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Dead deposits

Unless Pakistan curtails oil imports through optimum exploitation of its indigenous resources, the country would continue to face load-shedding and remain mired in circular debt

By Alauddin Masood

Pakistan ranks amongst those energy deficit countries that have the potential to augment their indigenous production of oil and gas, but which continue to meet their energy requirements spending exorbitant amounts on imports for want of commitment and focused approach to exploit their energy resources.

Currently, Pakistan is spending some 60-65 percent of its annual foreign exchange earnings on the import of oil, which accounts for 79pc of Pakistan’s total energy consumption; while hydro, coal and nuclear sectors meet 13, seven and one percent respectively of its demand for energy.

Since the country’s thirst for energy is increasing due to increase in population and economic growth, its imports would also rise in proportion to the increase in demand, which would further impact the country’s meager foreign exchange earnings and also the vicious cycle of ever-widening circular debt.

This brings to the fore the need for optimum exploitation of the country’s hydrocarbon as well as bio-fuel and other alternate sources of energy (like wind, solar and sea waves), aimed at reducing pressure on foreign exchange.

Unless we succeed in curtailing our exports through optimum indigenisation, the country would continue to face load-shedding and also remain mired in the ever-increasing debt trap. Given the situation, one would appreciate Prime Minister’s decision to hold a special meeting of the cabinet on one point agenda – to suggest measures to reduce load-shedding and to discuss the overall energy sector.

According to experts, Pakistan has gas reserves of 32 trillion cubic feet, but these are not being fully and expeditiously exploited for one reason or the other.

Presently, the country is producing 67,000 barrels of oil and 3,950 million cubic feet of gas per day against its daily requirement of 400,000-450,000 barrels of oil and 5,900 million cubic feet of gas. In other words, the country is facing a daily shortfall of 330,000-380,000 barrels of oil and 1,950 million cubic feet of gas. However, two recent discoveries of gas and oil would slightly reduce the shortfall when the country succeeds in tapping them.

Prime Minister’s Advisor on Petroleum, Dr. Asim announced, on October 2, 2012, that a gas reservoir of 300-400 billion cubic feet has been discovered at Bhadhra near Bhit gas field in Sindh. This field will produce 30 million cubic feet gas per day (mmcufd).

The country has also struck oil from the Nashpa field, near Kohat in Khyber Pakhtunkhwa, which would jack up its oil production to 90,000-100,000 barrels from the existing 67,000 barrels per day. However, oil companies are facing difficulties in exploiting oil and gas resources in some regions due to law and order problem, which not only hinder efforts to make new discoveries but also fully exploit the existing fields economically.

One would not, therefore, be surprised if PPL has obtained a block for oil exploration in Iraq, while it is engaged in obtaining one in Afghanistan.

Despite the energy crunch, Pakistan is losing Rs. 0.5 billion upfront for its inefficient LPG (Liquefied Petroleum Gas) production and Rs. 2.5 billion daily by burning the gas in air from its oilfields. It is also losing billions through allocation of LPG without competitive bidding.

The natural gas extracted from different fields in the country contains traces of other combustible gases that have to be separated from methane before pumping it in to the gas distribution network. LPG is the mixture of these separated gases.

LPG plants have not been installed at many gas/oilfields and the impure gas, equivalent to 500 tons of LPG, is burnt in the air daily before pumping pure methane in the distribution system. The daily loss of 500 ton of gas exceeds Rs. 2.6 billion.

Furthermore, gasoline and diesel prices can be substantially reduced and the end users provided relief if naphtha cracker plants are installed in those oil refineries where virgin unprocessed crude oil is led into “Furnace Oil” chamber.

By commissioning naphtha cracker plants, refineries can obtain 33 percent more diesel and 22pc more gasoline or 33pc more gasoline and 22pc more diesel, as per national requirements, from naphtha, which is one of the most important hydrocarbon ingredient and a basic feedstock for most of the large-scale industrial activity.

Installation of naphtha cracking plants can also obliterate the need for the import of diesel, polyethylene and such other products; while a reduction in the prices of diesel and gasoline can result in bringing down the freight charges and the cost of doing business and thus contribute to making Pakistani goods more competitive in the international markets.

Currently, Pakistan’s oil refineries are annually producing over 800,000 tons naphtha, but it is entirely exported for want of naphtha cracking facilities. Derived from crude oil, coal and other forms of hydrocarbons, naphtha is further processed for use in a wide range of downstream industries ranging from fibers to textiles, pharmaceuticals to paints and varnishes, metallurgy to explosives, construction materials to printing, etc.

Pakistan Economy Watch (PEW) believes that appointment of qualified Energy Managers can help resolve the persistent energy crisis in the country. All qualified nations have qualified energy managers who ensure cost saving, best utilization of resources and maximum benefits for the country.

Coal reserves

With a total coal reserves of some 195 billion tons, globally Pakistan is reportedly the sixth largest coal rich country, having an aggregate energy potential exceeding the combined energy potential of the entire resources of Saudi Arabia and Iran. At Thar alone, Pakistan’s coal reserves are estimated to be over 185 billion tons against India’s total coal deposits of 140 billion tons. Seven other coal fields in Sindh have 8.617 billion tons of coal reserves.

These include Lakhra, Sonda-Thatta, Jherruck, Oagar, Indus East, Meting Jhimper and Badin with reserves of 1.328 billion tons, 3.700 billion tons, 1.323 billion tons, 312 million tons, 1.777 billion tons, 161 million tons and 16 million tons respectively.

Other major fields in the country contain reserves of over 533 million tons. These include Khost-Sharig-Harnai, Sor-Range-Degari, Mach-Abagum, Duki and Pir Ismail Ziarat in Balochistan with reserves of 76 million tons, 34 million tons, 23 million tons and 12 million tons respectively; Salt Range and Makerwal-Gullakhel in Punjab with reserves of 234 million tons and 22 million tons respectively; and Hangu in NWFP with a reserve of 81 million tons.

In addition to these major fields, there exist minor coal deposits at Badiuzai, Bahol, Bala Chaka, Bhalgor, Johan, Kachh, and Margot in Balochistan; Cherat in NWFP; Choi in Punjab; Khilla (near Muzaffarabad) and Kotli in Azad Kashmir.

It speaks volumes about the priorities and lack of focused approach of the successive governments that these massive reserves of coal have largely remained untapped till now, denying employment and enormous economic opportunities to the people. Whenever the government shows willingness to exploit these vast reserves, certain lobbies and their moles become active to scuttle the move.

Presently, coal is providing 26pc primary energy and 40pc of electricity supply worldwide. Coal has gained special importance due to the growing concerns for energy security prompted by apprehensions about fast depletion of the known resources of energy and abnormal fluctuations in the international prices of oil.

Currently, China is the world’s largest producer as well as the biggest consumer of coal, accounting for 78pc of its total energy requirement. Meeting 60pc of its energy requirements from coal, the USA is the second largest user of coal on the globe. Ironically, Pakistan meets about 7pc of its electricity needs from coal. Pakistan’s continued dependence on imported fuel oil obliges the nation to make huge annual payments in foreign exchange from its meager earnings, leading to burgeoning circular debt; while creating jobs and benefits in foreign lands but denying the same benefits to its citizens.

Conversion into liquid fuels

Coal can be converted into liquid fuels. Though already meeting most of its energy requirements from coal, at Erdos (Inner Mongolia), China is vigorously pursuing efforts to turn its vast coal reserves into barrels of oil. Chinese state-owned Shenhua Group has employed 10,000 workers for operating its Erdos CTL (coal-to-liquid) plant, which until 2010 had the capacity to convert 3.5 million tons of coal into one million tons of oil products, like diesel, per year, for use in automobiles.

The production of the plant, in other words, is equivalent to about 20,000 barrels per day of oil. By 2020, China plans to raise its CTL capacity to 50 million tons or 286,000 barrels a day. In view of the relatively low cost of CTL produced oil, some other countries, including the USA, are also considering to using their coal reserves for producing oil.

Developed about 100 years ago, CTL produced fuel has a shelf life of 15 years. However, it has been little used, except in Nazi Germany and the apartheid South Africa when they had difficulty in getting oil supplies. However, rapid fluctuations in oil prices have revived interest of coal-rich countries in CTL technology. Realizing the importance of coal in the economic development, many countries are now fast switching over to coal to meet their energy requirements. India, Indonesia, Germany, Australia and UK are among those countries that recently embarked upon new coal based power plants.

Thar coal project

At Thar, the objective of producing Syngas was successfully accomplished by igniting two of the 38 gas wells on December 11 last, with gas flow of 1,000 cubic meters per hour resulting in a blue gas flame,” according to UCG (Underground Coal Gasification) Thar Project.

The federal Planning Commission’s monitoring team, headed by Member Implementation and Monitoring Lt. General (Retd) Shahid Niaz has declared these projects to be economically and technically feasible after visiting Thar coal project from May 7-9, 2012. The team also observed that the success of generating 8-10 MW electricity would pave the way for upscaling the project to the next level of power generation of 100 MW.

Prime Minister Raja Pervaiz Ashraf, accompanied by Sindh chief minister, visited the UCG project on August 9 and appreciated the breakthrough. The project was allocated Rs. 900 million on September 9, against a total requirement of Rs. 1800 million, for its pilot project pertaining to demonstration of production of 8-10 MW of electricity. To avoid extensive pollution of atmosphere, electricity from coal can be generated either through UCG route or by following the route of first mining the coal and then producing coal gas (syngas) through surface gasification plants.

The writer is based in Islamabad.


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