KESC to tap Thar Coal

Karachi Electric Supply Company (KESC) which is facing shortage of fuel especially gas of over 80 MMCFD is planning to generate at least 300 megawatts from Thar Coal. The company has also planned to convert one of its existing dual-fuel power generating unit of 200 MW into coal fired plant to minimise the cost of electricity.

KESC objective

Tabish Gauhar, Chief Executive Officer (CEO) of KESC disclosed these upcoming major developments in the KESC, in an exclusive interview with Profit. KESC, in partnership with a British company is planning to start power generation from Thar coal, he said, adding that the British company will do the mining works while KESC would install a coal-based power plant of 300 MW at Thar. KESC had already signed a Memorandum of Understanding (MoU) with Oracle Coalfields, a company incorporated in England and Wales and primarily engaged in coal drilling, exploration, mining and production, to set up a major coal-fired power plant at mine-mouth fueled by coal to be mined at Thar Coalfields in Sindh. According to the MoU, Oracle Coalfields will own and operate the mine. Oracle Coalfields have engaged SRK Consulting UK Ltd (“SRK”) as an independent consultant to manage the Feasibility Study to a Bankable Standard. As part of this process SRK is carrying out an independent review of a study done by Dargo Associates, along with the preliminary economic assessment.

Preliminary phase

These preliminary phases will be used as the basis for the detailed feasibility study. In consultation with SRK, Oracle has also appointed Aquaterra, an international water and environmental company to complete a hydro geological assessment, and Dargo Associates Ltd, a group of dedicated coal specialists and commercial professionals with long experience in coal mining, coal markets and coal contracts as technical advisers to the Company to oversee the site work program, including sub-crop drilling, hydro geological, geotechnical studies and geophysical reports. Simultaneously, Oracle has appointed City Bank as their financial advisors. Oracle has completed Environmental & Social Impact Assessment (ESIA), sub crop drilling, hydrogeology, geotechnical and geophysical studies and is nearly close to completion of a Bankable Feasibility Study (“BFS”). KESC has declared its intention to develop power plant of initial capacity of 300 MW with any suitable configuration at mine mouth of Block VI Thar Coalfield, Sindh. The power plant will be established under an SPV structure with project finances mostly to be supported by multilateral agencies, foreign and local lenders.

Transformation of power plants

KESC is in dialogues with NTDC and investors for the probable power plant and has also floated Request for Proposal (RFP) for carrying out feasibility study to prospective consultants for power plant engineering. Review process concerning the RFP is underway for the selection of the Power Plant Consultant. The planed power plant at Thar, KESC, Tabish said, has also signed another MoU with a Chinese company to convert one of its existing power generating units of Bin Qasim Thermal Power Station from furnace oil to coal. For the conversion project KESC was also in process to import coal until the domestic sources of fuel become available at Thar for power generation. The conversion aims to reduce the company’s reliance on furnace oil and result in cost savings for the company and for power consumers in the form of tariff reduction. According the CEO, KESC’s management which would be adding almost 1100 MW in the company’s system by April 2012, was facing the short supply of fuel especially gas, a cheaper source of generating electricity. He said that if the KESC is provided 275 MMCFD gas as per agreement, his company would eliminate loadshedding in the city. He pointed out that KESC gives preference to use gas that costs only Rs4 per unit as compared to Rs6/unit of KANUP, Rs16/unit of furnace and Rs19/unit cost of diesel. He said that if the KESC produces expensive electricity, it is understood the company would pass on this cost to the consumers.

Adequate gas to end load shedding

He, however, said that adequate supply of gas could help KESC to produce low cost electricity to end load-shedding in the economic hub of Pakistan. Replying to a query, Tabish said that the company has started installing ‘prepaid electricity meters’ on experimental basis in the high power theft areas to control losses and to conserve electricity. In the first phase, the new meters which are operated for power supply through prepared cards system, have been installed in Sheerin Jinnah Colony area of the city, where the power losses have been reduced through the new technology. The new meters would be installed in other parts of city if they proved fruitful to control losses and conserve electricity. To another question, the head of KESC said that he was trying to further improve power supply system during the winter season. But, he said, the situation might be critical if gas supply to KESC is reduced in the winter season in case consumption in Quetta shoots up due to chilling weather. The KESC chief said the Sui Southern Gas Company and government’s policy makers should make efforts to enhance gas supply to the power sector to mitigate the hazards of loadshedding on the common people and on the economy as well.