The 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, the GoP had decided that a coal off-take agreement would be signed between Generation Company (GENCO) and Sindh Engro Coal Mining Company (SECMC). This decision was in line with the Memorandum of Understanding (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 was 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 would merely shift reliance from one imported energy source to another with inherent international pricing risks. Our furnace oil based energy tariff had gone up from 1.8 cents in mid 90s to 15 cents presently. Against this, we had previously 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 presently.
Thar always had an enormous energy potential. SECMC’s Thar Block-2, which was only 1% of the entire Thar coal reserves, could produce 4000 megawatts (MW) for the next 50 years. The total foreign exchange savings for 4000 MW of Thar coal based power plants were estimated at more than US $ 50 billion for life of the project.
SECMC had completed the feasibility study on Thar Coal project, confirming the technical, commercial and environmental viability of the project. All the required government approvals had been obtained and the mining work was likely to start later this year, subject to the coal off-take agreement between GENCO and SECMC. The Government of Sindh was also diligently working on the completion of infrastructural setup, which was in line with the development of the mine. SECMC’s mining project, which would cost US$ 1.3 billion, was expected to take less than four years for completion. Failing which, the company would be liable to pay the liquidated damages. The timeline of mining project had matched well with GENCO’s power project development at Jamshoro.
GENCO was planning to convert its Jamshoro’s oil-based power plants and establish new power plants at the same site. This conversion would not only yield a cheaper power tariff, but would also improve the efficiency of the existing plants which could become a model for the other GENCO and Independent Power Producers (IPPs). After Jamshoro, GENCO would convert its Muzaffargarh units to coal-based power plants. As per the GoP decision, Thar coal would be utilized for new power plants as well as the conversions.
To cover any mismatch in timing, imported coal would be utilized until the indigenous Thar Coal was available for the mentioned conversions. This coal off-take agreement would be yet another feather in the present government’s cap, which was eager to resolve the energy crisis with long-term solution. This decision would unlock the potential of Thar and would 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 the GoP would be a realization of the dream of late Benazir Bhutto and would enable the government to save billions of dollars from oil imports, that would be spent on the development of the industrial sector and for the well-being of the people of Pakistan. SECMC applauded this landmark decision by the GoP and reiterated its firm commitment to fulfill all its obligations in a timely manner, which would hopefully bring energy security to Pakistan and accelerate the industrial development in the country.
