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Business

January 13, 2018

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Pakistan Business Council favours power generation from RFO-based plants

KARACHI: Pakistan Business Council (PBC), a leading business advocacy group, urged the government to improve efficiency of oil-based power plants as prices of liquefied natural gas (LNG), which is an alternative fuel, may escalate due to its growing global demand.

The council, comprising of the country’s renowned businesses, said reliance on LNG as a fuel to generate power is “a pragmatic move (but) planning needs to take into account of likelihood of increase in cost of LNG as more countries, especially China and India, switch to this cleaner fuel”.

“The RFO (residual fuel oil) generation option should, therefore, be retained and plants restructured to make them more efficient,” PBC said in a statement on Friday, referring to its moot on energy security and competitiveness held in Islamabad and Lahore during the current week.

Khalid Mansoor, chief executive officer of Hubco, headed the discussions, which were attended by other industry and government officials.

The think-tank said the country has untapped tight and shale gas reserves of around 150 trillion cubic feet.

A wellhead price closer to or even higher than the imported LNG cost, presently $11/million metric British thermal unit, will encourage exploration and exploitation of indigenous resources with success rate in Pakistan for oil and gas exploration standing at 33 percent of wells dug – one of the highest in the world.

“Greater reliance on indigenous fuel has to be encouraged to reduce the pressure on the external account,” it added.

“Reduction in taxes, increase in subsidy and rebates and leveling of the tariff differential with domestic users (will) make industry more competitive.”

PBC said over‐reliance on nameplate power production capacity, poor efficiency of older plants and auxiliary and maintenance shutdowns reduce capacity by 30 percent.

The council said the participants in the moot recognised the difficulty to gauge true power demand in the country. “Demand estimates used for planning may be underestimating the need.”

The think-tank, however, added that electricity consumption per capita in Pakistan is lower than Sub-Saharan Africa, while 27 percent of the country’s population is not connected to the grid.

PBC advised more investment in increasing capacity and improvement in efficiency.

“The roundtables noted that whilst the change in the fuel mix, with greater reliance on cheaper coal, would bring down the cost of production, capital and capacity related payments will offset it, resulting in little or no impact on tariffs in the foreseeable future,” it said.

“There exists a 1-1.5 US cents/kWh (kilowatt/hour) scope for saving from reduction in transmission and distribution loses, which at 19 percent are considerably higher than the 10 percent average for non-OECD (Organisation for Economic Co-operation and Development) countries.”

Average cost of electricity in Pakistan is nearly 12.5 cents/kWh as compared to seven cents/kWh in India.

“With no prospect of reduction in delivered cost of electricity, the government would need to consider reduction in taxes and subsidise industry, especially exporters to enable them to compete against Bangladesh and India,” the council said.

Besides, more than 85 percent of Pakistan’s 60,000 megawatts of hydropower potential remains untapped. Storage-based small hydropower projects should be used to feed communities not connected to the grid.

The think-tank said the country has 132 gigawatts of wind and 2,900 megawatts of solar potential.

“Cost of solar in particular is declining and net metering could exponentially expand the adoption of this energy source.”

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