Two RLNG based mega power projects (Bhikki and Haveli Bahadur Shah) are pacing towards financial close and both Punjab and Federal governments have done a good job in limiting the projects costs at substantial discount, and at higher efficiencies, to the projects executed in yesteryears. The lady luck is in their favour as prices of turbines are down in international market and machineries are readily available.
OGRA has finally released pricing and the government is in the process of long term contract with Qatar for the supply of LNG. NEPRA has determined the tariff which is now a benchmark for smaller (medium size) projects that could be executed by the government (GHPL) or private sector. These upfront tariffs are lower than what was initially envisaged and regulatory authorities are not likely to give cost plus tariff anymore. Such practice will prohibit operators from over invoicing of plants and machinery and in turn earning higher than perceived stipulated returns.
These projects have set a benchmark for private sector and consumer is the beneficiary. There should be now a yardstick for efficiency of power plants and the government should start shelving inefficient GENCOs and should not extend CPP for any IPPs. And all the new projects must be of high efficiency to save imported fuel cost.
But enhancing the energy supply at affordable prices is not confined to negotiating and installing mega power projects at decent cost and quick time. There is much more to the whole chain including areas where the cost factors may not be too high but overall management and governance system has to be more vigilant.
The success of RLNG based power plants is anchored on the homogenous continuous supply of RLNG to the plants and evacuation of power from these plants to the grid and from there to end consumers. First the need is to import LNG, re-gasify it and transport it to the plants. The mismanagement on the first leg of importing gas from Qatar is exhibited from the ill planned Engro LNG terminal.
There was nothing wrong on end of the terminal provider; but the lack of coordination amongst various ministries resulted in not having required dredging at port Qasim initially. It took many months even after getting first shipment to rectify the issue and now 200mmcfd gas is coming from the terminal.
The terminal capacity has to treble in two years and an another terminal of capacity 500-600 mmcfd has to be built for getting adequate gas for three planned RLNG based power projects to produce 3000-3600 MW by the start of 2018. There are issues on port capacity to handle such volumes; the limitation of port Qasim is more exposed for an array of imported coal based projects. How much burden can be shifted to KT Bandar?
The answer to these probably is in building Gaddani port from the scratch or the authorities are solely relying on Gawadar port which is supposed to be constructed by Chinese under CPEC. With economic activities picking up after the implementation of CPEC, improved energy infrastructure and expansions planned in various industries, the external trade activities are bound to increase at unprecedented levels. Can our existing ports handle such loads? Its highly unlikely as already the ports are congested and system will be chocked without adequate planning.
Thus, port handling is a risk to mega energy projects; but there are more thronging issues pertaining to RLNG based projects. The north south LNG pipeline is imperative for transporting gas to the plants located in Punjab. The pipeline cost is estimated at $2.5 billion and Russians have shown interest in the project. Russians have shown carrot to Pakistan to safeguard its own interest in reshaping geopolitical landscape; but critics are skeptical on the execution of the project as they suspect that Russian interest may diverge in the process.
Without the gas pipeline, the mega power plants would not be able to operate; hence the projects carry risk of delay in construction and operation of the pipeline. Even after the pipeline being operational, there are risks involved in maintaining quality of RLNG intact in transporting process and if the quality deteriorates the efficiency of power plants will be adversely affected.
These are risks where governance and overall management in the chain ought to be right for reaping fruits from mega projects. The picture of LNG terminals, pipeline construction and homogenous supply of gas have to be more clear before the federal government start contracting third LNG power project at Balloki. And any other smaller size project by GHPL or private sector.
The above mentioned governance issues are not small. The gas marketing companies performance has not remained good in the past few years. Both SSGC and SNGPL have not published their annual accounts for three years as UFG losses have gone out of bound. The permissible losses in developed world are around 2-3 percent and in Pakistan they were used to be around 5-7 percent but now the losses are in double digits. What the government has done to control these losses? Why the financial accounts have not been published? Is there a regulator watching interest of consumers and small investors in these listed companies?
The ministry of petroleum and natural gas has its own management issues, as apparently, the bureaucratic staff of ministry is not keen to work with the Minister on LNG deals. The issue of pricing remained in thin air for months which had delayed the financial close of power projects and another work relating to terminal and gas pipeline.
By seeing failures of management and demonstration of poor governance in the whole energy chain, the doubts will remain on the planned execution of mega thermal projects (both RLNG and coal) till the time they start operating. And without delving into the proper evacuation of electricity from plants, up gradation of grids network and recovery of bills, circular debt issues may not allow the plants to run at optimal capacity.

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