Category Archives: Industry News

Russia plans to invest $14b in Pakistan’s energy sector

ISLAMABAD: Russia has come up with an integrated investment package of $14 billion for the energy sector in Pakistan.

During a recent visit of the Russian delegation, headed by Gazprom Management Committee Deputy Chairman Vitaly A Markelov, the Russian side pledged an investment of $14 billion in offshore gas pipeline project, North South Pipeline Project and underground gas storages in Pakistan.

The officials said that they would invest around $10 billion in offshore gas pipeline project, $2.5 billion in the North South Pipeline Project and the remaining on building underground storages in Pakistan. The Russian companies would build gas pipeline from Karachi to Lahore to transport imported gas for meeting the needs of the gas-starved province. Recently, the government faced a severe gas crisis, which can be prevented by underground storages, said an official. The storages would help store imported gas allowing meeting rising gas demand at any time, particularly in winters, he added.

Meanwhile, Pakistan and Russian state run entities on Wednesday signed inter corporate agreement to conduct a feasibility study of the $10-billion offshore pipeline project. Under this project, Russian company, Gazprom, will conduct feasibility steady to build offshore pipeline from Iran to Pakistan. The pipeline construction is expected to be completed in three to four years. Inter State Gas Systems (ISGS) Managing Director Mobin Saulat and Markelov signed the agreement in the Petroleum Division.

Earlier, the Ministry of Foreign Affairs irked Russia by refusing to sign the agreement in the presence of Prime Minister Imran Khan at the PM Office. This move came as a contrast to when the American energy giant – Exxon Mobil – was welcomed grandly to engage in offshore drilling, with the agreement being signed at the Prime Minister’s Secretariat.

In a letter sent to Petroleum Division secretary on February 4, a copy of which is available with The Express Tribune, Ministry of Foreign Affairs Director General Europe-2 Malik Muhammad Farooq referred Memorandum of Understanding (MoU) on implementing offshore gas pipeline project between Pakistan’s designated entity ISGS and Russian energy giant Gazprom.

The Ministry of Foreign Affairs stated that it does not support signing of the agreement either in the presence of Prime Minister Imran or at the PM Office as the same is a commercial agreement between two commercial entities, said Farooq, adding that it would be appropriate if an alternative venue is selected.

The Petroleum Division had approached the PM Office requesting to hold the signing ceremony at the Prime Minister’s Office. In a letter, the Petroleum Division said that the petroleum secretary had spoken to the additional secretary Europe-2 ministry of foreign affairs regarding signing of the agreement proposed to be held at Prime Minister’s office on February 6. However, the additional secretary Europe did not give any cogent reason as to why the signing ceremony should not be held at the PM Office.

According to the deal, Russia will export 500 million cubic feet per day (mmcfd) to one billion cubic feet per day gas to meet growing demand of gas following industrialisation under the China-Pakistan Economic Corridor (CPEC).

In the first instance a feasibility study would be conducted by Gazprom at its own cost with no financial implications on Pakistan. Certain economic benefits such as transit fee would accrue to Pakistan if the project is implemented. Moreover, the project would bring Pakistan on the world map as the transit country for offshore gas pipelines. Besides, Pakistan will also have an option to off take gas from the transit gas pipeline.

Russia holds huge gas deposits in Iran and has offered Pakistan and India gas exports by laying an offshore pipeline that will pass through Gwadar Port. Russia has been a big gas exporter to EU countries and Turkey since long and despite US anger, the European bloc has continued to make imports to meet its domestic needs. Moscow receives gas from Turkmenistan and then exports it to EU states. It has got and managed gas deposits in Iran as well and is looking to gain foothold in the Pakistani market.

According to a statement, Minister for Petroleum Division Ghulam Sarwar Khan appreciated the expanding trajectory of bilateral relations between Russia and Pakistan. Khan welcomed Gazprom’s interest in off-shore gas pipeline project and termed it a manifestation of multifaceted cooperation between the two countries. This project envisages transporting of gas molecules from Gazprom’s sources in the Middle East onwards to Pakistan with a possibility of extending it further to South Asian countries.

The pipeline would follow an integrated approach including other ancillary projects such as underground gas storage, desalination and other power projects. Pakistan will import some 500 million to one billion cubic feet of gas from Russia daily, which would be transported via sea link, the agreement stipulates.


Mitsubishi’s energy subsidiary looking to invest in Pakistan

ISLAMABAD: Minister for Petroleum and Natural Resources Ghulam Sarwar Khan has assured the foreign companies interested in investing in Pakistan’s gas sector that the government will extend all possible cooperation and facilities to them.

“All impediments in the way of expansion of the gas sector will be removed,” the minister emphasised while talking to a delegation of Mitsubishi Tabeer Energy, on Wednesday.

He said robust investment in the gas sector was the need of the hour due to ever-increasing energy needs in the country. After seeing a tremendous potential, the minister revealed, well-reputed international companies were in constant contact with the Petroleum Division for investment in the hydrocarbon sector.

Hydroelectric power generation crosses 7,500MW for first time in history

The country manager of Tabeer Energy Marketing, a subsidiary of Mitsubishi Corporation, expressed keen interest in investing in the gas sector of Pakistan and welcomed the offer of cooperation from the minister.

The delegation expressed confidence that Tabeer Energy would play an important role in meeting energy needs of Pakistan. The country manager said Pakistan had a great potential in hydrocarbon resources, which needed to be tapped efficiently.


CPEC energy projects undergoing rapid construction

Islamabad – Work on 13 energy projects having capacity to generate 8,995MW electricity under China Pakistan Economic Corridor (CPEC), throughout the country is in progress.

About 20 energy projects under CPEC with total investment of over US $25 billion will add 12,335MW electricity in the national grid, revealed documents available with APP.Out of 20, seven energy projects under CPEC had been completed and supplying 3,340MW energy to the national grid.

Sahiwal coal fired plant, Dawood Wind Farm, Quaid-i-Azam Solar, UEP Wind Farm, Sachal Wind Farm, Port Qasim Power plant and three gorges second and third wind farms are among the completed energy projects under CPEC.

Whereas, Suki Kinari HPP, Korot HPP, Engro Thar Block-II coal fired power plant, TEL Mine Mouth Thar Block-II coal fired power plant and CPHGC coal fired power plant having capacity to generate about 3900MW were under construction.

Eight more power projects including SSRL coal, Thal Nova power, Kohala HPP, Cacho wind, Western Energy wind, Coal fired plant at Gwadar and Oracle power having the 5,094 MW generation capacity were also in various stages of completion. Matiari-Lahore transmission is also part of CPEC and will be completed by March 21.


Power generation capacity of Port Qasim power plant equivalent to 10 percent of national power generation capacity

Karachi – By 24:00 hours December 31, 2018 (Pakistan local time), the cumulative energy output of Port Qasim coal-fired power plant is up to 7.559 billion kWh with its aggregate grid output of 7.1 billion kWh. According to journalist of China Economic Net, the power generation capacity of Port Qasim power plant is equivalent to 10% of the current national power generation capacity in Pakistan, which has played an important role in promoting the structural adjustment and economic development of Pakistan’s power industry.

In April 2015, as the first implemented large-scale energy project of China Pakistan Economic Corridor (CPEC), the Implementation Agreement and Power Purchase Agreement of Port Qasim Power Project were signed under the witness of two countries’ leaders during President Xi’s visit to Pakistan. POWERCHINA has completed construction of this project within only 32 months and both units were synchronized ahead of the required schedule. On April 25, 2018, Port Qasim coal-fired power plant entered into commercial operation smoothly. In the future, the average annual energy output is around nine(9) billion kWh, which is expected to support 4 million local families’ and more than 20 million peoples’ daily power consumption and effectively improve the local power shortage situation and provide continuous power for Pakistan’s economic development.

As one of the high-quality and demonstration projects under the CPEC, Port Qasim Power Project is of great significance to Pakistan.

Firstly, by adopting Chinese capital, Chinese advanced standards, technology and equipment, Port Qasim power plant has integrated its superior chain resources of investment, design, supervision, engineering and operation, which greatly reduce the investment cost and operation cost of coal-fired power plant. The tariff of Port Qasim power plant is below the average tariff level in Pakistan. It will alleviate the power shortage in Pakistan and optimize its power structure by “replacing oil with coal”. It will also have a profound impact on promoting infrastructure construction and economic development, and improving people’s livelihood.

Secondly, during construction, POWERCHINA attaches great importance to sharing advanced engineering technologies with Pakistan, promoting the improvement of Pakistan’s industrial level. POWERCHINA has been actively exploring qualified and potential local subcontractors, and establishing good engineering subcontracting links with them. POWERCHINA shares advanced engineering technology and management concepts, and enhances the training and education for local senior technicians and management personnel in the fields of engineering technology, safety, quality, and etc.

Thirdly, there is a keen focus on people’s livelihood and responsibility. POWERCHINA takes green development and ecological environmental protection as an important part of development by permeating the “Green and Scientific Development” philosophy throughout the construction.

Port Qasim Power Project adopts super core units independently designed and manufactured in China. Compared with traditional fuel oil generating units, the super core coal-fired generating units have higher power generation efficiency and are more environmentally friendly. The plant adopts seawater secondary circulating and cooling, seawater desalination system, as well as limestone-gypsum wet Flue Gas Desulfurization, and is in compliance with local and World Bank’s environmental standards. It can maintain the local blue sky and clean water through the concept of “strictly clean power generation”.

Fourthly, by upholding the principle of “openness, cooperation, mutual benefit, and win-win outcome”, POWERCHINA has been promoting “localization strategy” and “differentiated management” to increase the employment of Pakistani work forces. POWERCHINA creates over 4,000 employment opportunities for the local people in the peak period of construction. Furthermore, more than 600 long-term stable employment opportunities have been provided after entry of commercial operation. Also, the project indirectly increases local jobs by over ten(10) thousand in relevant fields such as materials supply, equipment transportation, legal advice, financial audit etc..

According to the report of China Economic Net, till present, Port Qasim coal-fired power plant has paid more than 167 million US dollars of different kinds of taxes and duties to the federal and provincial governments of Pakistan.


Pakistan to receive $284 million from ADB to improve power transmission network

ISLAMABAD: The Asian Development Bank (ADB) would provide $ 284 million to Pakistan for improving its power transmission network , besides developing a stronger, smarter, greener and more climate resilient power transmission system.

In this regard the Government of Pakistan and Asian Development Bank on Thursday signed a loan and grant agreements worth $284 million to improve power transmission network in the country.

The ADB Country Director for Pakistan Ms.Xiaohong Yang and Secretary of the Economic Affairs Division Noor Ahmed inked the agreement on behalf of their respective organizations, said a press release issued by ADB.

Addressing the agreement signing ceremony ADB Country Director said that the project will help provide a more stable and secure electricity supply, so people and businesses can continue their productivity and contribution to the economy.

Ms. Yang said that ADB was working with the government and the private sector to further develop Pakistan’s power supply chain, including expanding the power transmission network.

She said that the agreement was the third tranche of a multi-tranche financing facility (MFF) under the ADB-supported Second Power Transmission Investment Program.

The MFF aims to develop a stronger, smarter, greener, and more climate resilient power transmission system in Pakistan, she added.

The tranche, she said was comprised of a $280 million loan from ADB’s ordinary capital resources and a $4 million grant from the High-Level Technology Fund (HLTF) to help the National Transmission and Dispatch Company Limited (NTDC) meet the country’s electricity demand of 1,150 megawatts efficiently and reliably.

She said that to achieve this, it will deploy high-level technologies and climate-resilient transmission systems through load centers in Punjab Province, adding that the investment in the power transmission network was the first investment of its kind by ADB in Pakistan.

It will pilot large-scale, grid-connected battery energy storage system, which will help NTDC comply with national standards and best practices in power distribution, she added.

It will also enhance the NTDC’s capacity to dispatch intermittent renewable energy and this investment will also facilitate the development of ancillary services market which is an important component of the future competitive power markets.

Ms. Yang said that the capacity building component of Tranche 3 will support the government in preparing an energy storage system roadmap to leverage the country’s rich indigenous renewable energy potential for longer term energy security.


Pakistan can save $8.4bn per annum through power sector reforms

ISLAMABAD: Pakistan’s power sector suffers from inefficiencies that cost the economy $18 billion or 6.5 per cent of the GDP in the fiscal year 2015, according to a new World Bank report.

It said reforms could save Pakistan’s economy $8.4 billion in business losses and could increase total household incomes by at least $4.5 billion per annum.

The report titled, ‘In the Dark: How Much Do Power Sector Distortions Cost South Asia’, stated that Pakistan has made great strides in expanding electricity access and capacity, as 91 million more people received electricity for the first time since 1990. However, up to 50 million people still do not have access to grid electricity while frequent load shedding has damaged their businesses, health and subsequently their living standards.

“Pakistan can boost economic growth and job creation by overcoming inefficiencies in its power sector,” said World Bank Country Director for Pakistan Illango Patchamuthu. “Reforms that address these distortions can make better use of the existing facilities. The focus should be on elimination of waste, shift towards cleaner energy and private investments.”

Almost a fifth of electricity generated in Pakistan is lost to poor infrastructure, faulty metering and theft, the report stated, adding that load shedding is caused by high cost, losses and subsidies, which compromise investments and the ability to procure fuel.

“A lack of grid electricity also impacts health, as it leads to greater use of kerosene lamps, causing indoor air pollution that is linked to respiratory infections and tuberculosis risks,” it noted.

The report argues that reforms that focus solely on liberalizing energy prices would lead to an excessively high cost of electricity because of inefficiencies in the system, thus negatively impacting the poor and vulnerable.

Reforms must therefore go beyond liberalizing energy prices to address several aspects of the power sector distortions, including prioritizing gas allocation for efficient power generation and adopting tariff mechanisms that encourage performance.

For the benefit of consumers, reforms should focus on rationalizing consumer prices for electricity and gas to reflect supply costs; and social assistance to help vulnerable populations cope with increased energy prices. Increased access to reliable power must be made a priority.

“If well designed, these reforms will directly benefit the poor by increasing access, improving reliability, and reducing cost and pollution,” said World Bank Senior Economist and author of the report Fan Zhang.


Pakistan plans to scrap upfront tariff regime for captive power plants

In order to implement competitive bidding regime for electricity generation sector to the letter, Pakistan plans to do away with upfront tariff awarded to existing sugar mills operating captive power plants, The News has reported.

Keeping in view the changed dynamics of the electricity power market, the Nepra is considering withdrawing the announced upfront tariff. The authority convened a meeting on November 28 to take the decision.

To recall, in December 2017, the government announced to scrap the upfront tariff mechanism for projects based on domestic renewable energy resources and decided to award power generation contracts through competitive bidding.

In November 2016, National Electric Power Regulatory Authority (Nepra) issued a concept note proposing a new, structured regime for competitive bidding in generation and transmission tariffs, in line with best international practices.

Pointing out deficiencies in the existing regulations of 2014, Nepra stated that the focus of the 2014 Regulations was on aspects of approval of tariff rather than cultivating a competitive bidding regime for procurement of electricity. These regulations did not regulate the process of bidding, which proposed concept note intends to address.

Competitive Bidding is an allocation procedure based on a precise evaluation criterion, and a pre-defined publicly available set of rules designed to allocate or award objects or products (e. g. contracts) on the basis of a financial bid.

In December 2016, Nepra announced the upfront tariff of Rs7.82/kilowatt hour for electricity generation from sugar mills and supplying it to power purchasers. As the technology evolves, it is high time that the tariff regime is changed and more competition is brought to increase renewable energy supply to the grid.

Earlier, special tariff rates were offered to power generation companies in the form of upfront tariff, which encouraged them to make investment in Pakistan. Now, the situation has improved as the country has surplus electricity.

Sugar mills are estimated to produce 600 to 700 during the crushing that starts from November to February. It is the time when hydropower goes down. Share of hydropower in energy mix, however, fell during the last five years due mainly to low water availability. The government tried to offset the downward share through promotion of renewable energy sources, which, however, constitute only two percent of electricity generation.


Pakistan engaged in multiple projects to meet energy requirements

Pakistan at present is engaged in multiple projects including Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipelines, import of Liquefied Natural Gas (LNG) and CASA-1000 to meet its ever-growing energy requirements.

The country’s gas supply-demand gap has reached almost 4 Billion Cubic Feet per Day (BCFD) as total gas demand of the country is 8 BCFD against total supply of 4 BCFD.

A foreign journalist Omid Shokri Kalehsar, in his recent online article, has highlighted different dimensions of Pakistan’s energy requirements, and ups and downs in gas import agreements amid changing global scenario.

In 1990, Pakistan started negotiations with Iran for export of natural gas, while India’s increasing energy demand forced it to join the then 2,700-kilometer “Peace Pipeline” and now the “IP” that would allow the two countries to import Iranian resources.

According to the initial agreement, 1,100 kilometers was scheduled to be constructed in Iran, 1,000 kilometers in Pakistan, and 600 kilometers in India, with projected 150 million cubic meters of gas supply daily to Pakistan and India.

In 2011, India withdrew its support for the Peace Pipeline due to international pressure. However, Iran completed the required pipeline to deliver natural gas from South Pars to the Iran-Pakistan border by December 2014 whereas, Pakistan has yet to start construction work at its side.

The journalist quoted Pakistan’s former Ministry of Foreign Affairs spokesman as saying that in order to achieve long-term goals of regional stability, “Pakistan’s national interest require new energy transit projects. Pakistan supports the economic strengthening of the region. The energy and energy sectors are important factors in realizing regional political and economic goals.”

Under the TAPI project, the leaders of the four countries signed an implementation contract in December 2015, and practical work finally commenced in 2016. The first gas will start to flow in early 2020. The project will cost an estimated $7-9 billion and will transfer 90 million cubic metres of gas per day to these countries.

The author calculated that LNG now forms 50 percent of Pakistan’s energy basket, and this will increase in coming years due to Pakistan’s new agreements with LNG suppliers. In February 2015, Pakistan signed a deal to buy LNG from Qatar to meet its energy needs.

Because of the shale gas revolution, the United States became an energy exporter by 2017 and plans to send about 3 million cubic feet to Pakistan, the writer hinted.

The Russian energy giant Gazprom is also considering the possibility of supplying 5-7 million tons of LNG annually to Pakistan. In July 2014, Pakistan and Gazprom signed an agreement to construct three LNG terminals, and the first shipment arrived in July 2015.

Pakistan and Azerbaijan also signed deals in 2016 for the latter to supply electricity, crude and refined oil products, and both LNG and liquefied petroleum gas (LPG). The Azerbaijani state oil company SOCAR will begin delivering LNG to Pakistan in the coming months. Under, China-Pakistan Economic Corridor (CPEC), Pakistan will soon be able to generate electricity from coal-fired power plants and import electricity from places like Turkmenistan.

The larger goal of the CPEC is to turn the Gwadar Port into an energy hub in the region. Pakistan is also trying to address part of its electricity shortage through other projects such as the Casa-1000 project, which is designed to boost the electricity trade between the Central Asian countries of Tajikistan and Kyrgyz Republic and the South Asian countries of Afghanistan and Pakistan.

LNG deal with QatarGas saves Pakistan $76 million

LAHORE: Buying of liquefied natural gas (LNG) from state-owned QatarGas under the long-term agreement saved Pakistan $76 million in the last three months when compared with the current spot market rates, documents revealed on Tuesday.

Official documents, available with The News, showed that Pakistan saved almost Rs8 billion ($76 million) in December, January and February of the fiscal year of 2017/18 because of buying LNG under a 15-year agreement with Qatari government as compared with recent spot purchases.

Pakistan’s government-to-government LNG buying deal with Qatar has long been subject to criticism.

Industry officials termed the deal expensive as compared to spot market prices of LNG.

The data analysis of Pakistan LNG Limited’s (PLL) recently floated tenders seeking delivery during December 2017 and January and February 2018 under spot market rates, however, presented entirely different picture. PLL’s tenders fetched bid prices ranging from 13.98 to 16.89 percent of Brent, which is much higher than the prices agreed under the long-term sale-purchase agreement with QatarGas.

In December, an average saving per LNG cargo import stood at around $2.30 million. For six cargoes imported every month, under state-run Pakistan State Oil’s deal with QatarGas, total savings for December came around $13.8 million.

In January, average saving per cargo was $5.7 million and for six cargos aggregate savings amounted to $34 million. Likewise, average saving per LNG cargo stood at around $4.7 million for February, while total savings for six cargoes were $28 million. An official of the ministry of petroleum and natural resources said the global LNG market is “all about preferences and choices of LNG producers and traders.”

“LNG cargoes supplied on spot basis should not be compared with the cargoes bought under long term agreements,” the official added. “This is because of difference in market dynamics and factors that affect the prices like demand and supply situation, global weather condition, plants maintenance, geopolitical situation, freight elements and port charges.”

The official added that traders usually prefer spot supplies. Energy experts argued that Pakistan should not have entered into the agreement with Qatari government and instead should import LNG from spot market.

Ministry’s officials, however, said had the agreement with Qatar been not in place LNG imports could have been subject to price fluctuations, causing a substantial dent to precious foreign reserves.

Generally, the officials said countries initiate LNG imports with long term contracts and then build on the experience to buy on spot and for short term.

Officials said Pakistan saw significant price fluctuations on buying LNG on monthly basis. Sometimes, bidders did not bid, rendering terminal charges and causing uncertainty in supplies to power producers that use LNG to produce electricity for domestic consumption.

“Therefore, effort was diverted to five-year contracts and now the number of bidders significantly increased and the benefits surfaced in the two contracts awarded for the second LNG terminal,” an official said.

Pakistan’s second LNG terminal commenced operation in November last year to import 4.5 million tonnes per year of LNG. In 2015, the country saw its first terminal. The country’s LNG re-gasification capacity has increased to 1.2 billion cubic feet/day. The country is expected to be a market of 30 million tonnes per year of LNG in the next five years.


ECC okays power generation by 4 IPPs thru RLNG

ISLAMABAD – The government on Friday decided that four independent power producers (IPPs) would produce electricity on RLNG instead of furnace oil and high-speed diesel to save billions of dollars.

The Economic Coordination Committee (ECC) of the Cabinet, which met under the chair of Prime Minister Shahid Khaqan Abbasi, has authorised Central Power Purchasing Agency (CPPA) to sign interim agreement regarding revised payment terms for generation on RLNG (re-gasified liquefied natural gas) by four IPPs. The IPPs are: M/s Saif Power Ltd., M/s Orient Power Ltd., M/s Saphhire Electric Company Ltd., and M/s Halmore Power Generation Company Ltd. These IPPs have dual fuel plants, which can be operated on natural gas as primary fuel and High-speed Diesel (HSD) as secondary/alternative fuel. The operations of these IPPs on RLNG would result in significant cost saving each month.

Under the proposed plan, existing power plants running on furnace oil and high-speed diesel will switch to re-gasified liquefied natural gas (RLNG) and coal. The plan is being framed in the backdrop of consistently high oil import bill of the country and expensive electricity generation . The Ministry of Petroleum and Natural Resources argues that RLNG is the only cheaper source of electricity generation and is seeking a ban on the consumption of furnace oil, coal and diesel in power plants in order to improve plant efficiency and save billions of dollars.

According to a comparison of fuel cost component, Saif Power produces electricity at Rs 12.75 per unit by consuming HSD whereas the cost of RLNG was Rs 6.64 per unit. Likewise, Orient Power , Sapphire Electric and Halmore Power Gen produce electricity at Rs 12.67, Rs 12.58 and Rs 12.54 by consuming HSD while the cost of electricity being produced through RLNG was Rs 6.64 per unit. This implies that the cost of electricity being produced on RLNG is almost half of the electricity being produced on HSD.

The government wants to increase power production on RLNG. At present, hydroelectric power has a share of 34 percent in power generation mix, furnace oil 29 percent, locally produced natural gas 19 percent, RLNG 8 percent and renewable and nuclear energy 5 percent each.

Meanwhile, the ECC has also permitted extension in the deadline of export of 41,000MT surplus urea till 28th February 2018. Proposal to export an additional quantity of 35,000MT urea to Sri Lanka was also approved. Sri Lankan President Maithripala Sirisena had recently requested Prime Minister Shahid Khaqan Abbasi to send 75,000MT of fertiliser to Sri Lanka.

The ECC approved a proposal of allowing United Towel Exporters Limited to remit € 8.425m from its special foreign currency account to acquire 70% shares of Vespo Group B.V. Netherlands. The ECC also approved a proposal for extension in the date for applicability of reduced withholding tax rate @ 0.4% for non-filers till 30th June 2018 under section 236P of the Income Tax Ordinance, 2001.


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