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LNG power generation

In a wise move, the government has approved the conversion of four duel-fuel fired thermal power plants having a combined generation capacity of 910 megawatts to Liquefied Natural Gas (LNG). But at the same time a financial concession of hefty amounts of idle capacity payments were agreed to these four Independent Power Producers (IPPS) at the expense of poor people of the country. The owners of the IPPS could have run their plants on High Speed Diesel (HSD) due to the non-availability of LNG. They appear to be the blue-eyed guys of the ruling PML-N. The non-availability of LNG will be treated as force majeure. The power producers that benefited at the cost taxpayer’s money include Saif Power LTD, Orient Power Ltd, Sapphire Electric Company and Halmore Power Generation.

The second Benazir Bhutto government made agreements with the independent power producers which were heavily loaded against the interest of the country and its people. The clauses about the payments for idle capacity and non-purchase surplus electricity were irrational and politically motivated for personal interests, the heavy price of which is being paid by the domestic and commercial consumers in the form of highly inflated electricity charges bills.  It was because of these vested interest protecting clauses that National Distribution and Transmission Company of Pakistan lost its case against IPPS in the London Court of International Arbitration (LCIA) on 31st October. The Arbitration Court in its final award  asked Pakistan’s  government  to pay more than Rs. 14 billion to nine IPPS.

Ever since the end of President Ayub Khan Government, the successive civilian government deliberately ignored working out a long term energy policy with a view t giving more weight to power generation from renewable sources like water, wind and solar. In mid 60s the construction of Tarbella dam was started, technical feasibility of Kalabagh dam was also completed bedsides initiating the process of land acquisition for its construction. Moreover, conducting feasibility studies for other big dams upstream Tarbella were decided. But Z.A Bhutto government shelved Kalabagh dam project in mid 70s. Later, it was made politically controversial by the regional nationalist parties of KP and Sindh. Benazir Bhutto made the opposition of Kalabagh dam an election slogan in 1988.It was in the PPP second government that agreements of HSD fired thermal power plants, which ran contrary to national interest, were made.

Conversion of duel fuel fired power plants to LNG is a welcome step as it will reduce the production cost of thermal power by 50 percent. Hence the remaining duel fuel fired plants should also be converted to LNG. But the price of LNG in Pakistan is $11 mbtu as compared with India where it is available at $ 7 mbtu. The price of this energy input must be renegotiated with Qatar to bring down its price. The business community is making persistent demands for reduction in the electricity and gas tariffs to steer the economy out of acute stagflation and boost productivity of manufacturing sector.  The Ministry of Finance has estimated gross external financing liabilities at $ 18 billion for this fiscal. But this figure again appears un-realistic as it does not fully take into account the ever widening current account deficit and the ballooning external debt payment. Lahore Chamber of Commerce and Industry has given 20 plus workable proposals last month for substantial increase in exports but the federal government has not responded positively to valuable proposals of businessmen. If immediate measures for increasing exports are not taken pressure on foreign exchange reserve will intensify further. The total amount of these reserves are $14.13 out of which $ 6.12 belong to private depositors who fear that the PML-n government may freeze the foreign currency accounts which they had once done in May, 1998 when the economic situation worsened because of stoppage of economic assistance by the United States, European Union and Japan. The mantra of economic gains should be abandoned and the issues of alarming trade gap and reckless borrowing be addressed by taking corrective measures.

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