Government of Pakistan (GOP) has decided to convert all the existing and new power plants on the specification of Thar Coal versus earlier plan of converting these on imported coal.
In a historic decision, GOP has now decided that a coal off-take agreement would be signed between Generation Company (GENCO) and Sindh Engro Coal Mining Company (SECMC). This decision is in line with the MoU signed between Pakistan Electric Power Company (PEPCO) and SECMC at the Chief Minister House Karachi last year, whereby it was agreed that after the approval of the feasibility report, PEPCO would sign Coal Supply Agreement with SECMC.
Pakistan’s existing power generation mix with 40% reliance on imported furnace oil is not sustainable as reflected in country’s inability to utilize 100% of its power generation capacity due to lack of funds for furnace oil purchase. Development of power plants on imported coal will merely shift reliance from one imported energy source to another with inherent international pricing risks. Our furnace oil based energy tariff has gone up from 1.8 cents in mid 90s to 15 cents. Against this, we rejected Shenua’s offer of Thar coal based fuel energy component at Usc 2.7/KWh in mid 90s which would have increased only to USc 3.6 /Kwh now.
Thar has an enormous energy potential. SECMC’s Thar Block-2, which is only 1% of the entire Thar coal reserves, can produce 4000 MW for next 50 years. Total foreign exchange savings for 4000 MW of Thar coal based power plants are estimated at more than USD 50bn for life of the project.
SECMC has completed the feasibility study on Thar Coal project, confirming the technical, commercial and environmental viability of the project. All the required government approvals have been obtained and the mining work is likely to start later this year, subject to the coal off-take agreement between GENCO and SECMC. Government of Sindh is also diligently working on the completion of infrastructural setup, which is in line with the development of the mine. SECMC’s mining project, which will cost US$ 1.3 billion is expected to take less than four years for completion. Failing which, the company will be liable to pay the liquidated damages. The timeline of Mining Project matches well with GENCO’s power project development at Jamshoro.
GENCO is planning to convert its Jamshoro’s oil-based power plants and establish new power plants at the same site. This conversion will not only yield a cheaper power tariff, but will also improve the efficiency of the existing plants and will become a model for the other GENCO and Independent Power Producers (IPPs). After Jamshoro, GENCO will convert its Muzaffargarh units to coal-based power plants. As per GOP decision, Thar coal will be utilized for new power plant as well as the conversions.
To cover any timing mismatch, imported coal will be utilized until the indigenous Thar Coal is available for the said conversions. This coal off-take agreement will be yet another feather in the present government’s cap, which is eager to resolve the energy crisis with long-term solution. This decision will unlock the potential of Thar and will enable the GOP to meet the country’s power requirements as well as to produce a number of other chemicals including petroleum products and urea.
This visionary decision by GoP will realize the dream of Mohtarma Benazir Bhutto and will enable the government to save billions of dollars from oil imports and will spend the same on the development of the industrial sector and for the well-being of the people of Pakistan. SECMC applauds this landmark decision by GoP and reiterates its firm commitment to fulfill all its obligations in a timely manner, which will bring energy security to Pakistan and accelerate the industrial development in the country.
Govt to use Thar Coal in all Power Plants
