State of the Energy Sector

Pakistan’s policy-makers have done a reasonably good job of articulating (repeatedly through several five-year planning cycles) policy objectives for the energy sector. The broad objective is to develop the sector to support an expanding economy. Developing indigenous resources, importing energy at competitive prices to meet deficits, expanding delivery infrastructure and improving energy efficiency and reliability, would enhance energy supplies. Security of energy supply would be increased by greater reliance on national resources thus reducing import dependence, and by diversification of energy supplies to manage risks and external shocks. Long-term viability of the sector would be supported by a shift in the role of government from owner to that of policy-maker and regulator, encouraging the private sector to own and run the energy companies through appropriate incentives, including attracting foreign and local private capital and deploying competitive processes. Also, the objectives contain consumer-oriented, eco-friendly and pro-poor elements, promoting service-provision, environmental protection and affordable energy for the underprivileged.

Despite these laudable objectives the sector is in a dire state. The problem is not a lack of clarity on what needs to be done but how it is to be done.

Before considering solutions, it is essential to briefly review the state of the sector, the gravity of issues, and why the situation has become so serious. The official Pakistan Energy Yearbook 2009 lays out the supply and consumption picture. Total primary energy supply in Pakistan is 63 MTOE (Million Tons of Oil Equivalence) of which natural gas accounts for 48 per cent, oil 32 per cent, hydroelectricity 11 per cent and coal around 7 percent. Nuclear, LPG and imported electricity make up the remaining 2 per cent. Pakistan imports a third of its energy requirements mainly in the form of oil and coal, despite huge proven reserves of coal and a significant exploration potential of oil. Over 80 per cent of Pakistan’s oil requirements are imported at a prohibitive cost of $12 billion a year, and over 60 per cent of its coal supplies come from overseas.

Pakistan’s indigenous coal reserves are huge, estimated at 186 billion tons, of which the Thar deposit of 175 billion tons is the fifth largest in the world. Proven reserves stand at 1980 million tons and at the present production level the reserves-to-production ratio is well over 400. This signals the need to enhance production significantly. However, most of this coal is of low quality (high sulphur and ash content) and is located in remote areas. Its exploitation therefore requires expensive excavation, treatment and transport infrastructure, in areas where security is a concern. Renewable energy sources are also significant. Hydroelectric potential in Pakistan is an impressive 41,700 MW of which only 6,600 MW or 16 per cent has been harnessed till today. For mini-Pydro (units up to 5 MW capacity), the potential is about 1500 MW of which only 60 MW (4 per cent) has been tapped. Pakistan’s almost entirely untapped wind energy potential, according to the USAID Renewable Energy Lab, is estimated at 41000 MW of power generation based on areas of favorable wind regimes.