Contextualizing the Energy Crisis in Pakistan
With a rising population and an expanding economy, Pakistan’s energy needs have outpaced its national energy supply. Exacerbating the demand-supply gap is Pakistan’s unsustainable power generation fuel mix, which contains a high share of oil-based power generation (up to 32%), resulting in high cost of electricity production. Moreover, there is a heavy reliance on imported fuels which results in constant depletion of foreign exchange and insufficient control over the fuel supply chain. This inappropriate fuel mix leads to energy losses at each level of the value chain and inadequate recoveries lead to power outages, unaffordable electricity and circular debt.
The sustainability of Pakistan’s power sector would only be possible if the power distribution system is improved by controlling electricity theft, inefficacy and improvising recoveries.
Tackling the Energy Crisis through Public-Private Partnership
To provide incentives for the development of local coal and encourage mining and power projects in the region, the Government of Pakistan, through the Economic Coordination Committee (ECC), approved a number of incentives for such projects in October 2010. These included declaring Thar Coalfield a Special Economic Zone and approving the provision of sovereign guarantee for debt portion of the mining project of up to USD 700 million with the condition that Government of Sindh (GoS) shall hold the majority shareholding in the project.
The Thar Coal Mining project has been undertaken by Sindh Engro Coal Mining Company (SECMC) – a Joint Venture Agreement (JVA) between GoS, Engro Energy Limited (formerly Engro Powergen Limited) and its partners namely: Thal Limited (House of Habib), Habib Bank Limited (HBL), Hub Power Company (HUBCO) and China Machinery Engineering Corporation (CMEC); whereas Houlinhe Open Pit Coal Mine, subsidiary of State Power International Mengdong (SPIM), formerly CPIM, has joined the SECMC board as a strategic investor with preference shares’ subscription.
SECMC was created with the vision “to develop a technically and commercially viable Coal Mining Project in Thar Block-II to bring energy security to Pakistan.” The total reserves of block-II are sufficient to support 5000 MW of energy for 50 years, enough to pull the country out of the energy crisis.
The total allocated area of 95.5km2 has been leased to SECMC for 30 years, further extendable to another 30 years for extraction of coal. The approximate project cost for the 3.8 Mt/annum coal mine is USD ~845 million with a construction timeframe of 42 months.
Initiating Mining Activities at Thar Block-II
Thar coalfield, located in Sindh Pakistan, is bounded in the North, East and South by India, and in the West by flood plains of the Indus River. Town of Islamkot, a population center, is 44km to the West of the mining project site in Thar coalfield. The coalfield was discovered in 1991 by Geological Survey of Pakistan (GSP) and the United State Agency for International Development bearing 6th largest coal reserves in the world – approximately 175 billion tons – enough to meet Pakistan’s current energy shortfall and fuel requirements for centuries, relieving the country of the prevalent energy crisis.
Bankable Feasibility Study (BFS) was developed by Sinocoal International Engineering Research & Design Institute of China, RWE of Germany, SRK (UK) and Hagler Bailly, Pakistan in 2010 for a mine capacity of 6.5 Mt/annum. The study concluded the project to be technically, commercially, environmentally and socially feasible. In 2012-13 RWE amended the original feasibility study for the mine size of 3.8 Mt/annum, which was done to reduce the capital cost of the overall project.
In 2012, RWE also developed a Competent Person Statement (CPS) for the Lignite Resources in Thar Block-II, confirming the total resources in there to be at 2.039 billion tons of which 1.57 billion tons are mineable.
The Thar mining project is categorized amongst the ‘early harvest’ projects under CPEC to generate electricity utilizing Thar’s untapped coal reserves. The mining project completed all tests, inspection and declared commercial operations date on July 10, 2019.
The total planned mining capacity of the project will be 20.6 MT/annum with a capacity to scale it to 30.4 MT/annum while the power generation capacity is projected to be 3,960 MW at full capacity. The mining project is planned to be executed in 5 phases with phase I completed in June 2018 and Phase II commenced thereon. In the first phase, the mine has been developed for a capacity of 3.8 MT/annum whereas two 330 MW subcritical plants have been constructed as part of the project by Engro Energy’s subsidiary – Engro Powergen Thar (Pvt.) Limited – utilizing the complete capacity of 3.8 MT/annum. In the second phase the mine will be further expanded to 7.6 MTPA and additional two 330 MW of power plants will be added whereas in the third phase the mine will be expanded to a capacity of 15.2 MT/annum with an additional power generation capacity of 1,320 MW.
Similarly, in the fourth phase the mine will be expanded to a capacity of 22.8 MT/annum with additional 1,320 MW added to the system while in the fifth and final phase it will be expanded to its full potential of 30.4 MT/annum with additional 1,320 MW added into the system, bringing the combined total to over 5,000 MW of power generation through Thar coal from Block-II.
Generating Power to Address the Energy Shortfall
The first-ever Thar based 660 MW Lignite Coal Power plant has made rapid progress and successfully achieved commercial operations date on July 10, 2019 thereby providing 660 MW of electricity to the national grid. Engro Energy is the majority shareholder of Engro Powergen Thar Private Limited (EPTL) whereas together EPTL and SECMC are the largest private investments under China-Pakistan Economic Corridor (CPEC) and are part of the early-harvest component of the CPEC framework being the only investments which are owned 95% by Pakistanis.
Empowering and Uplifting Communities in Thar
In order to combat multi-dimensional poverty in the region of Tharparkar, Engro Energy, in collaboration with SECMC and EPTL, have set up the Thar Foundation. The Foundation has been established as a Section 42 Company under the Securities and Exchange Commission of Pakistan (SECP) framework with an objective to improve the lives of the underprivileged communities living in Tharparkar district of Islamkot in the Sindh province of Pakistan. The Foundation aims to improve the lives of these people through graduated and sustainable interventions by adopting the UNDP’s Sustainable Development Goals framework to ensure that Islamkot becomes SDG-compliant by 2024 – six years ahead of the global timeline for SDG implementation. A unique aspect of the social work being undertaken by Engro Energy in the Thar desert as part of the Thar coal project is the fact that majority of the programs and interventions started before the projects were commissioned.
Since these goals are a universal call-to-action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity, the Thar Foundation has adopted these Global Goals with a vision to uplift the communities in Thar and usher in a new era of peace and prosperity. By adopting the SDG Framework, the Thar Foundation has divided these 17 Global Goals into three key categories: Overarching Goals; Prioritized Goals and Advocacy Goals.
For the first time in Pakistan, inhabitants of the project area have been made Project Beneficiaries by the Government of Sindh. This has been achieved by diluting 3% of the Government’s shareholding for the Project Affected Persons who will become shareholders in the project. In addition, as part of the SDG framework, the Foundation continues to work on key impact areas such as education, health, livelihoods, gender equality, water and women empowerment amongst other focus areas.
In the area of education, the Thar Foundation has established 24 school units which it runs in collaboration with The Citizens Foundation and the Charter of Compassion. The schools together provide functional schooling experience to over 4,000 children.
Moreover, the Foundation is sponsoring the adaptation of the 3-language curriculum whereby students will be taught in their native language – Sindhi – first and later graduate to Urdu and English languages as the medium of instruction. Other achievements by the Foundation in education includes setting up four adult literacy centres in the area, signing an agreement with IBA to offer 100% scholarship to Thari students, collaborating with Higher Education Commission to establish a world-class NED campus at Islamkot for Thari youth. Both HEC and NED have principally agreed to it and the first classes will commence in October 2019.
The Foundation is also focused on providing quality healthcare to the people of Thar. It has established a free-of-cost healthcare clinic for residents of Block-II, which is managed by the Indus Hospital. A second clinic was inaugurated at Gorano in July 2018. Together both these clinical interventions continue to provide quality and free of cost healthcare to residents in and around a radius of approximately 90 kilometres of Block-II. Additionally, the Foundation has also setup an 82-bed state-of-the-art hospital in Islamkot in collaboration with GoS, Indus Hospital and the Shahid Afridi Foundation.
The Foundation promotes sustained, inclusive and sustainable economic growth in Tharparkar by providing full and productive employment opportunities and decent work to locals. Approximately 70% of the workforce employed at the projects are locals whereas over 1000 Tharis have been trained for various technical skills under the Khushaal Thar initiative of Thar Foundation. Moreover, another program titled Thar Associate Engineering Program (TAEP) is operational and provides technical training to select candidates from Thar at the Technical Training College in Daharki. Another program – Thar Information Technology Program (TITP) – has been instituted in collaboration with the Saylani Institute in Karachi where approximately 25 students are currently under training to become Android and mobile application developers. Khushaal Thar Driving School, initiated by the Thar Foundation, is training approximately 700 male and female students from Thar and adjoining areas to become professional truck and heavy vehicle drivers.
The Foundation also ensures availability and sustainable management of clean drinking water and other livelihood facilities for all. This is being achieved through installation and management of around 18 RO plants and supply of clean drinking water to communities in and around Block-II and beyond.
Another flagship program that is receiving acclaim from both local and international quarters is the Women Dump Truck Driving Program. Under this program the Foundation is promoting gender equality and ensuring women empowerment at all levels in Islamkot. The Women Dump Truck Driver Program has uniquely trained over 45 of Thar’s females to drive 60-ton heavy dump trucks, while another program, the Khushaal Naari focuses on developing enterprise and go-to-market opportunities for females across Thar.
Under its environmental conservation and care for climate initiatives, Thar Foundation is working to make Thar Block-II a plastic free site and distributes re-usable cotton bags among the workforce as an alternate to plastic. Another significant campaign for the betterment of the environment is the Thar Million Tree project which aims to plant 1 million trees across Thar by 2019. To date through various drives and interventions the Foundation has planted over 300,000 native plant saplings.
All in all, Engro Energy, together with SECMC, EPTL and Thar Foundation, is committed to securing the energy future of the country. The answer lies in developing affordable, abundant and indigenous solutions to cater to the growing demand whilst also deploying inclusive business models which can usher in socio-economic opportunities for the communities and the nation at large.
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