Govt eyes $58b investment in power sector till 2022

The government has claimed that it has arranged $58 billion investment for the power sector till 2022, but at the same time aired uncertainty over implementation of the Iran-Pakistan gas pipeline project, according to a report in the local media.

This was the gist of a briefing the Prime Minister Office had arranged for Islamabad-based foreign diplomats, civil society members, academics and media persons on the eve of completion of three years of the Pakistan Muslim League-Nawaz (PML-N) government with a focus on power projects, oil and gas and connectivity limited to roads.

At the outset, Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said the Iran-Pakistan gas pipeline project was still facing two major issues to take off. Explaining, he said international sanctions against Iran had eased but “dollar transactions are still not allowed”, making it difficult to have normal business transactions with Tehran. Secondly, the existence of a snap-back clause in Iran’s agreement with the West was a problem for international financing of the project.

Responding to a question why such restrictions did not work against the European Union, Abbasi said the EU had only a one-off transaction with Iran while the Iran-Pakistan pipeline project was a long-term arrangement for 20 years which could be affected in case of application of snap-back clause.

When asked about the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline project, the minister said Turkmenistan had taken upon itself to deal with security of the pipeline in Afghanistan and the project envisaging 1,325mmcfd of gas to Pakistan could materialise in January 2020.

He said even if both the IP and Tapi projects materialised, Pakistan’s energy needs would not be overcome because domestic gas supplies were about 4,000mmcfd against a demand of about 8,000mmcfd.

Therefore, import of liquefied natural gas was “the only short- to the medium-term solution of Pakistan’s energy crisis as it was sustainable, flexible and scalable”. He said the government had a target to inject 2,000mmcfd of LNG in the system by mid-2018 to “wipe out load shedding”.

By 2018, Pakistan will have surplus gas in the system and all consumers including power plants, fertiliser, industry, CNG, captive power plants and housing colonies would have gas available without any problem. To meet this challenge, Rs850billion worth of gas pipeline network and four LNG terminals at a cost of Rs120bn were in different stages of implementation, the minister said.

Furthermore, Minister for Water and Power Khwaja Asif said $58bn worth of investment in the power sector was expected for generation of 30,948MW by 2022 and the power crisis would completely wipe out in 2018 but declined to give a deadline.

Asked what gave him the confidence that $58bn investment would materialise, Mr Asif said the government had already lined up $36bn investment and added that agreements for 11,000MW had already been signed. Many projects were now achieving financial close, others were already in an advanced stage with equity investment.