Pakistan Government decides to use Thar coal for all power plants

Government has decided to convert all the existing and new power plants on the specification of Thar coal versus earlier plan of converting these on imported coal.

In a decision, government has decided a coal off-take agreement would be signed between Generation Company (GENCO) and Sindh Engro Coal Mining Company (SECMC).

This decision is in line with the Memorandum of Understanding signed between Pakistan Electric Power Company (PEPCO) and SECMC, whereby it was agreed after the approval of the feasibility report, PEPCO would sign coal supply agreement with SECMC. Total foreign exchange savings for 4000 MW of Thar coal based power plants are estimated at more than $50 billion for life of the project.

SECMC has completed the feasibility study on Thar Coal project, confirming the technical, commercial and environmental viability of the project. All the required government approvals have been obtained and the mining work is likely to start later this year, subject to the coal off-take agreement between GENCO and SECMC.

Government of Sindh is also diligently working on the completion of infrastructural setup, which is in line with the development of the mine. SECMC’s mining project, which will cost $1.3 billion is expected to take less than four years for completion. Failing which the company will be liable to pay the liquidated damages. The timeline of Mining Project matches well with GENCO’s power project development at Jamshoro.

GENCO is planning to convert its Jamshoro’s oil-based power plants and establish new power plants at the same site. This conversion will not only yield a cheaper power tariff, but will also improve the efficiency of the existing plants and will become a model for the other GENCO and Independent Power Producers (IPPs).

After Jamshoro, GENCO will convert its Muzaffargarh units to coal-based power plants. As per GOP decision, Thar coal will be utilised for new power plant as well as the conversions. To cover any timing mismatch, imported coal will be utilised until the indigenous Thar Coal is available for the said conversions.

Pakistan’s existing power generation mix with 40 percent reliance on imported furnace oil is not sustainable as reflected in country’s inability to utilise 100 percent of its power generation capacity due to lack of funds for furnace oil purchase.

Development of power plants on imported coal will merely shift reliance from one imported energy source to another with inherent international pricing risks.

Our furnace oil based energy tariff has gone up from 1.8 cents in mid 90s to 15 cents. Against this, we rejected Shenua’s offer of Thar coal based fuel energy component at Usc 2.7/kilowatts per hour (KWh) in mid 90s, which would have increased only to USc 3.6/Kwh now. Thar has an enormous energy potential. SECMC’s Thar Block-2, which is only 1 percent of the entire Thar coal reserves, can produce 4000 megawatts (MW) for next 50 years.

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