Black faces, black deeds and black deposits
22 September, 2006
By Khaleeq Kiani
Many believe that personal interests of some leaders in the Sindh’s ministry of mines to be blamed. Others say Chief Minister should be held responsible for non-development of Thar district because he came directly from that area. There are few who even ask why not Mr Shaukat Aziz who made it to the Prime Minister’s post by taking votes from Thar’ies and then forgot them. But it is a fact that Thar coal is blackening the faces of all.
Thar coal in Sindh province is the World’s largest coal reserve. Still, only one per cent coal is being used for power generation in Pakistan. As against this, 55 per cent electricity in neighboring India is based on coal, 58 per cent in Germany, 90 per cent in Poland, 50 per cent in Australia and 38 per cent in Russia. Just two per cent of its use for power production can ensure more than 20,000 megawatt of electricity for more than 40 years.
There are confirmed estimates that its reserves were equivalent to at least 850 trillion cubic feet (TCF) of gas – about 30 times higher than Pakistan’s proven gas reserves of 28 TCF. Students in the primary classes used to be taught decades ago that Pakistan has one of the largest coal reserves. It is a million dollar question as to why the use of these reserves is still far from reality. Why these resources remain untapped and lobbies provide joyride trips to the authorities in the energy ministries for fuel imports, both in the form of petroleum, natural gas pipelines and liquefied natural gases. A big question mark on their integrity, vision, planning and professional capacity.
The provincial government did not want to loose its contract awarding rights to the centre and it was itself incapable to doing things at its own. The provincial authorities say the centre wanted to deprive it of its constitutional rights. Power utility Wapda also has stakes. Coal mining at Thar requires a total investment of $4 billion in a phased manner. These estimates have been confirmed by separate bankable feasibility studies conducted by Chinese and Russian experts. “We have so much of energy at home but we are looking for imported fuels”, said Dr Akram Sheikh, head of the planning commission adding an effort is being made to correct this situation.
The studies have also confirmed that 185 billion tons of coal deposits in Pakistan are second only to 247 billion ton reserves in the United States and much higher than 157 and 115 billion ton reserves of Russia and China respectively. The decision to accord top most priority to coal has been taken as there was no tangible or bankable progress on three proposed gas import pipelines.
Thar coal reserves are equivalent to at least 400 billion barrels of oil - equivalent to oil reserves of Saudi Arabia and Iran put together. One estimate put Pakistan’s coal energy at 576 billion barrels of oil which is equivalent to combined oil reserves of the three largest producers including Saudi Arabia (264), Canada (179) and Iran (138).
Having failed to materialize gas import pipelines, the government was now in the process of setting up a $500 million Thar Coal Mining Company with equity participation to provide guarantee to international mining majors to develop mines because Thar reserves were about 238 meters deep compared with 270 feet deep coal deposits in Germany. The major use of Thar coal would, however, remain power generation because it was not of metallurgical or coking grade but could used for oil production, ground and under-ground gasification that could be transmitted through pipelines to any part of the country for cement and fertilizer industries.
The studies also revealed that 2,000 MMCFD (million cubic feet per day) of coal gas is equivalent to 250,000 tons of coal per day and was capable of producing 20,000mw through gasification route. As by-product, the same quantity of coal can produce 5.14 million tons of fertilizer which is higher than 4.5 million tons current production in Pakistan besides a chain industrial activity of pesticides, enamel, epoxy resins, liquid nitrogen, naphtha, methanol etc.
The President has been asked to order an enquiry as to how a Chinese group was discouraged that had offered to set up a power plant at 5.7 cents per tariff by developing the mine as well but gas plants 5.9 cents per unit and thermal plants at 14 cents per unit tariff were allowed to power plants. “It has become pretty clear that many people within the government were discouraging cheaper projects of natural resources like water and coal to promote imported fuels”, claims a senior government official. An official delegation led by Advisor to the Prime Minister on Energy would be leaving to Beijing early next month to hold road shows for attracting Chinese coal mining companies to become part of the project directly as management partners and also financial institutions. The $500 TCMC would be responsible for mining, research and introduction of latest mining and refining technology. The whole plan prepared on the basis of a year long study by Rheinbraun Engineering Company (RWE) of Germany of one coal block of Thar project, was presented to the President and the Prime Minister on July 28 and was cleared for implementation.
The company, with 49-51 per cent public and private shareholding respectively, will have a debt-equity ratio of 70:30. Of the $150 million equity, the government will have 49 per cent share to be contributed on an equal basis by the federal and provincial governments while 51 per cent shares would be offered to the private sector for investment. The remaining $350 million would be raised through loans.
The company would be run by the private sector management under a board of management. This would allow international mining firms to become part of the company to initially develop one modern mine with six million tons of annual coal production that would be enough to fuel about 1,000mw and then move on to the next mine.
The plan approved by the President and the Prime Minister envisaged unbundling of Thar Coal project into mining and power generation to bring down the size of investment in each block from $1.5 billion to $500 million. The decision stemmed from realization that mining and power generation could not go together and need to be separated and developed independently. It was also felt that energy crisis has already hit the country that might be choking the economy from next year and even the power produced from natural gas was now costing 5.9 cents per unit.
“We lost six years in attracting large companies that could finance up to $1.5 billion in mining and
production of electricity from Thar coal reserve but failed to get a breakthrough because such a big investment was not forthcoming”. It has also been decided that Wapda should be geared up to set up first coal-based thermal power plant at Thar if foreign or local investors continue to show laxity because dependence on imported fuels has to be checked.
The “mining majors” were not coming in for the Thar coal mining. Many companies showed keen interest in power generation at Thar coal but showed hesitation when the government asked them to also develop the mines themselves. An integrated project of mining and power generation required investment between $1 – 1.5 billion which was found to be very difficult. “Thar is not worth $1.5 billion investment for a foreign investor”.
The planning commission advised the government that it would not be prudent to leaving energy planning to the ministries of water and power and petroleum or their management capacity should be strengthen at the top level. The $1.5 billion Thar Coal Power Project in Sindh with an estimated production capacity of 1,000mw of electricity has already been put on hold following Rs23 billion demanded by the sponsors to lay a pipeline for fresh water which the government believed was unreasonable. A new study would be conducted to see if a power project would be feasible if established at Umarkot through transportation of coal from Thar by laying a rail track and running a regular train. The new site could also be used for power generation by using imported coal.
Thar’s four blocks were identified by the Geological Survey of Pakistan in the early 1990s while another two blocks have now been created by the Sindh government. Block one of Thar coal was earlier offered to Shenhua group of China which also hit. The GSP drilling data has indicated three water-bearing zones (aquifers) at an average depth of 50, 120 and more than 200 meters. The government has now realized that coal deposit were enough to meet country’s energy requirements for centuries and it was time to religiously focus on developing these resources, instead of continuous dependence on imported fuels.