Sindh’s treasure of black gold

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LAKHRA coal reserve is one of the world’s largest, Sindh’s treasure trove for prosperity and a silver lining on Pakistan’s dark energy horizon. It can be used for generation of electric power sufficient to end load-shedding. Also it can be converted into oil and gas to reduce if not rid us of dependence on imported oil and gas. Estimated at 185 billion tons, equivalent to 350 billion barrels of oil, Lakra coal can launch Sindh on a trajectory to development and progress
. Why hasn’t that been done so far defies common sense. Precise reasons are difficult to identify. However, more relevant now are prospects that should beckon the Sindh government to seize the initiative and launch a resolute drive for exploitation of its natural wealth. With the same political party in power also at the centre, it can secure prompt fulfillment of the federal government’s obligation to formulate an integrated policy for development of nature’s bounty. With the constitution vesting the right to minerals in provinces Sindh would be entitled to royalty as well as due share in benefits and profit on investment. Technology for multiple uses is well known and corporations in China, Germany and South Africa have abundant experience. China generates 70 percent of its energy from coal. South Africa produces 350,000 barrels of oil and 4 billion cu. ft. of gas per day from lignite coal similar to Lakhra’s. India has built a 1200MW power station in Rajasthan using coal from the seam that is an extension of the reserve at Lakhra. World Bank, Asian Development Bank and even commercial corporations can be expected to invest in profitable coal-based ventures. But government has to first formulate policy and foster a social and economic environment conducive to foreign investment. That unfortunately has been delayed.


Pakistan has known of the available reserve but did not undertake necessary preparation of a project. Islamabad approached Beijing some six years ago and as usual Chinese leaders responded positively. A Chinese corporation invested $25 million in exploration and feasibility study. Chinese government indicated willingness to participate in investment. Final agreement was within sight as Chinese government intervened to reduce price to 5.8 cents per unit, lower than the rate government gave to private power producers a decade earlier, but the deal collapsed because of imprudent bargaining on our part. In exasperation the Chinese company left.
Nor was the above the only instance of missed opportunities. Over nearly forty years one government after another succumbed to misinformed pressure and political manoeuvring so that no new major dam has been built since Tarbela in 1960s. The cost of procrastination is writ large in long hours of load-shedding, inconvenience and hardship to consumers and damage to commerce and industry. Experts also point to failures to formulate appropriate policies to encourage prospecting for oil and gas on a scale necessary to attract foreign investment. Promising on- and off-shore fields were found in Balochistan and along Sindh coast decades ago but follow up actions were not taken in good time to develop the finds. As a result Pakistan is heading for an energy crisis even earlier than the rest of the world. Only immediate policy decision and fast track implementation to develop Lakhra coal field offers hope of amelioration. It does no require technical expertise to realize we would otherwise be confronted with a multi-dimensional energy crisis. More than most other countries, we are short of alternatives. Oil and Gas. Currently supplying 50% of energy supply, production of natural gas in Pakistan is projected to decline and as early as 2009 brown-outs are likely to add to misery of load-shedding across the country. In five years indigenous gas will meet only about a quarter of the demand. So far no alternative arrangements have been made. Even if agreement with Iran is signed the pipeline will take several years to build. Besides, imported gas will entail fivefold increase in consumer price. Oil prices have sky-rocketed already. The trend is global and irreversible.


Fossil fuels are a finite and depleting resource, discovery of new mega-fields has been leveling off and average output per oil well has been in decline. At current trends global demand is projected to rise from 85 million barrels per day in 2008 to 130 million bpd by 2030, which is unlikely to be met by increase in production. Driven by imbalance between supply and demand, price is bound to maintain a rising trend. The era of cheap oil is gone for ever. Newsweek has predicted rise to $200 a barrel. Unless production of energy from domestic resources is rapidly increased, the country will face unmanageable supply and price problems. Apart from developing Lakhra we also need to build more dams and invigorate prospecting for oil and gas. Oil and gas bearing geological structures have been identified in Balochistan, both off-shore and inland. Their development has been delayed, because of suspected pressure on foreign oil companies from their governments. Load-shedding already afflicts consumers. Petrol and diesel prices have sky-rocketed. There is no relief in sight. Pakistan’s exchange reserves of $16 billion in 2007 are already down to about $10 billion. At present rate of depletion these will not last much longer than a year or so. Then oil imports would be inadequate to meet demand with predictable consequences for individual and corporate sector. Wheels of industry would not continue at present pace. Increasing numbers of private car owners even in rich countries are switching to public transport. In our country that is not an inviting option. Neither government nor private enterprise has developed efficient bus facilities in urban areas. School children and office workers depend on private cars for conveyance.


Electric Power. The picture of electric power is equally bleak in the short term. Pakistan’s current installed capacity for power generation is variously estimated at 18000-19400 MW, with hydel generation contributing 10000-13400 MW in different seasons. About 4000 MW is generated from natural gas and the rest mostly from diesel. The power crisis of 2008 is more acute because demand has continued to increase while little has been added to generation capacity over the past years. New river dams will take several years to build even after sites have been selected. Government has announced it will install 4000 MW new capacity by later 2009. Cost of electricity to be supplied by private producers may be 20-25 cents, i.e. up to 20 rupees per unit. THERE IS NO TIME TO LOSE. Government should immediately appoint a cabinet committee with a mandate to focus on development of Lakhra coal reserve for power. The committee should include one or more ministers of Sindh government, deputy chairman of Planning Commission, secretaries of concerned federal and provincial ministries. The committee would benefit much if it invited energy expert and former minister Osman Aminuddin for counsel. While launch of the power project should be priority number one, the same committee could be tasked to recommend proposals for projects for conversion of coal into petrol and gas.

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