Haste makes waste. The present government has lent quite some credence to the age-old proverb in its different initiatives especially when it comes to the power sector. Billions of rupees have gone down the drain in trying to execute projects without the necessary planning and pre-requisites being checked off first.
The latest victims in the power sector seem to be the three R-LNG power plants set up by the Punjab government under an IPP mode. According to November’s power generation data the load factor of these plants declined to almost 3 percent in the cases of the Balloki and Haveli Bahadur Shah power plants!
Even though these power plants have signed long term gas supply agreements (GSA), they are still being subjected to gas curtailment. Recall that the primary purpose of importing R-LNG by the government was to provide gas for power generation.
During winters the demand outpaces the supply of gas by a wide margin due to higher demand by domestic sector. This is despite the provision of R-LNG to the industry as well as power plants to plug the shortfall.
However, it seems the government is bent on putting the cart before the horse once again as it plans to build another 1200MW R-LNG power plant in Jhang, Punjab. Where is the backend infrastructure to ensure an uninterrupted supply of R-LNG to these power plants? Sources within have told BR Research about the issues they are facing in procurement of a reliable stream of gas for generation purposes.
One paper the RLNG power plant has been allocated 200 MMCFD of R-LNG. That means currently they require 600 MMCFD per day whereas when the fourth power plant will come online that will increase to 800 MMCFD.
Currently, Pakistan has two LNG regasification terminals with a total capacity of 1.2 billion bcfd. However, faults have emerged in both terminals in the past which has led to the closures of power plants and industry especially in Punjab.
The fallacy lies here. When the government which is responsible for providing the gas and running the power plants, is not able to provide the gas for whatever reasons, it still has to pay capacity payments thanks to a “take or pay” contract mechanism. At the same time it is also bound to pay for R-LNG even when there is an issue with the terminal as the import contracts are also take or pay.
What is the point of setting up efficient power plants when you’re unable to run them at their maximum capacity? Capacity payments will more than offset any fuel savings due to higher efficiency when the plants are operating at lower load factors. This only ends up in hurting the end consumer who will be ultimately fleeced in paying for these inefficiencies by the state.
Ideally, an international consultancy firm should be hired by the government to chalk out the supply chain dynamics of gas provision to the power plants and industry in an organised and systematic manner. Ad-hoc delivery will only result in more losses.
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