VIP Shipper Club library – Overcoming Energy Crises

ISSUE 3 / 2017

ISSUE 3 / 2017

OVERCOMING ENERGY CRISES

Pakistan Leans on Project Cargo-led Development

VIP SHIPPER CLUB MEMBER:

CHINA MACHINERY ENGINEERING CORP. ................ page 55

energy update

OVERCOMING ENERGY CRISES Pakistan Leans on Project Cargo-led Development

BY VL SRINIVASAN

P

akistan perennially faces an acute shortage of power supply due to a growing population and aggressive industrial demand over the years. But a solution might finally be in sight with the construction of several power projects under the multibillion-dollar China Pakistan Economic Corridor, or CPEC. These projects are expected to make the nation power independent within five years, and are already propping up project cargo business in the country.

Although the country’s installed capacity has been about 22.8 gigawatts, actual generation is estimated at about 12.5 GW against a demand of 19.7 GW. While some 1.5 GW was recently added, the deficit is still said to be more than 5 GW. However, power demand is expected to touch 26 GW by end of 2017 and likely to add another 4 GW by the end of next year.

Demand for electricity in Pakistan has been growing about 6 percent to 8 percent per annum over the past few years without a commensurate growth in generation capacity. This increasing shortfall is said to be costing the economy 2 percent of gross domestic product every year.

The resultant power cuts are so acute that people are forced to use fixed and portable generators to meet their electricity requirements. Khyber Pakthunwa, formerly North West Frontier Province, is the only province where the local government is said to have installed several small water-driven turbines to cater to the electricity needs of villages in its territory.

POWER HUNGRY

According to Pakistan Minister of State and Chairman of Investment Miftah Ismail, the power cuts that have plagued the nation will be a thing of the past by December 2017 as a result of government-

A vertical reactor is unloaded at a port to be moved to a project site in Pakistan. / Credit: Noble Shipping Services 54 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2017

PROJECTS OF THE CHINA-PAKISTAN ECONOMIC CORRIDOR* Coal

Hydro

Solar

Wind

AFGHANISTAN Rahim Yar Khan, Punjab 1,320 MW Muzaffargarh, Punjab 1,320 MW

Gwadar, Balochistan 300 MW

IRAN

INDIA

Bahawalpur, Punjab 1,000 MW

Tharparkar District, Sindh 3,960 MW

*Includes existing, under construction and planned highway routes

several highways and railways are also being taken up as part of CPEC across Pakistan to strengthen the dilapidated transportation network, which is said to cost the country 3.5 percent of is GDP every year. These networks will link seaports in Gwadar and Karachi with northern Pakistan and in western China and Central Asia.

JOINT APPROACH

Karot, Punjab/AJK 720 MW

Jhimpir, Bhambore and Thatta, Sindh 350 MW

Port Qasim, Sindh 1,320 MW

launched energy reforms. These power shortages have been hurting the country’s growth rate for several years.

“Only 23,000 MW was added in the last 70 years, but with the new and upcoming projects, an additional 25,000 MW will be added in the next couple of years,” the minister said while addressing a recent meeting organized by the Islamabad Chamber of Commerce & Industry.

ICCI President Khalid Iqbal Malik said that the CPEC project has brought together the private sectors of Pakistan and China under longterm partnerships, and that Pakistani entrepreneurs were Khalid Iqbal Malik keen to enter into ICCI joint ventures with Chinese counterparts.

“Lots of power projects are coming up due to CPEC, and I am positive and very hopeful that the energy crisis in Pakistan will be largely solved by 2018. In fact, we will have surplus energy and can even export it to Afghanistan,” he added.

Besides energy-related projects,

Suki Kinari, Khyber Pakhtunkhwa 870 MW

Sahiwal, Punjab 1,320 MW

PAKISTAN

Source: Government of Pakistan

CHINA

Indeed, the CPEC project is considered a game-changer, opening new gates for investment and employment and allowing countries like Iran and those in Central Asia to plan for exports and investments in Pakistan.

As part of CPEC, Chinese firms are investing US$35 billion in 19 power projects which combined will generate more than 12 GW. The investments cover five Thar Desert coal projects, four imported coal projects, four wind projects, three hydroelectric projects, one solar, one 660 kV transmission line between Sindh and Punjab and a feasibility study with regards to another.

Work for 15 of the projects has started, and 12 are to be commissioned by the end of 2018 or early 2019, adding about 6 GW. However, there are signs that not all the projects will be as grand as they were first envisaged. In a report to a

Parliamentary Committee earlier this year, senior officials from Pakistan’s Water and Power Ministry stated that the China Machinery Engineering Corp. in collaboration with Pakistan’s Engro Corp. will construct two 330-megawatt power plants, having initially proposed the simultaneous construction of two 660MW power plants.

For infrastructure required for transmission and distribution of electricity generated from the Thar power plants, a US$2.1 billion transmission Line from Matiari to Lahore and a US$1.5 billion transmission line from Matiari to Faisalabad are also being constructed under the CPEC project.

BOOST FOR CARGOES

The development of infrastructure and execution of dozens of infrastructure and energy-related projects has brought cheer to project cargo movers in Pakistan.

Khurram Niazi, director, commercial of Karachi-based Freight Connection Group, said that as the first logistics company appointed as a vendor to the world’s largest solar park in Pakistan under the CPEC project, his company is fully geared to arrange movements of project cargo in the country. “From the heaviest pieces to the smallest www.breakbulk.com BREAKBULK MAGAZINE 55

energy update

ELECTRICITY SHORTFALL

Supply vs. demand of electricity in Pakistan 2010 to 2017 (MW). Pakistan’s energy deficit needs addressing.

-8,023

36,000 Demand (Summer Peak) 32,400

-4,593

Expected Available Generation Deficit Generation

-3,621

28,800

-2,381 -758

25,200 -1,293 21,600

-849

-60

18,000

2010

2011

2012

2013

2014

2015

2016

2017

Source: Private Power & Infrastructure Board – Government of Pakistan

accompanying bolt, we will arrange everything to make possible import, transport and installation at the final destination,” he said.

Karachi-based Noble Shipping’s Managing Director Capt. Mohammad Inam added that the energy-focused activities have certainly boosted the outof-gauge industry, especially for those handling project cargo from the point of origin to the project site.

“There are about half a dozen companies equipped with multi-axle trucks and trailers and with cranes capable of handling heavy and out-ofdimension loads [in Pakistan]. Although some of the specialized trucks may not be adequately available in town,

the transport companies are managing either by fabricating locally designed transport or by borrowing from one another, depending on availability.”

However, he warned that there would likely Capt. Mohammad be delays when Inam over-dimensional cargo for multiple Noble Shipping projects have to be moved simultaneously from the port.

Two foreign companies, one from China

and one from Germany, have opted to import additional equipment to address such an issue, but Inam feels that more could be done to avoid inevitable bottlenecks.

Operators are also feeling the pinch of short supply of equipment to handle over-dimensional cargo at the project sites. Citing an example, Inam said there’s a contract to transport 85 tonnes of over-dimensional cargo from Karachi port to the hinterland using a floating crane. However, when it came time to move the product, the equipment was declared out of order.

Noble Shipping had two options: hire a shore crane, which would take two days to come from a remote area at an exorbitant rate; or wait for the floating crane to be repaired, which would take equal amount of time.

“While the floating crane was repaired within two days, the stevedore could not find the shackles for adequate safe working limits – 25 tonnes.

Therefore, we had to deviate from the original lifting plan and thus discharged the packages using conventional slings,” he said.

V L Srinivasan is a senior journalist based in Hyderabad, India, covering finance, infrastructure, energy, shipping, transportation, IT, environment and political and regional developments in India and the Gulf Cooperation Council region.

CPEC DICTATES ENERGY MIX Most of the new energy generation capacity under the China Pakistan Economic Corridor, or CPEC, will be coal-fired projects, which are expected to be completed by 2018 or early 2019 as part of the CPEC’s “early harvest” projects.

But the government is also making all efforts to tap unconventional energy resources like wind and solar, alongside hydro and coal-fired power.

Pakistan is also looking at using liquefied natural gas, or LNG, as feedstock for generating power, and 56 BREAKBULK MAGAZINE www.breakbulk.com

signed an agreement with Qatargas, the world’s premier LNG company owned by the state of Qatar, in early 2016. Under the terms of agreement, Qatargas, will supply 1.3 million tonnes per year of LNG to Pakistan for 20 years, with provisions allowing the volume to increase to 2.3 million tonnes per year. The first LNG cargo is expected to be delivered to Pakistan in 2018 by Qatargas-chartered Q-Flex vessels.

As far as nuclear power generation is concerned, the Pakistan Atomic

Energy Commission has set a target of 8 gigawatts, but the current combined power generation by the four nuclear power projects in the country is only 1.04 GW. In fact, the third unit of the Chashma Nuclear Power Plant in Mianwali district in Punjab province was inaugurated only late last year.

Under the CPEC project, China aided the construction of the plant which began around six years ago.

A fourth unit is expected to be commissioned by June. BB ISSUE 3 / 2017