deserves credit for leading this education revolution in Pakistan.

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Affordable Fuel Shortage Hurts Power Sector in South Asia

Lack of affordable fuel has forced many power producers in Pakistan to operate at a fraction of their installed capacity since 2008. It has led to widespread load-shedding in the country, seriously hurting its economy. Similar situation now appears to be developing in India as well, although it's not quite as serious as Pakistan's current crisis yet. Current costs of various fuel options vary from $4 per mmBTU for coal to $20 per mmBTU for oil. Recently, the US prices of natural gas have dropped dramatically from $12 per mmBTU a few years ago to less than $2 per mmBTU, about half the price of coal, with the shale gas revolution currently sweeping the United States.

India burns coal to produce 55 percent of its electricity needs. Domestic coal production has increased just 1 percent last year while 11 percent additional power generation capacity has been installed. Some power producers have been importing coal, but that option has become more untenable recently because India’s biggest supplier, Indonesia, has doubled coal prices, according to a report in New York Times.

The gap between demand and supply in India has increased to 10.2 percent last month, from 7.7 percent a year earlier. In some states like Andhra Pradesh and Tamil Nadu, power cuts have become so common that many factories report getting more electricity from diesel generators than they do from the power grid, at much higher cost. Retail rates for electricity are lower than the cost of producing and delivering it and the difference is made up by Indian state government subsidies running into hundreds of billions of rupees annually.


Unlike India which uses coal, Pakistan relies heavily on natural gas for the bulk of electricity production and other energy needs. Demand for natural gas now exceeds 4.5 billion cubic feet per day or 1.6 trillion cubic feet per year, with a shortfall of nearly 300 million cubic feet per day. According to BMI, gas accounted for 47.5% of Pakistan's primary energy demand (PED) in 2007, followed by oil at 30.7%, hydro-electric energy at 12.9% and coal with a 7.9% share.

The main option Pakistan is pursuing now is Iran-Pakistan pipeline to import gas and reduce the growing gap between supply and demand. However, this option faces serious obstacles with tightening US and international sanctions aimed at isolating Iran because of concerns about Iran's nuclear ambitions. At the same time, Pakistan is also negotiating for LNG imports from Algeria. The wholesale prices of these options are 3 to 4 times more expensive than the the retail rate of $3 to $5 per mmBTU for domestic gas being produced in Pakistan.

 In addition to gas imports, Pakistan has other options to meet its energy needs. Some of these are as follows:

1. Developing its shale gas reserves estimated 51 trillion cubic feet near Karachi in southern Sindh province. The US experience has shown that investment in shale gas can increase production quite rapidly and prices brought down from about $12 per mmBTU in 2008 to under $2 per mmBTU recently. Pursuing this option requires US technical expertise and significant foreign investment on an accelerated schedule.

2. Increasing production of gas from nearly 30 trillion cubic feet of remaining conventional gas reserves. This, too, requires significant investment on an accelerated schedule.

3. Converting some of the idle power generation capacity  from oil and gas to imported coal to make electricity more available and affordable.

4. Utilizing Pakistan's vast coal reserves in Sindh's Thar desert. The problem here is that the World Bank, Asian Development Bank and other international financial institutions (IFIs) are not lending for coal development because of environmental concerns.And the Chinese who were showing interest in the project have since pulled out.

5. Hydroelectric and other renewables including wind and solar. Several of these projects are funded and underway but it'll take a while to bring them online to make a difference.

In my view, Pakistan should pursue all of the above options with options 1, 2 and 3 as a priority for now. Pakistan's best interest is not in defying Saudis and Americans to buy expensive Iranian gas and end up with crippling sanctions which could be much worse than its current energy crisis. Its best interests will be served by developing its own cheap domestic shale gas on an accelerated schedule with Saudi investment and US tech know-how. If the Americans and the Saudis refuse to help, then Pakistan will have a stronger case to go with the Iran gas option.

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Pakistan's Shale Gas With US & KSA Help?

There are strong rumors that Kingdom of Saudi Arabia has joined the United States to oppose Iran-Pakistan gas pipeline project for which Pakistan is trying to arrange financing in the face of tightening US sanction on Iran.

The Chinese have already pulled out of the project after the US imposed sanctions on banks and other entities dealing with projects and transactions involving Iran. Russia's Gazprom is reportedly interested in financing and constructing the Pakistan section of the pipeline, but only on the condition that the project be awarded to it without any competitive bidding.

The question now is how should Pakistan deal with the situation? Can Pakistan satisfy its growing energy needs without alienating the Saudis and avoiding crippling US sanctions which could be more damaging than its current energy crisis?

To answer these questions, let's first examine the following facts:

1. Pakistan has at least 50 trillion cubic feet of recoverable domestic shale gas reserves, according to US Energy Information Administration.



2. US oil and gas companies are pioneers and leaders in shale gas development. In fact, these firms have been so successful that there is now a gas glut in the United States and gas prices have plummeted to less than $2 per mmBTU (approx 1000 cubic feet).



3. Iran-Pakistan deal requires Pakistan to pay $11-12 per mmBTU for its gas, six times the current price in the United States. Since the pricing formula for Iranian gas is based on the price of oil, it's almost certain that Pakistan will end up paying more than $12 per mmBTU with rising oil prices in the future.



4. Pakistan needs investment and technical know-how to develop its shale gas reserves to assure cheap and abundant energy supply.

Considering the above-mentioned facts, I think the best option for Pakistan is to go with its own domestic shale gas at a fraction of the price Iran is demanding.

Pakistan's best interest is not in defying Saudis and Americans to buy expensive Iranian gas and end up with crippling sanctions which could be much worse than its current energy crisis. Its best interests will be served by developing its own cheap domestic shale gas on an accelerated schedule with Saudi investment and US tech know-how. If the Americans and the Saudis refuse to help, then Pakistan will have a stronger case to go with the Iran gas option.

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Pakistan's Energy Security Via Shale Gas Revolution

US natural gas prices have fallen below $2 per million BTU (approx 1000 cubic feet), about one-sixth of the price Pakistan has agreed to pay for Iranian gas. With over 50 trillion cubic feet of known shale gas reserves in Sindh alone, Pakistanis can also enjoy the benefits of cheap and abundant source of energy for decades via the shale gas revolution already sweeping America.



Increased production of gas from shale rock in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.



In addition to the fact that the Iran gas is extremely expensive, the entire Iran-Pakistan gas pipeline project raises other serious issues as well.

Iran-Pakistan Pipeline Issues:

1. Chinese investors and contractors have pulled out of the project for fear of being hit by US sanctions on their banks and other companies.

2. Russia's Gazrom is reportedly interested but only if it gets the deal at whatever price it decides to charge without any competitive bidding.

3. Pakistani companies and financial institutions are also under threat of US sanctions if they participate in the project.

4. If the pipeline does eventually get built, it will still be several years before gas starts to flow to Pakistan.

5. If Iran is still under US sanctions when the Iranian gas imports finally begin, Pakistan will have difficulty paying for the gas using international banking system. Iran has already been suspended by SWIFT, the Society for Worldwide Interbank Financial Telecommunication, which is the main mechanism used for international bank transactions.

6. The largest chunk of Pakistan's trade deficit is accounted for by energy imports. Iranian gas bill will only worsen this deficit, contributing to yet another balance of payments crisis sending Pakistan back to IMF.



Advantages of Domestic Shale Gas Development:

1. Cheap domestic gas can start flowing from Pakistani shale in a couple of years if Pakistan can make a deal with US (and American pioneers of shale gas like George Mitchel's Devon Energy) to invest and execute on an accelerated schedule in exchange for dropping Iran pipeline.

2. Pakistan will dramatically reduce its dependence on foreign sources and save a lot of foreign exchange spent on hydrocarbon imports.

3. Gas burns a lot cleaner than coal which is also a option given vast amounts of it in Thar desert. World Bank and other International financial institutions are more amenable to financing shale gas development than coal.

4. Abundant and cheap domestic gas supplies can help reduce electricity load-shedding which is caused mainly by under-utilization of installed generating capacity for lack of affordable fuel.

Shale gas revolution began a few years ago when an American named George P. Mitchell defied the skeptics and fought his opponents to extract natural gas from shale rock. The method he and his team used to release the trapped gas, called fracking, has paid off dramatically. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is over 30 percent and rising.



Among the potential downsides of shale gas development is the possibility of groundwater contamination reported in some places in the United States. Such risks can be minimized by following accepted practices to protect the aquifers which are found at levels well above the deep shale rock fractured for extracting natural gas.

Cheap and abundant energy is a pre-requisite for rapid economic growth in any country. Pakistan is no exception. The sooner Pakistanis recognize and resolve this crisis, the better it will be for the south Asian nation.

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Pak Consumer Boom Fuels Underground Economy

Car sales increased 14 percent in February from a year earlier. Cement sales are rising with growing housing demand for increasing population. Lucky Cement, Pakistan’s biggest publicly traded construction materials company, is expected to post record earnings this year. Rising farm prices of bumper crops are pumping hundreds of billions of rupees each year into Pakistan's rural economy.

Contrary to government statistics of a stagnant economy, packed shopping malls and waiting lines at restaurants tell a different story-- the story of growing discretionary incomes of Pakistani consumers today.



So where is the disconnect between these two opposite views of Pakistan's economy? Naween Mangi of Businessweek answers it in her piece "The Secret Strength of Pakistan's Economy". She attributes it to the fast growing informal sector of the nation's economy that evades government's radar, illustrating it with the story of a tire repair shop owner Muhammad Nasir. Nasir steals water and electricity from utility companies, receives cash from his customers in return for his services and issues no receipts, pays cash for his cable TV connection, and pays off corrupt police and utility officials and local politicians instead of paying utility bills and taxes.

Here's an excerpt from Mangi's Businessweek story:

"The rhythms of life in the underground economy remain largely undisturbed. After work, Nasir and his friends sometimes hire a rickshaw to head to the beach or to a religious festival. The driver, part of the flourishing local transport business, doesn’t turn on the meter because he doesn’t have one. On his way home, Nasir stops to buy cooking oil, wheat flour, and sugar at a small grocery store that isn’t officially there. Out of about 1 million shops, up to 400,000 are grocery stores, and most of them are not registered and don’t pay taxes, according to Rafiq Jadoon, president of the City Alliance of Markets Association. In the evening, Nasir unwinds in front of the television. He watches an Indian movie transmitted by a local cable operator to whom he pays a monthly fee—in cash."

The estimates of the size of Pakistan's underground economy vary from 30% to 50% of the official GDP of just over Rs. 18 trillion (US$200 billion). Businessweek's Mangi claims that the government is losing as much as Rs. 800 billion (US$9 billion) in taxes from the informal sector...nearly enough to wipe out Pakistan's current fiscal deficit.

In my view, there are two major problems that arise from the underground economy described by Mangi. First, the massive tax evasion fosters Pakistan's dependence on foreign aid which comes with strings attached and infringes of national sovereignty. Second, the widespread theft of electricity is largely responsible for the huge circular debt and the ongoing power shortages that affect all aspects of life and scare away investors. The sooner the government and the people realize the severe downsides of the underground economy, the better it will be for Pakistan.

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US Can Help Pakistan Develop Shale Gas

Pakistan has over 50 trillion cubic feet of shale gas reserves, according to the US Energy Information Administration (EIA) estimates. It's enough to energize Pakistani homes, businesses, power plants, CNG vehicles, fertilizer plants and factories for 25 years at a rate of 2 trillion cubic feet of consumption per year at half the currently agreed price of imported gas from Iran, an agreement the US strongly opposes. It will also save Pakistanis hundreds of billions of dollars in foreign exchange.

The relevant question here is whether America is willing to offer through its oil and gas companies the necessary investment and the advanced technology to quickly and profitably develop shale gas fields in Pakistan in exchange for abandoning the Iran-Pakistan gas pipeline?



Shale gas revolution began a few years ago when an American named George P. Mitchell defied the skeptics and fought his opponents to extract natural gas from shale rock. The method he and his team used to release the trapped gas, called fracking, has paid off dramatically. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is over 30 percent and rising.



Up until 2009, the US was the largest importer of Qatari LNG. However, the discovery of development of shale gas has caused a glut in the US. The Qatari LNG imports are no longer needed and the gas prices have plummeted in the United States. Qatari oil minister was quoted by Bloomberg as saying that 60 percent of Qatari LNG exports “moved to the east” in 2009.



Increased production of gas from shale in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.



Under the new policy, exploration companies will be offered 40-50% higher prices for the extracted gas compared with the $4.26/Btu price announced in Exploration and Production Policy 2009. Companies which succeed in recovering gas from tight fields within two years will get 50% hike over the 2009 price and if it takes more time they will get only a 40% hike on the 2009 price. As an added incentive, the leases for the fields will now be for 40 years instead of 30 in the 2009 policy, the official said.

Even with the higher prices for the tight gas offered to the exploration companies, it is estimated that Pakistan will have to pay a maximum of $6.50/Btu for the gas compared with $12.30/Btu for gas imports, according to a report by Platts.

Pakistan should ask the Obama administration to help fund and develop shale gas in exchange for abandoning the Iran-Pakistan gas pipeline. It will be a historic win-win for both nations, as historic as the US aid to Pakistan for Green Revolution in 1960s. Pakistanis will get relief from the severe energy crisis which affects almost everyone in the country. The US energy companies will create thousands of American jobs and make a huge profit in the process with the potential bonus of largely neutralizing the strong anti-American sentiments in the country.

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