ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL

AND RISING COSTS

SYNOPSIS

Energy plays an important role in the socio-economic development of a country. It is critical

to have access to adequate levels of energy supply and infrastructure to meet the desired
economic growth standards. With rising energy needs, population expansion and declining
energy supplies, Pakistan faces an energy crisis with electricity shortfall reaching a peak of
6,500 megawatts (MW) in June 2012—more than 40% of national demand1. This critical
state of the energy sector has caused a strain on the economic development of the country.
Pakistan‘s GDP growth rate in 2012-2013 fell to 2%, which is less than half of the country's
long-term trend potential of about 6.5 per cent per annum2.

This note presents an in depth review of the energy sector of Pakistan. It presents an analysis
of the key issues and challenges facing the sector by presenting an overview of the different
sources of energy, the roles of major players and sector related challenges, government

1
Michael Kugelman, ‗‘ Pakistan‘s Energy Crisis From Conudrum to Catastrophe,‘‘ The National Bureau of
Asian Research, (2013): 1-7. http://www.nbr.org/research/activity.aspx?id=323#.UaxFnEBmiSo
2
‘’Power crisis shaves off 2pc GDP,‘‘PakTribune, June 12, 2013, http://paktribune.com/business/news/Power-
crisis-shaves-off-2pc-GDP-11290.html

This technical note was written by Dr Arif Nazir Butt and Teaching Fellow Shezeen Salim Hemani at the
Lahore University of Management Sciences to serve as basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation. This material may not be quoted, photocopied or
reproduced in any form without the prior written consent of the Lahore University of Management Sciences.
This research was made possible through support provided by the United States Agency for International
Development. The opinions expressed herein are those of the author(s) and do not necessarily reflect the views
of the US Agency for International Development or the US Government.

© 2014 Lahore University of Management Sciences

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initiatives in overall strategy building and a set of recommendations to address the nation‘s
energy crisis.
The report opens with a brief introduction highlighting the development as well as the
challenges facing the energy sector since Pakistan‘s independence in 1947. Next, it discusses
the source wise energy profile, which includes oil, natural gas, coal, hydel and nuclear
electricity with natural gas (50%) and oil (30%) remaining as the major sources of energy. In
this section, the paper discusses the demand and supply trends for each resource and the
related issues of depletion of natural gas reserves, overreliance on oil imports, share of coal
and potential for its contribution and the declining trend of hydel power generation.

The following section of the note briefly highlights the structure of the energy sector and the
institutions that play a major role in the oil, gas and the power sectors. Furthermore, the
report presents a detailed review of the challenges in the power sector. The major issues
facing the energy sector include rising international oil prices, overdependence on fossil fuel
as the prime source of energy to run the country‘s thermal plants, and depleting gas reserves
coupled with lack of exploitation. The energy sector also faces a liquidity crunch due to the
rising circular debt. Transmission and distribution losses of gas and electricity cause another
burden on the energy sector. Moreover, the involvement of various ministries, agencies and
organisations has hampered comprehensive policy making. Lack of implementation of
energy related plans and non-availability of funds to exploit coal, hydel and other renewable
resources are also factors contributing towards the energy crisis.

The note concludes by presenting a set of recommendations. It briefly suggests strategies for
dealing with the energy crises over the course of short, medium and long term.

INTRODUCTION

Pakistan has historically been energy poor. Even before Pakistan‘s independence in 1947,
there were questions about its lack of energy resources and economic prospects. At the time
of independence, Pakistan inherited a total of 60 MW of electricity generation capacity, in
the form of a small hydel electric facility and a thermal power plant. Comparatively, today

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Pakistan has almost 23,000 MW of installed capacity, which caters to an estimated 60% of its
population of over 160 million3.

Since independence (1947) to date (2012), the energy sector has grown in several ways e.g.
development of a diversified energy profile comprising oil, gas, hydel, nuclear, and
renewable sources, exploration of domestic gas and coal reserves, establishment of modern
infrastructure for hydel electricity, creation of research boards for exploration of nuclear and
renewable energy sources and policy introduction (e.g. 1994 and 2002 power policies 4) for
increasing the role of domestic and foreign private investors in the energy sector.

However, there have been several factors which have hindered the growth of the energy
sector. Firstly, the overall exploitation of energy resources has been slow due to shortage of
capital, lack of business incentives and uncertain political situation in the country. Secondly,
the lack of proper policy making, political interference in energy departments, financial and
administrative irregularities, corruption and nepotism have resulted in serious ramifications
for the energy sector‘s development and performance. Thirdly, the growth rate of Pakistan‘s
energy supply began decelerating in 2007-08, primarily due to a decline in oil and natural gas
supply, and it turned negative in 2008-09 and 2009-10 (see Exhibit 1). The global economic
meltdown and sharp increase in the international price of oil throughout 2009 put enormous
upward pressure on the cost structure involved in power generation and the transport sector,
leading to a large domestic deficit of electricity and gas. Fourthly, lower accumulation of
water reserves in dams compounded the severity.

Further, Pakistan‘s power sector was burdened with a circular debt5 of Rs. 872.41 billion in
2012, mainly because of the inefficiency in revenue collection from the private sector, non-
payment of dues by the public sector including the provincial governments and ineffective

3
Zia Mian and Abdul H. Nayyar , ‗‘ Pakistan and the Energy Challenge,‘‘ in
International Perspectives of Energy Policy and the Role of Nuclear Power (2009), PDF e-book, [537-553],
[http://www.princeton.edu/sgs/faculty-staff/zia-mian/Pakistan-Energy-Challenge2.pdf]

4
See Appendix
5
Circular debt arises when one party - not having adequate cash flows to discharge its obligations to its
suppliers- withholds payments. When it does so, the problem affects other entities in the supply chain, each of
which withholds its payments, resulting in operational difficulties for all service providers in the sector, none of
whom are then able to function at full capacity.

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contractual arrangements between PEPCO and KESC6. The estimated cost of power crises to
the economy is approximately Rs.380 billion per year, around 2 per cent of GDP. On the
other hand, GOP gives subsidies to the power sector since electricity to the end consumer is
provided below the cost price. Rs. 1100 billion have been given in the last four years (2008-
2012), which is almost 2.5 per cent of GDP. The liquidity crunch in the power sector has
resulted in underutilisation of the installed capacity of up to 4000MW7. It has also affected
investment in the power sector (see Exhibit 1). Lastly, the energy mix became skewed due to
over dependence on highly priced fuel oil. With no change allowed in the electricity tariff
between 2003 and 2007, the compounded effect on the viability of the energy sector has been
significantly distressing.

THE ENERGY PROFILE OF PAKISTAN

Pakistan‘s primary sources of energy are oil, natural gas, coal, hydel and nuclear electricity.
Natural gas has remained the major source of energy followed by oil, coal, hydel, and nuclear
energy (see Exhibit 2). It imports around 30% of energy requirements in the form of crude
oil, petroleum products, coal, LPG, etc. that cost US$ 14.5 billion annually 8 . Pakistan‘s
energy mix remains considerably different from the global energy mix trends (see Exhibit 3)
and its per capita energy consumption is 0.49 TOE/capita as compared to the world average
of 1.78 9 . The comparison of Pakistan‘s energy consumption versus world energy
consumption is shown in Exhibit 3. Finally, energy consumption 10 in 2012 stood at 40
million TOE (see Exhibit 3). The energy supply and consumption reflect a difference of
almost 24 million TOE11. This difference between supply and consumption is due to losses in
conversion, processing, transmission, distribution and non-technical losses such as thefts, etc.

6
USAID, 2013, The Causes and Impacts of Power Sector Circular Debt in Pakistan, pp. 1-42,
http://www.pc.gov.pk/hot%20links/2013/Final_USAID-Pakistan%20Circular%20Debt%20Report-
Printed%20Mar%2025,%202013.pdf
7
Ministry of Finance, Government of Pakistan, Pakistan Economic Survey 2011-2012, PDF e-book, [pp.193-
220], [http://www.finance.gov.pk/survey/chapter_12/14-Energy.pdf]
8
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
9
Ziad Alahdad, ‗‘Pakistan‘s Energy Sector: From Crisis to Crisis- Breaking the Chain,‘‘ Pakistan Institute of
Development Economics Monograph Series, (2012): 1-41,
http://pide.org.pk/pdf/publications/Monograph/Pakistans%20Energy%20Sector%20From%20Crisis%20to%20
Crisis-Breaking%20the%20Chain.pdf
10
Final energy consumption is the total energy consumed by end users, such as households, industry and
agriculture after all the transmission and distribution losses etc.
11
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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Source and sector wise consumption of energy has changed over the years as is shown in
Exhibit 4.

SOURCES OF ENERGY

Natural Gas

Natural gas is the largest energy source in Pakistan, contributing up to 50% in the energy
mix12 . Natural gas remained the cheapest and cleanest energy source before the reserves
reached a sharp decline, estimating to be 488.19 million TOE in 201213. Local production of
natural gas as well as sector wise consumption of natural gas has shown variation over the
years, as shown in Exhibits 5 and 6 respectively.

Natural gas consumption started accelerating since the 1950s with the discovery of Sui gas
reserves. The gas supply infrastructure developed throughout the country and eventually
Pakistan‘s per capita gas consumption ranked ahead of all South Asian states. Interestingly,
Pakistan is the 27th largest producer of gas but number one in the use of CNG cars 14 .
Government policies such as those of encouraging CNG use in private cars, promoting the
importation of equipment for cars to run on natural gas and rapidly giving out licenses to
open gas stations put pressure on the demand side15. Deteriorating local gas production could
not support this demand while also feeding power plants, fertilizer companies and other
businesses that relied on fuel 16 . Textile, pharmaceutical, rubber and other gas-intensive
industries shut down, cut down their productions or shifted to using other expensive
alternatives due to non-availability of natural gas. Inefficiencies in the transmission and
distribution network of the two gas utilities due to inefficient measurement and control,
faulty pressure management and deteriorating pipelines put pressure on the supply network
spreading over 139,8.4 km17 to cope with the increasing number of natural gas consumers

12
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
13
Ibid.
14
Mushtaq Ghumman, ‗‘Transfer of USC managing director disallowed by Prime Minister,‘‘ Business
Recorder, January 23, 2014, http://www.brecorder.com/fuel-a-energy/193/1146259/
15
Specifically during Musharraf‘s government
16
Rebecca Santana, ‗‘Gas shortage exposes Pakistan‘s energy crisis,‘‘ Yahoo News, December 14, 2012,
http://news.yahoo.com/gas-shortage-exposes-pakistans-energy-crisis-060506700--finance.html
17
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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reaching 6.6 million in 201218. In 2012, the total supply network expanded by 5.73% as
compared to a 5.91% increase in the number of natural gas consumers19.

Rising demand for natural gas and depleting gas reserves have created a gas shortage of 2
billion cubic feet per day (bcfd) 20 . If current gas policies persist, Pakistan‘s natural gas
supply is expected to decline from 4 bcfd in 2010/11 to less than 1 bcfd by 2025/26. This will
lead to a growing gas/energy shortfall reaching 8 bcfd (over 50 million TOEs) by 2025/26
and will depress Pakistan‘s average GDP growth rate over the next 15 years21.

Lack of political will and the law and order situation in Baluchistan, KPK and FATA has
hindered the exploratory work. In 2012, 21 exploratory and 36 development oil and gas fields
were drilled as compared to 27 exploratory and 59 development wells drilled in 2008.

The declining natural gas reserves, late payments by government entities and power
companies 22 and low gas price became significant disincentives in attracting new gas
supplies. While the gas prices are low in domestic and fertilizer industries as compared to
other emerging gas markets, gas prices for industrial consumers remain close to USA and
indeed cheaper than in India23. Although the margins in the tariff are designed to guarantee a
fixed return, SSGC and SNGPL assets have seen a steady decline in their profitability
hampering further investments in the country‘s gas sector (see Exhibit 7).

Import of natural gas has remained the most popular option for Pakistan. For this, various
routes have been explored. Gas import pipeline via Iran, Qatar, Afghanistan and other
Central Asian countries have been under consideration at different times. If constructed, the
Iran and TAPI pipelines (Turkmenistan, Afghanistan, Pakistan and India) will provide about
2 bcfd to Pakistan24. Both the pipelines are under slow progress due to technical issues and
political transitions in the country.

18
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
19
Ibid, p 72
20
Mushtaq Ghumman, ‗‘ Pakistan suffers gas shortfall of 2BCF a day,‘‘ Business Recorder, November 3, 2012,
http://www.brecorder.com/market-data/stocks-a-bonds/0/1253990/
21
Energy Outlook by PIP, 2011
22
In March 2012, SNGPL reported payment arrears from power companies of $250 million.
23
Ieda Gomes, ‗‘Natural Gas in Pakistan and Bangladesh: current issues and trends,‘‘ Oxford Institute for
Energy Studies, NG 77 (2013): 1-80. http://www.oxfordenergy.org/wpcms/wp-content/uploads/2013/06/NG-
77.pdf
24
Dr. Shahid Munir, ‗‘Tackling the energy crisis,‘‘ The Nation, July 1, 2013, http://www.nation.com.pk/E-
Paper/Lahore/2013-07-01/page-7/detail-0

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Oil

Oil stands at 29.4% in its share of energy consumption. Over the years, oil production has
remained fairly flat - approximately 3 million TOE, making the country highly dependent on
oil imports25 (see Exhibit 8). In 2012, 65% of units generated by IPPs were through furnace
oil and HSD. Oil reserves amounted to 45.87 million TOE and its production increased to 3.3
million TOE due to the major discovery made from Nashpa, field of Nashpa block, located in
KPK region (see Exhibit 9)26.

Sector wise consumption of petroleum products reflects the dependence of the country on oil
as one of the major sources of energy (see Exhibit 9).

The major challenge facing the oil supply situation is that the current refineries are reaching
their capacity limits, international fuel prices are rising and there is a lack of foreign and
government investment in this sector. Development of the oil sector continues to be impacted
by high interest costs of financing receivables owed by the government to oil companies such
as PSO, SHELL, ENI, etc., income tax payments in periods of net loss, and low fuel
margins 27 . In 2012, PSO‘s combined receivables from the power sector, PIA, OGDCL,
Pakistan Railways, etc. amounted to Rs. 215 billion while PSO payables to local and
international refineries increased to more than 179 billion28 (see Exhibit 10).

Hydel

Hydroelectric power supplied 6.8 million TOE in 2012, representing 10.5% of Pakistan‘s
energy mix. It provides for 1/3 of the power generated in the country.

Water flowing in the rivers is used to drive turbines and produce electricity called hydel
energy. Power produced by the turbines depends on the quantity of water flowing per minute
and the head of water available. The constant production of electricity, the easy stoppage and

25
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
26
Agencies, ‗‘Pakistan‘s oil production rises by 10%,‘‘ Pakistan Today, February 16, 2013,
http://www.pakistantoday.com.pk/2013/02/16/news/profit/pakistan-oil-production-rises-10/
27
Shell Pakistan Limited, Annual Report 2012, pp.1-75, http://s04.static-shell.com/content/dam/shell-
new/local/country/pak/downloads/pdf/shell-pak-financial-account-2012.pdf
28
Online, ‗‘PSO receivables swell to Rs. 215 billion,‘‘ Pakistan Today, June 16, 2012,
http://www.pakistantoday.com.pk/2012/06/16/news/profit/pso-receivables-swell-to-rs-215-billion/

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remittance of electricity for times of high demand of power, usage of lake water for irrigation
purposes, and no greenhouse gas emissions are some of the benefits that hydel power
generation brings along (Further related information is presented in the section ―Hydel
Generation‖, p.18).

Coal

Coal maintains only 6.6% of the total energy mix in Pakistan despite having the fourth
largest coal reserve base in the world with approximately 186 billion tonnes, out of which
175 billion tonnes of lignite reserves lie in Thar coal field. Thar coal field has the potential of
providing 100,000 MW of electricity to Pakistan (based on estimated consumption of 536
million tonnes of coal per year).

Coal production in 2012 was an estimated 3.61 million tonnes, showing decline since 2006.
Coal imports have remained high showing a growth rate of over 40% (see Exhibit 11)29. The
major users of coal are the cement sector and brick kilns (see Exhibit 12). The reason for the
high share of consumption of coal in the cement industry is due to switching over to coal
from furnace oil, which has increased the utilisation of indigenous as well as imported coal30.

Despite the abundance of coal reserves, various factors have hindered the development of
these reserves. Coal development requires heavy investments hence financial constraints
accompanied with technical issues such as depth and moisture level of the lignite reserves,
scarcity of fresh water and lack of road and power infrastructure have been the main reasons
for lack of coal development.

Thar coal reserves are lignite with thick seams at the depth of 145 meters that requires
additional equipment for open cast mining and handling ground water over and below the
coal seams. Just to make the required 3000 cusecs water available to the coal field, a cost of
100 billion rupees needs to be incurred. Due to topographic constraints, conventional gravity
driven channel flow of water to the coal project is not possible; costly upslope pumping
would be required. Open-cast mines similar to Thar Coal, which are lying at the depths of
more than 140 meters, would require about 40-48 months for achieving commercial
production. Construction time for a coal fired plant is considerably longer than other

29
Integrated Energy Plan 2009-2022. Report of the Energy Expert Group
30
Pakistan Economic Survey 2011-2012

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technologies i.e. 48-54 month. This will be a challenging undertaking requiring huge capital
cost.

Different approaches and tenders have remained unsuccessful in providing a methodology

for economical mining of the Thar coal field. Thar coalfield has not been developed due to
incorrect project development approach, which has been based on one or two 1000 MW
power plants. There is a clear need for a master plan as proposed by the Planning
Commission for full field development and coal production in the range of 400-600 mty and
downstream co-production applications based on highest economic returns.

Land acquisition plan & resettlement framework is not available for Thar Coal fields. There
is no comprehensive environmental impact assessment for Thar Coal fields or the related
infrastructure development work. Moreover, since the discovery of the Thar Coal field, the
central government has been locked in a disagreement with the Sindh provincial government
regarding how to allocate the spoils. Islamabad has proposed an 80/20 split, while Sindh has
insisted that it retain full control of the coalfields31.

Pakistan still does not have an integrated lignite / coal mining and power generation policy.
There is no indicative / tentative tariff on coal based power generation projects declared by
concerned authorities 32 (Further related information is presented in the section ―Thermal
Generation‖, p.17).

Other Sources: Wind, Solar, Biogas, and Nuclear

Besides hydel, renewable resources include wind energy, solar energy, micro-hydel, bio-
energy, and emerging technologies like fuel cell. Renewable sources have a negligible share
in Pakistan‘s energy mix. The Government of Pakistan established the Alternative Energy
Development Board in 2003 and is putting greater emphasis on renewable energy. The
Government has set a target of 10% share of renewable energy or 2700 MW in the country's
energy mix by 2015.

31
‗‘Solutions for Energy Crisis in Pakistan,‘‘ Islamabad Policy Research Institute, 2013
http://ipripak.org/books/secp.pdf
32
Pakistan Business Council, ‗‘Integrated Energy Planning and Pakistan‘s Energy Future,‘‘
http://www.pbc.org.pk/assets/pdf/Energy.pdf

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The coastal belt of Pakistan offers strategic benefits in the form of a wind corridor that is 60
km wide (Gharo – Kati Bandar) and 180 km long (up to Hyderabad) and has an exploitable
potential of 50,000 MW of electricity generation through wind energy. There are additional
wind sites in the coastal area of Baluchistan and in Northern Areas. More than 5000 villages
could be electrified through wind energy in Sindh, Baluchistan and Northern Areas through
micro wind turbines33.

The current system (for supply to HESCO) is adequate to cater for the initial 600 megawatts
of wind power generation in Jhimpir and an up gradation to a 22 KVA network will be
required to absorb further generation with a tariff of 13 cents per kilowatt hour 34.

If 0.25% of Baluchistan was covered with solar panels with an efficiency of 20%, enough
electricity would be generated to cover the entire Pakistani demand. In the previous years, the
use of solar panels has begun; for example solar panels are used for street lighting in some
areas of Gujranwala. Similarly, many private companies are providing solar panels for
houses. Pakistan can generate a unit of electricity with solar panels at around Rs. 3.0535. GOP
is taking initiatives to encourage the use of solar energy. Recently, Asian Development Bank
(ADB) has agreed to set up solar energy projects under public-private partnership in Punjab.
ADB would complete 2,000 megawatt solar energy projects within two years in Punjab36.

Pakistan also has huge resources of biomass that are available in the form of crop residues,
dung, poultry litter, sugarcane, bagasse and wood. Approximately 9 GW of electricity is
generated from biomass worldwide. There are about 80 sugar mills in Pakistan with the
potential to generate almost 3000 MW energy currently producing 700 MW37.

While the government has always encouraged the use of renewable sources, little action has
been taken for their development. AEDB was the first agency with the overall responsibility
for policy making, planning, and strategic management of the sector. Before its inception,
there were a number of distinct bodies with limited objectives and limited coordination

33
Dr. Muhammad Shahid Khalil,‘‘ Renewable Energy in Pakistan: Status and Trends ,‘‘ (Islamabad, Pakistan)
http://www.aedb.org/publications/repk.pdf
34
A recent report on the country‘s energy situation by Engro Corporation
35
Dr. Muhammad Shahid Khalil,‘‘ Renewable Energy in Pakistan: Status and Trends ,‘‘ (Islamabad, Pakistan)
http://www.aedb.org/publications/repk.pdf
36
Ibid.
37
Ibid.

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amongst different players 38 . The Alternative Energy Development Board (AEDB) has
acquired 18,000 acres for the installation of more wind turbines and has created 100 solar
homes in order to exploit solar energy. The AEDB also completed a project whereby
villagers who received solar panels were also given solar cookers. During the project,
deforestation decreased by 80% near the villages and the cookers were also made in Pakistan,
which generated local economic growth.

Despite the fact that Pakistan is so well endowed with wind and solar potential, only a few
projects have been completed. One of the reasons why this has occurred is that Pakistan does
not have major financial incentives available for those who want to install wind turbines or
solar panels. Research, development and implementation on renewable energy have remained
stagnant due to lack of institutional support, incentives to attract private sector, minimal
financial allocations, information and technological know-how. At the moment, all
renewable energy equipment has no sales or income tax and is free of custom duty, but these
incentives do very little to stimulate growth in the renewable energy market.

Nuclear electricity has a share of 1.9% in the total energy mix and provides 1.5 million TOE
of energy to Pakistan.

PAKISTAN’S ENERGY SECTOR STRUCTURE AND INSTITUTIONS

Currently the frontline agency is Water and Power Ministry (MWP) with 19 subordinate
agencies (see Exhibit 13 for key players in the energy sector). Besides MWP, the Ministry of
Petroleum and Natural Resources, 16 subsidiary agencies, four other ministries including
39
Planning Commission , Finance Ministry, AEDB and Ministry of Planning and
Development along with seven sub agencies are also involved in setting the energy policy
and running the power sector40.

38
Mashael Yazdanie, ‗‘ Renewable Energy in Pakistan: Policy Strengths, Challenges & the Path Forward‘‘
(Energy Economics & Policy, Dr. Thomas Rutherford, ETH Zurich, 2010)
39
The Planning Commission (denoted as PC), is a financial and public policy development institution of the
Government of Pakistan. The Planning Commission undertakes research studies and state policy development
initiatives for the growth of national economy and the expansion of the public and state infrastructure of the
country, in tandem with the Ministry of Finance (MoF).
40
Dawn, ‗‘‘‘Haphazard mix‘‘ of Pakistan‘s energy bureaucracy,‘‘ Dawn, July 6, 2011,
http://beta.dawn.com/news/641928/secret-us-cables-accessed-by-dawn-through-wikileaks-us-examined-
haphazard-mix-of-pakistans-energy-bureaucracy

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Oil and Gas Sector

Created in 1977, Pakistan‘s Ministry of Petroleum and Natural Resources regulates the
country‘s oil and gas sector. The core mission of the Ministry is to ―ensure availability and
security of sustainable supply of oil and gas for economic development and strategic
requirements of Pakistan. It also coordinates development of natural resources of energy and
minerals‖ 41. The Ministry is responsible for dealing with all matters relating to petroleum,
gas and mineral affairs. The Ministry also grants oil concessions by open tender and private
negotiations and offers various tax and royalty payment incentives to encourage oil sector
investment.

The Oil & Gas Regulatory Authority (OGRA) is an independent 42 organisation, which
regulates petroleum product distribution, including Compressed Natural Gas for vehicles,
setting safety standards and equalising prices across the country.

Pakistan‘s two largest national oil and gas companies (NOCs) are the Oil and Gas
Development Corporation Limited (OGDCL) and Pakistan Petroleum Limited (PPL). Both
companies operate under joint ventures and partnerships with various International Oil
Companies (IOCs) and other domestic firms. Major IOCs operating in Pakistan include Shell,
BP (UK), ENI (Italy), OMV (Australia), Orient Petroleum Inc. (OPI, Canada), PETRONAS
(Malaysia), and Tullow (Ireland). OMV is the largest foreign natural gas producer, supplying
17% of total gas production in Pakistan. BP, ENI and BHP Billiton are other foreign
companies also contributing to the overall gas supply available in the country (see Exhibit
14).

Pakistan has five refineries with a total refining capacity of approximately 270,000 bbl./d.
Pak-Arab Refinery Complex (PARCO) is the largest refinery in Pakistan with a capacity of
95,000 bbl./d became operational in 2000. In July 2004, Bosicor Pakistan Limited (BPL),
with a capacity of 30,000 – bbl. /d began commercial operations. The plant acquires crude oil
from Qatar and produces about 10,000 bbl./d of fuel oil, 6,000 bbl./d of diesel, and 5,500

41
Ministry of Petroleum and Natural Resources, Yearbook 2005-2006, pp.1-115, via Scribd
www.scribd.com/doc/130384574/Year-book-2005-06
42
In reality, it operates under the influence of MPNR

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bbl./d of naphtha, among other products. PSO has a supply contract to purchase the entire
output of BPL‘s products for the next 10 years43.

POWER SECTOR

1. WAPDA, PEPCO and KESC

Pakistan‘s power sector is dominated by the state owned WAPDA (Water and Power
Development Authority) and KESC (Karachi Electric Supply Corporation). Until the
privatisation of KESC in 2005, electricity transmission and distribution remained the
sole responsibility of the state – controlling almost 70% of the country‘s power.
KESC supplies electricity to the city of Karachi, and WAPDA to the rest of the
country.

As Pakistan‘s largest power producer, WAPDA controls the Water Wing by

monitoring the development and use of water resources for both hydel power
generation and irrigation-related activities. Split into the water and power wings,
WAPDA controls the majority of hydel generation and about 30% of thermal power
generated in Pakistan44. WAPDA controls 50% of the nation‘s total installed capacity
of 22797 MW (see Exhibit 15).

In December 1998, the WAPDA Act was amended, which allowed the creation of
Pakistan Electric Power Company (PEPCO), and unbundling of WAPDA‘s Power
Wing into:

 Eight distribution companies (DISCOS), formed from existing area

electricity boards.

 Four thermal generation (GENCO) companies, formed from WAPDA‘s

11 thermal generation plants.

43
Gordon Weynand, ‗‘Energy Sector Assessment for USAID/Pakistan,‘‘ USAID (June 2007):
http://pdf.usaid.gov/pdf_docs/PNADN955.pdf
44
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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The National Transmission and Dispatch Company (NTDC), formed from the
National Grid Company, will operate the transmission system and control dispatch.
Within a few months of its creation, PEPCO was placed under WAPDA, and the
restructuring of WAPDA remained with the parent organisation for a long time
without realising that the mother entity could not possibly extend full support to the
program. The reform process was considerably slowed down after 2001 when PEPCO
was reduced to a division in WAPDA.

The government reactivated the mandate of PEPCO in October 2007 to bridge the
increasing demand supply gap and to reduce the resulting load shedding in the
country45.

2. Independent Power Producers (IPP)

Thermal power received a boost in 1994 when the power policy was announced. This
policy allowed foreign and private sectors to set up Independent Power Plants (IPP),
choosing the fuel of their choice and promising them a fixed amount of return that
was to be paid by WAPDA.

After the power sector privatisation initiative, the role of IPPs began to become
prominent. While transmission and distribution is still controlled by PEPCO,
WAPDA and KESC, 39 IPPs control 37% of Pakistan‘s electricity having a joint
capacity of 8353 MW46. As the sole purchaser of power from the IPPs, WAPDA‘s
financial stability has been the main factor deciding the cash flows of IPPs. HUBCO
and KAPCO are two major IPPs with the installed capacity of 1292 MW and 1466
MW respectively47.

3. NEPRA

The National Electric Power Regulatory Authority (NERPA) was created under the
NERPA Act in 1997. NEPRA‘s main purpose is to ensure fair competition and

45
Prime Minister‘s Inspection Commission, ‗‘Effects of Power Sector Reforms,‘‘
http://pmic.gov.pk/index.php?option=com_content&view=article&id=1706&Itemid=612
46
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
47
Ibid., p. 81

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consumer protection. Its primary responsibilities include the issuing of licenses for
power production, transmission and distribution (including the stipulation of licensing
fees), specification of electricity tariffs, both with regard to remuneration of
producers (NTDC purchase price) and consumer pricing. In addition, NERPA is
responsible for approving the tariffs negotiated in connection with bilateral
agreements between individual power producers and the NTDC, distribution
companies and major customers. It also defines the licensing requirements and can
impose fines for noncompliance with the relevant regulations.

4. Private Power and Infrastructure Board (PPIB)

The PPIB, a state-owned consulting institution, was formed in 1994 with a view of
improving investment incentives in Pakistan‘s power sector (including investments in
the hydel sector after the 2002 policy48). The board is intended to serve as a one stop
facility to investors in Pakistan‘s private power sector. It acts on behalf of the
government, providing advice and guidance for the implementation of power plant
projects. Its main task is to negotiate implementation agreement and provide support
in negotiating fuel supply agreements and power purchase agreements. The PPIB also
provides guarantees to private investors for the performance of government entities
(such as WAPDA), monitors litigation and international arbitration for and on behalf
of the government, and assists the regulatory authority in determining and approving
tariffs for new private power projects.

5. Alternative Energy Development Board (AEDB)

AEDB was formed in 2003 by the Government of Pakistan to act as the central
national body for developing renewable energy i.e. solar, wind, bio-fuel, bio-gas, etc.
and to provide cleaner power and fuels for economic growth. The main objective of
the AEDB is to facilitate, promote, and encourage development of renewable energy
in Pakistan. The AEDB has also been charged with providing electricity services to
the 7,874 villages in Sindh and Baluchistan that cannot be served economically by the
national electricity grid.

48
It plans and works on projects independently of WAPDA.

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6. SAARC Energy Centre

In October 2005 at its 13th Summit, the South Asian Association for Regional
Cooperation (SAARC) endorsed the creation of a SAARC Energy Centre to be
located in Islamabad, Pakistan. The goals of the centre are to strengthen South Asia‘s
capacity to collectively address regional and global energy issues, to facilitate energy
trade within the SAARC region, and to enhance more efficient use of energy within
the region.

ELECTRICITY OUTLOOK

Electricity Overview

The power sector in Pakistan is a mixed industry of thermal, hydel and nuclear power plants
(Refer to Exhibit 15). Pakistan‘s electricity mix remains very different from the world
energy mix where coal takes the major share of 40% in electricity generation (see Exhibit
16).

Pakistan‘s installed electricity generation capacity stands at 22797 MW on June 30, 2012.
Gross electricity generation on the other hand has remained much lower (see Exhibit 17).
Share of imported electricity has an accumulated increase of 9.9% whereas gross generation
has declined by 0.6% since 200649.

As of 2012, the demand supply electricity shortfall is more than 6000 MW (see Exhibit
18).The current deficit in electricity is primarily due to non-execution of power generation
projects (especially hydel), old power generation plant that are losing efficiency, high
transmission and distribution losses (including theft) and non-availability of fuel to IPPs due
to default payments to fuel suppliers.

Meanwhile, sector wise consumption of electricity has shown great variation over the years
with overall consumption showing only an increase of 1.1% in the past six years (see Exhibit
19).

49
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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The present crisis started around 2006-2007 as a gradual increase in demand outstripped
power generation. Between 2004 and 2008 the economic boom led to a significant rise in the
demand for electricity which remained unmatched by a subsequent increase in electricity
generation capacity. Due to the failure of adding new power generation plants, the existing
power plants were inevitably overburdened to work round the clock. As a result, the exiting
power plants began to operate full time without following maintenance schedules and
optimal performance standards. These plants are now operating below full potential
contributing to power cuts and load shedding. Moreover, production of old plants in the
public sector has dropped causing a serious shortfall50.

Electricity Generation

Thermal

The majority of Pakistan's power generation is thermal, with furnace oil, high-speed diesel
and natural gas as fuels; coal is almost non-existent, contributing only 0.1% for power
generation vs. 72% in China, 56% in India and more than 50% in the USA. Natural gas,
which had the largest share as a source of fuel for thermal power generation was surpassed
by oil during the period 2011-201251 (see Exhibit 20).

During fiscal year 2008, the share of thermal power generation in the energy mix of Pakistan
was 65.31% as opposed to 68.12% in 2011-2012. The total installed capacity of thermal
power plants in the country as of June 30, 2012 was 15,454 MW- out of which thermal
power plants of 7101MW were in the public sector.

The incentives promised to IPPs in the 1994 Power Policy encouraged inefficiencies
eventually exacerbating the circular debt with WAPDA paying fixed returns for units that it
never received. However, thermal electricity generation has declined by 0.8% since 2006
owing to issues like transmission and distribution losses as well as circular debt52.

50
Afia Malik, ‗‘Power Crisis in Pakistan: A Crisis in Governance?‘‘ Pakistan Institute of Development
Economics (2012): 1-39, http://www.pide.org.pk/pdf/publications/Monograph/Monograph-4-Afia%20Malik.pdf
51
NEPRA, Industry Report 2012
52
Fahd Ali and Fatima Beg , ‗‘The History of Private Power in Pakistan,‘‘ Working Paper Series # 106, 2007,
http://www.sdpi.org/publications/files/A106-A.pdf

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Most IPPs have not been able to buy the fuel oil since PEPCO and KESC have not been
clearing their dues towards fuel suppliers and IPPs. Different power generation companies
owed Rs.113 billion to Pakistan State Oil due to unpaid bills of furnace oil for thermal power
generation. Independent Power Producers (IPPs) also received a less supply of gas by 250
million cubic feet53.

Almost 5,000MW of oil based power projects are currently in the pipeline, which combined
with the existing oil based projects, will put an unrealistic burden on the national economy.

Hydel

The installed hydel power capacity in 2012 was 6556 MW against a potential of 40,000
MW54, wasting almost 87% of the annual flow of its rivers55. The ratio of hydel to thermal
installed generation capacity has reached 28% to 68% as compared to 67% to 33% in 198556.
Hydel power provides the cheapest form of electricity with a low fuel cost as compared to
other sources (see Exhibit 21).

The Tarbell Plant (3,046 MW) serves as the largest hydel plant. Additional hydelelectric
plants in operation include Mangla (1,000 MW), Ghazi Barotha (1450 MW), Warsak (240
MW), and Chashma (184 MW). A number of other hydel power projects are also being
developed. These include Diamer Bhasha Dam and the 969 MW Neelum-Jhelum
Hydelpower Project. Besides these two, the Kurram Tangi Dam Project has also been
initiated. Neelum-Jhelum, Chakothi-Hattian project in Azad Kashmir and Kohala project on
the Jhelum and 20 such other projects were to be completed by 2010 but remain under
construction till date57. Kalabagh dam (3800 MW) is another mega project that has not been
able to take off due to political controversy. If constructed, with 3,800 MW electricity
generation capacity, it will become the largest source of electricity for Pakistan. However,

53
‗‘Expensive electricity: Daily oil bill of thermal power stations is Rs. 2 billion,‘‘ The Express Tribune, May
3, 2013, http://tribune.com.pk/story/543865/expensive-electricity-daily-oil-bill-of-thermal-power-plants-is-rs2b/
54
NEPRA- state of industry report
55
―State of Industry Report 2012‖ – National Electric Power Regulatory Authority (NEPRA)
56
NEPRA-State of Industry Report 2012
57
‗‘Only 20,000 MW can be generated through small hydropower projects,‘‘ PakTribune, May 14, 2013,
http://paktribune.com/business/news/Over-20000MW-can-be-generated-thru-small-hydelpower-projects-
11175.html

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rivalry between Sindh and KPK based on riparian rights has prevented any progress on the
dam.

44.3% of the installed hydel power capacity of the country is owned by the public sector
(WAPDA) and only 111 MW installed hydel power capacity is in the private sector58. Unlike
thermal power generation, hydel power generation is highly dependent on hydrological
variations and irrigation release requirements. In early summer, the reservoir levels are
generally low and the turbines operate at relatively low heads with consequently low power
output. In flood season, the reservoir levels are high and large discharge can be passed
through the turbines for maximum power generation. In winter, the irrigation requirements
are low and the discharge for power generation is limited resulting in lower power output.
However, the constant production of electricity, the easy stoppage and remittance of
electricity for times of high demand of power, usage of lake water for irrigation purposes, no
greenhouse gas emissions and minimal transmission losses are some of the benefits that
hydel power generation brings along.

Since 2006, Pakistan‘s hydel power generation has decreased by 2.2%59 due to maintenance
issues and damage caused during floods, which have led to non-functioning of almost 30
micro hydel power plants. Siltation 60 has also reduced the reservoir levels, affecting the
generation capacity of the dams. Tarbell Dam receives 500,000 tonnes of silt every day
meaning that it is annually deposited with the sludge of 200 million tonnes. 30 per cent of its
storage capacity has been eroded away61.

Lack of infrastructure facilities, such as access to roads in mountainous regions, resettlement

costs of affected populations and other issues such as dispute over land and territory 62 ,

58
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
59
Ibid.
60
Siltation is caused by deforestation when trees are not available to stop the silt from depositing in the
reservoirs
61
A. G. Mangrio, M. Aslam and M. Z. Ikram, ‗‘ Estimation and rapport between rainfall-runoff and sediment
load as soil loss from rawal sub- watershed (satrameel),‘‘Pakistan Journal of Agriculture, Agricultural
Engineering and Veterinary Sciences 27, no. 1 (2011): 27-38.
http://www.sau.edu.pk/sau_journal/2011/27_1/27-1full/04.pdf
62
Sindh is the lower riparian and strongest opponent of KBD and politicians presents many objections against
the proposed dam. Khyber Pakhtunkhwa says it will drown Nowshera, while Sindh says it will dry out the
downstream Sindh River.

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coupled with general inefficiency in the system 63 to implement planned projects have
contributed to the decline in the share of hydel power production64. There is also an overall
lack of funding for hydro projects from national as well as international sources owing to the
liquidity crunch, global economic crisis and political instability in the country.

Numerous promising hydel power sites have been identified in the region of Gilgit-Baltistan.
Due to low power demand in the region and absence of Extra High Voltage (EHV), Gilgit-
Baltistan is not connected to the National Grid. However, instead of developing the hydel
potential, Ministry of Water and Power has decided to construct a 765-kv transmission line to
import 1000MW from Tajikistan via Afghanistan at a much higher rate65.

All small hydel power projects up to 50MW are the responsibility of the provincial
governments, which cannot construct small hydel power projects due to financial constraints,
among other reasons. Punjab has enough financial resources yet it has made no real progress
even though WAPDA has not only identified various locations having a potential of 350MW
but also completed the necessary design works.

In India on the other hand, developing small hydel projects at a fast pace is one of the
components of their energy policy. The 520 MW Omkareshwar project on the Narmada
River has been completed in four years. The central government there has completed 90
small hydel projects with 270MW capacity in the past five years. Small hydel power projects
are taking 20 to 22 months for completion.

Nuclear Generation

The total installed capacity of nuclear power plants in 2012 was 787 MW against the total
installed electricity generation capacity of 22797 MW. The share of nuclear power plant to
the total installed generation capacity is 3.4%66.

63
Sponsors of hydel power producers who offered a tariff of 4.7 per unit under the 1997 policy were practically
blocked from developing their plants at this tariff rate and offered a much lower rate of 3.3 cents per unit in
1999.
64
Pakistan Power Sector: Report by Consulate General of Switzerland and Pakistan , October 2009
65
IUCN Pakistan Water Gateway, ‗‘Hydropower: way out of energy crisis,‘‘
http://waterinfo.net.pk/cms/?q=node/90
66
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook 2012, pp. 1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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Pakistan Atomic Energy Commission (PAEC) undertakes the projects of nuclear power
plants' development, operation and maintenance in the country. The first nuclear power plant
of the country, Karachi Nuclear Power Plant (KANUPP: 137 MW), was commissioned in
1971. After completion of its 30 years life, the Pakistan Nuclear Regulatory Authority
(PNRA) extended the operational life of this plant, by another 15 years at reduced capacity.
However, it was still producing 137 MW of electricity in 2012.

The second nuclear power plant of the country, Chashma Nuclear Power Plant
(CHASNUPP-I) was commissioned in year 2000 through an agreement by China National
Nuclear Corporation. Pakistan developed its third nuclear plant, Chashma II. The combined
installed capacity of the two combined in 2012 was 650 MW. Chashma III and IV are under
progress.

Electricity Transmission and Distribution

National Transmission and Dispatch Company Limited (NTDC) and KESC are responsible
for electricity transmission in the country. NTDC operates in the public sector while KESC
operates in private sector. When power is transmitted through power carrier lines, some
power is lost as dissipated heat during transmission.

There are 9 Distribution Companies (DISCOs) in the public sector, which are responsible for
distribution of electricity to the end consumers in Pakistan, except the area served by KESC.
KESC distributes electricity in Karachi and its suburbs. In addition to the 9 public and 2
private sector DISCOs , NEPRA has granted licenses to small producers for the supply of
electric power to designated bulk power consumers. The distribution companies in Pakistan
are responsible for channelling electricity from the transmission substations to consumers at
different distribution voltages.

The overall distribution system is overburdened, out-dated, augmented and needs to be

expanded. Over the years most DISCOs have failed to recover full amounts of billed units.
This inefficiency of DISCOs in collection of revenue from private sector (see Exhibit 22) ,
non-payment of dues by the public sector including the provincial governments and
ineffective contractual arrangements between PEPCO and KESC has snow-balled the
circular debt issue. The position of net circular debt in 2012 was Rs. 872 billion, which on

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April 16, 2010 stood at Rs. 115 billion due to federal government support in the form of
subsidy67 (see Exhibit 23).

Uncontrollable factors like global economic meltdown of 2008 and extraordinarily high oil
prices have further compounded the circular debt issue (see Exhibit 23). In order to pass on
the fuel price variations, NEPRA provided adjustments on a six-monthly basis. However the
oil prices fluctuated so rapidly that the six monthly adjustments could not support DISCOs in
their day-to-day operations. As a result DISCOs had to resort to bank borrowing which
became tougher under the liquidity position of the financial institutions whose exposure to
the power sector reached an unsustainable level. In 2012-13, the circular debt problem snow-
balled to such an extent, that the fuel suppliers found it difficult to supply fuel oil, on credit
(see Exhibit 24 for the structure of the power sector).

Transmission and Distribution (T&D) Losses

Inefficiencies and governance issues in the public sector distribution companies are
reflected in huge transmission and distribution losses68 which range from 20% to 25% as
compared to around 8% in China and just 3.6% in South Korea and 7% in OECD
countries (see Exhibit 25). No efforts have been taken to minimise theft or overcome
technical constraints such as overloading of transformers and limited capacity of
transmission lines to transfer power to consumers efficiently. These inefficiencies result in
additional unjustified cost to consumers who pay their bills or to the government in the
form of Tariff Differential Subsidy (TDS).

TDS on electricity is around Rs. 3.5 per unit provided by the government. The
government is charging an average rate of Rs. 9.0 per unit from consumers as against its
average purchase price of Rs. 12.50 per unit. The government disbursed a power subsidy
of Rs. 464 billion during fiscal year 2011-12 as against a budgeted target of Rs. 147
billion (revised target for FY12 Rs 464 billion)69.

67
Ministry of Finance
68
These losses occur due to unreliable and old-age generation plants, low voltage and distribution lines, weak
grid infrastructure, inaccurate metering and billing , default payments, un-metered supplies and more
importantly theft through illegal connections one of such ways is known as kunda systems
69
The Federation of Pakistan Chamber of Commerce and Industry, ‗‘ Summary of news appearing in National
Dailies (May 9, 2013) relating to Industry, Business, Trade & Commerce,‘‘
http://fpcci.org.pk/products/subcat_pdf_142.pdf
http://www.dailytimes.com.pk/default.asp?page=2013%5C05%5C09%5Cstory_9-5-2013_pg5_7)

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T&D losses are one of the major contributory factors for the increasing circular debt. All
DISCOs are losing about Rs 150 billion a year only because of system losses. If losses are
reduced by even 5 per cent, savings would exceed Rs 30 billion per year70.

Government Initiatives

About 3000 MW of new power generation has been added to the system in the last few years.
However there is a large quantum of suppressed demand that keeps adding onto the energy
burden. Since 2008 the GOP has doubled the tariffs and provided more than a trillion rupees
as subsidies; however the problems are still not under control71.

To address the current energy situation, the government and institutions have taken certain
initiatives. The federal government‘s initiative to overcome the power supply shortages
includes offering incentives to the IPPs to increase their share in the total energy supply. By
June 2010, about 1500 MW were in the system through power generation by IPPs and around
1000 MW is expected in the next 5 years. The federal government is also considering
upgrading the existing thermal power plants to make up for their lost capacity due to in-
adequate maintenance. In order to boost power production through hydel sources, the
government has decided to build another 960 MW plant at Tarbell Dam using existing
reservoir outflow.

The federal government had decided to induct some rental power plants in the system as a
short-term measure. Rental power plants, a popular concept used by several developed
nations, are based on used machines that can start supplying energy to the grid within six to
eight months. This however, turned out to be a huge corruption case, causing loss of billions
of rupees. Of the 19 rental power projects that the government committed to, only one
became operational as scheduled, adding only 62 megawatts of electricity to the national grid
compared to the planned 2,700MW.

On the institutional level, NEPRA has undertaken a few measures to confront the on-going
problem. NEPRA has offered additional Internal Rate of Return (IRR) for domestic coal as

70
Afia Malik, ‗‘Power Crisis in Pakistan: A Crisis in Governance?‘‘ Pakistan Institute of Development
Economics (2012): 1-39, http://www.pide.org.pk/pdf/publications/Monograph/Monograph-4-Afia%20Malik.pdf
71
Pakistan Economic Survey 2011-2012

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well as hydel resources to encourage the hydel and domestic coal use in power generation.
Further, it has initiated a program to encourage key players of the sugar industry to
participate in the power generation through its idle capacity by use of cheap indigenous
biogas. To encourage them, NEPRA has offered a tariff based on determination in one of
sugar mills to the rest of the sugar industry without going through the time consuming
process of scrutiny of their estimates. This tariff is based on 18% IRR and it is expected that
it will encourage the sugar industry to come forward and play a constructive role in adding
generation capacity to the power sector. NEPRA has also enlarged its monitoring role by
creating a Monitoring Division. In 2012, frequent visits, inspections and advisories have been
given to its licenses and relevant quarters in the GOP. DISCOs losses are also being
monitored by NEPRA on monthly and quarterly basis. International donor agencies are also
providing technical and financial assistance.

The GOP in order to provide more independence to DISCOs had decided to appoint the
Board of Directors (BoDs) from the private sector. However, this decision was opposed so
strongly that the GOP had to postpone the appointment of new CEOs. Rehabilitation work on
certain power plants had been initiated through funding provided by international agencies.
The GOP also created GENCO Holding Company Limited to oversee the performance of
GENCOs.

The government has provided Rs. 1122 billion from the budget during the last four years to
resolve the circular debt issue. However, extremely low tariff collection (90 per cent of the
billed amount) by DISCOs left a high balance as receivables. Numerous steps have been
taken such as issuance of Standard Operating Procedure (SOP) for recovery of private
receivables. Electricity disconnection policy after a limit of 45 days for payment overdue and
initiation of loss mapping in each DISCO to identify losses and their sources are some of the
other steps that the government has taken. The government has also facilitated the recovery
of dues of provincial and federal government departments, and started a media campaign for
prudent use of electricity. The government also started an energy conservancy program that
included two holidays a week, closing the markets at 8:00 pm, lighting alternate pole of the
municipalities and using air conditioners in offices after 11:00 pm72.

The government is implementing a number of priority hydel projects such as Neelum Jhelum,
1410 MW Tarbell 4th Extension, and Patrind in the private sector. Almost 96 per cent of the

72
Economic Survey 2011-2012

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work on the main dam at Mangla, spillway and allied facilities are completed and
resettlement work is in progress. Likewise 99.7 per cent work on Satpara and 72.1 per cent
on Gomal Zam dam have been completed. 7100 MW-Bunji, 4320 MW-Dasu, 80 MW
KurramTungi Dam, 740-MW Munda Dam and 4500 MW-DiamerBhasha Dam are in the
pipeline. Pakistan is one of the beneficiaries of Tetra-partner power import project under the
head of Central Asia-South Asia (CASA-1000) electricity trade. In addition, a number of
thermal projects are under implementation including the, 747 Guddu refurbishment.
However, all these developments remain slow paced (see Exhibit 26)73. Under the Power
Policy 2002, the government had planned run-of-rivers hydel power projects for adding
4,325MW of electricity, and funds were provided accordingly during the last 11 years.
However, only two major projects were completed. No relevant investigation was made.

Despite wrong decisions in the past74, federal as well as Sindh Government are now actively
pursuing providing the necessary infrastructure at Thar for exploiting these coal reserves for
power generation. Two blocs have been leased out on a pilot basis. Efforts are underway to
provide the missing transmission link between Matiari and Thar75. The Sindh Government
has also signed an agreement with Engro PowerGen for coal based power generation. Coal
mining and power generation are expected to start from 2016.

RECOMMENDATIONS TO IMPROVE ENERGY SECTOR MANAGEMENT

There is a dire need to develop and implement an integrated energy planning program. Over
the years governments have resorted to ad hoc measures taking initiatives without
considering their long term impacts on the economy and the energy sector.

According to a report by USAID, the critical need to maintain and expand the energy supply
will be vital for sustaining the expected GDP growth in the future. The two critical needs that
have been identified and are:

 Providing more energy supplies through expansion and conservation; and

73
Economic Survey 2011-2012
74
In 1997, a Chinese firm that had agreed to setup a 600 MW project at Thar for 5.79 cents per unit was forced
to quit when the authorities refused to offer a tariff of more than 5.39 cents per unit
75
Pakistan Economic Survey 2011-2012

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 Increasing access to modern energy services to un-served regions and population

groups.

The two major challenges that must be overcome to satisfy these needs are:

 Aligning economic incentives through policies, regulations, subsidies, tariffs, prices,

collections, and taxes to improve fiscal discipline and transparency, attract investment
and encourage energy conservation and efficiency improvements; and

 Creating sufficient capacity to empower stakeholders such as the Government of

Pakistan, the private sector, NGOs, and energy consumers to both implement and
respond to the incentives framework76.

To overcome the energy crisis a set of short, medium and long term initiatives can be taken
which are as follows:

Short Term Measures

 Conservation and demand management: Media campaigns should be launched to

educate private and public entities to reduce wastage of gas and electricity.

 Prompt implementation of tariffs determined by NEPRA: Government does not pass

on cost that occurs due to fuel price increases. It should implement the tariff
determined by NEPRA so DISCOs are able to cover the difference between their cost
and revenue.

 Ensure recovery of revenues from the public sector: Ministry of Finance should
allocate a particular amount for federal organisations to clear their bills and should
take strict action against any default.

 Control electricity theft: Strict measures should be taken against those who steal gas
and electricity.

76
Gordon Weynand, ‗‘Energy Sector Assessment for USAID/Pakistan,‘‘ USAID (June 2007):
http://pdf.usaid.gov/pdf_docs/PNADN955.pdf

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Medium Term Measures

 Efficiency improvement: Old and inefficient transmission and distribution systems

should be refurbished

 Promote alternate energy resources

 Develop a comprehensive and integrated energy policy: The policy should

particularly cover allocation, regulation and pricing of energy and identify least cost
options for prioritisation. The energy policy should include plans such as the
following :

 Build dams

 Manage gas load and re-allocate its proportion among the transport,
domestic, commercial, industrial and power generation sectors

 Exclusive integrated coal mining and power generation policy and

establish an independent agency to exploit the coal reserves

 Formation of a single energy ministry

Long Term Measures

 Correct the energy mix balance: Efforts should be made to shift focus from thermal
based energy mix to hydel based. Efforts to utilise the Thar coal reserves as well as to
explore and develop indigenous gas reserves should be undertaken. The Iran Gas
pipeline should be pursued.

 Improve governance to implement the above mentioned strategies77.

Apart from this, in order to make the industry viable it is important to completely overhaul
the tariff structure to ensure cost recovery. Also DISCOs must be privatised while investment
77
‗‘Solutions for Energy Crisis in Pakistan,‘‘ Islamabad Policy Research Institute, 2013
http://ipripak.org/books/secp.pdf

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needs in the distribution network must be addressed immediately. It is also important to re-
structure the pricing system where for different quality of service different premiums may be
charged. Further, all energy resources (oil, gas, coal, water, nuclear, renewable) should be
under one roof. Plans should be driving activities rather than events shaping the plans. Cross
subsidies of fuels give wrong market signals and create inefficiencies. Hence, priority must
be given to the most efficient use of these limited resources; that is how maximum power
will be derived from a limited resource. Further, key industry players must be involved in the
planning process to devise long term plans to work towards a different fuel mix, letting the
market forces work, and demonstrating political will.

Moreover, provinces have to supplement efforts of the federal government on increasing

generation. Constitution Article 157 (2) (c) gives latitude to provinces to build plants and
NEPRA Act Article 7(4) gives them authority to set their own tariffs for use within the
provinces. Focus has to be on smaller and medium size projects under the present financial
conditions. More distributed and small power generation systems may be used efficiently. All
local fuel needs should be utilised regardless of the size of the projects.

Despite the above mentioned initiatives and several other plans and strategies on paper, the
energy sector has failed to emerge from critical problems. One of the reasons for this is that
planning is not backed by budgetary support, implementation and monitoring plans and
timely feedback. International project financing has also decreased due to the recent global
financial crisis. Further, political and economic instability has also discouraged commercial
lenders from entering into large project finance agreements78.

78
Interview with Mr. Nadeem Babar – CEO Orient Power Company

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 16-295-2014-2

Exhibit 1
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Annual Growth in GDP, Energy Consumption and Supply

Annual 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Growth

GDP 6.8% 4.1% 1.2% 3.1% 3.0% 3.7%

Energy 6.07% 9.46% -5.25% 3.81% 0.91% 3.05%

Consumption

Energy 4.42% 3.78% -0.56% 0.83% 2.27% 0.32%

Supply

Sources: Growth and Investment, PDF,

http://www.finance.gov.pk/survey/chapter_10/01_Growth_and_Investment.pdf
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook
2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 2
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Primary Energy Supplies by Source (TOE)

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

(TOE)
18,188,28 19,206,441 20,103,060 19,806,314 20,674,840 19,958,483 1.90%
Oil
30.00% 30.50% 32.10% 31.40% 32.00% 30.80%
(% share)
29,324,316 29,874,989 30,255,885 30,808,523 30,683,357 32,033,074 1.80%
Gas
48.40% 47.50% 48.30% 48.80% 47.60% 49.50%
(% share)
470,998 418,952 401,705 395,583 339,633 321,214 -7.40%
LPG
0.80% 0.70% 0.60% 0.60% 0.50% 0.50%
(% share)
4,426,678 5,783,844 4,732,823 4,621,639 4,350,868 4,285,400 -0.60%
Coal
7.30% 9.20% 7.60% 7.30% 6.70% 6.60%
(% share)
7,626,755 6,851,955 6,631,841 6,705,533 7,593,074 6,806,704 -2.20%
Hydel
Electricity
12.60% 10.90% 10.60% 10.60% 11.80% 10.50%
(% share)
546,159 734,537 386,165 690,821 816,370 1,256,791 18.10%
Nuclear
Electricity
0.90% 1.20% 0.60% 1.10% 1.30% 1.90%
(% share)
40,781 47,550 54,266 59,537 64,093 65,515 9.90%
Imported
Electricity
(% share) 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%

Total 60,623,966 62,918,268 62,565,745 63,087,952 64,522,235 64,727,181 1.30%

Annual 4.42% 3.78% -0.56% 0.83% 2.27% 0.32%

Growth
Rate

Sources: Growth and Investment, PDF,

http://www.finance.gov.pk/survey/chapter_10/01_Growth_and_Investment.pdf
Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy Yearbook
2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 3 (p1 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

World Energy Mix

Percentage Share

Hydel 2.2%

Bio Mass 10.5%

Natural Gas 20.9%

Oil and Derivatives 34%

Nuclear 5.9%

Coal 26.5%

Source: ‘’Brazil: Courting Risk and Reward,’’ Urban Times,

http://urbantimes.co/magazine/2012/03/brazil-energy-policy-ethanol-or-fossil-fuel/

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 16-295-2014-2

Exhibit 3 (p2 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

World Energy Consumption by Sector

Sector % Share

Industrial 51.7 %

Transport 26.6 %

Residential 13.9 %

Commercial 7.8 %

Source: Al Bredenberg, ‘’The Damage Done in Transportation- Which Energy Source

Will Lead to the Greenest Highways?’’ Thomasnet News, April 30, 2012,
http://news.thomasnet.com/green_clean/2012/04/30/the-damage-done-in-transportation-
which-energy-source-will-lead-to-the-greenest-highways/

-32-
 16-295-2014-2

Exhibit 4 (p1 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Primary Energy Consumption by Source (TOE)

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

10,575,33 11,528,722 10,842,614 10,829,455 11,252,938 11,617,788

Oil
1.90%
(% share) 29.40% 29.30% 29.00% 27.90% 29.00% 29.00%

14,701,024 15,881,990 16,307,898 17,024,933 16,781,247 17,618,199

Gas
3.70%
(% share) 40.80% 40.30% 43.70% 43.90% 43.20% 44.00%

Coal 4,149,041 5,404,715 3,893,001 4,282,061 4,025,380 4,057,678

-0.40%
(% share) 11.50% 13.70% 10.40% 11.00% 10.40% 10.10%

Electricity 5,921,635 5,977,697 5,731,032 6,054,921 6,278,947 6,251,421

1.10%
(% share) 16.40% 15.20% 15.30% 15.60% 16.20% 15.60%

LPG 658,225 619,944 569,995 576,631 503,272 481,064

-6.10%
(% share) 1.80% 1.60% 1.50% 1.50% 1.30% 1.20%

Total 36,005,255 39,413,069 37,344,540 38,768,001 38,841,783 40,026,149

2.10%

Annual
Growth
6.07% 9.46% -5.25% 3.81% 0.19% 3.05%
Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 4 (p2 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Primary Energy Consumption by Sector (TOE)

Source 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 ACGR

Domestic 7,605,145 8,046,294 8,092,132 8,360,016 8,724,790 9,360,514

4.20%
% share 21.1% 20.4% 21.7% 21.6% 22.5% 23.4%

Commercial 1,377,247 1,455,527 1,459,817 1,530,154 1,521,171 1,585,498

2.90%
% share 3.8% 3.7% 3.9% 3.9% 3.9% 4.0%

Industrial 15,792,049 16,804,303 14,845,670 15,604,871 14,956,785 15,034,116

-1.00%
% share 43.9% 42.6% 39.8% 40.3% 38.5% 37.6%

Agriculture 767,266 803,837 789,008 849,595 772,930 720,393

-1.30%
% share 2.1% 2.0% 2.1% 2.2% 2.0% 1.4%

Transport 9,721,183 11,567,394 11,371,869 11,654,834 12,019,250 12,562,448

5.30%
% share 27% 29.3% 30.5% 30.1% 30.9% 31.4%

Other govt. 742,364 735,712 786,045 768,531 846,857 763,183

0.60%
% share 2.1% 1.9% 2.1% 2.0% 2.2% 1.9%

Total: 36,005,255 39,413,069 37,344,540 38,768,001 38,841,783 40,026,151 2.10%

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 5
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Natural Gas Production By Province

Province 2006-07 2007-08 2008-09 2009-10 2010-11 2012-11 AGGR

Balochistan 6,508,590 6,460,384 6,125,752 5,781,545 5,564,652 5,672,964 -1.40%

KPK 633,292 658,731 811,610 1,863,231 3,132,778 3,434,509 38.80%

Punjab 1,567,688 1,679,165 1,678,687 1,564,535 1,579,378 1,674,670 2.00%

Sindh 20,588,060 21,077,289 21,643,082 21,603,127 20,389,591 21,257,380 1.00%

Total 29,327,630 29,875,569 30,259,132 30,812,438 30,666,399 32,039,523 2.00%

Annual
Growth 0.97% 2.87% 0.45% 1.52% 0.76% 5.92%
Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 6 (p1 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Natural Gas Consumption by Sector (TOE)

Sector 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

Domestic 4,341,475 4,774,412 5,010,247 5,133,540 5,434,507 6,128,822

7.1%
(% share) 16.5% 17.3% 18.3% 18.6% 20.4% 22.3%

Commercial 734,180 793,367 831,547 864,747 853,313 927,272

4.8%
(% share) 2.79% 2.88% 3.04% 3.14% 3.2% 3.37%

Gen Industries 6,791,013 7,152,491 7,137,980 7,499,138 6,545,378 6,693,679

-0.3%
(% share) 25.8% 26% 26.1% 27.2% 24.6% 24.3%

Pak Steel Mill 383,432 395,483 326,687 304,949 279,653 236,925

-9.2%
(% share) 1.46% 1.44% 1.2% 1.11% 1.05% 0.86%

Cement 343,646 298,025 170,927 45,490 32,240 29,629

-38.7%
(% share) 1.31% 1.08% 0.63% 0.17% 0.12% 0.11%

Fertilizer (as 2,989,825 3,145,626 3,186,253 3,421,523 3,350,683 3,157,367

feedstock 1.9%

(% share) 11.4% 11.4% 11.7% 2.4% 12.6% 11.5%

Fertilizer (as fuel 786,437 782,979 765,787 860,424 990,662 817,280

use) 1.4%

(% share) 2.99% 2.85% 2.8% 3.12% 3.72% 2.97%

Power 8,640,208 8,491,536 7,830,065 7,106,962 6,493,766 6,732,876

-3.7%
(% share) 32.8% 30.9% 28.7% 25.8% 24.4% 24.5%

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 16-295-2014-2

Exhibit 6 (p2 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Transport- 1,320,841 1,685,232 2,064,722 2,316,646 2,645,493 2,784,591

CNG 16.1%

(% share) 5.02% 6.12% 7.56% 8.41% 9.94% 10.1%

Total 26,331,057 27,519,152 27,324,216 27,553,419 26,625,696 27,508,442 1.1%

Annual Growth -0.07% 4.45% -0.45% 0.66% -2.91% 3.83%

Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 7 (p1 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Natural Gas Prices

Source: Brazil’s MME (2012), ARSEP (2012), UK DECC (2012), BERC, OGRA

Components $/MM Btu

Producers price (net of royalty) 3.76

Royalty (12.5%) 0.54

Wellhead price 4.3

Excise Duty 0.09

T&D costs 0.37

Return on Assets 0.23

Other incomes/equalization -0.18

-38-
 16-295-2014-2

Exhibit 7 (p2 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Gas Price Breakup

Prescribed price 4.8

GDS (Gas Development Surcharge) 0.05

Notified Consumers Price 4.85

General Sales Tax 0.78

Consumer Price 5.63

Price Break-up

Producers Price 3.76

T&D costs and other incomes 0.42

Taxes 1.44

Average Consumer Price 5.63

Source: Ieda Gomes, ‘’Natural Gas in Pakistan and Bangladesh: current issues and
trends,’’ Oxford Institute for Energy Studies, NG 77 (2013): 1-80.
http://www.oxfordenergy.org/wpcms/wp-content/uploads/2013/06/NG-77.pdf

-39-
 16-295-2014-2

Exhibit 8
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Import Billion (Million US$)

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Petroleum 3,671.36 6205.97 5197.00 6144.59 8507.11 9430.00

Products

Crude Oil 3776.74 5740.86 4243.71 3850.51 4685.89 5119.78

Total Import Bill 7,448.10 11,946.83 9,440.71 9,995.10 13,193.00 14,549.78

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

-40-
 16-295-2014-2

Exhibit 9 (p1 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Crude Oil and Petroleum Product Supply (TOE)

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Local
10,613,340 11,072,733 10,114,753 9,286,508 9,205,191 8,681,800
Supply

Annual
-1.76% 4.27% -8.61% -8.47% -0.94% -5.80%
Petroleum Growth
Products Rate

Supply Imports 8,422,347 9,157,914 10,093,801 11,321,256 12,500,572 11,623,500

Annual
Growth 38.61% 8.35% 10.52% 12.07% 10.67% -6.98%
Rate

Local
3,302,216 3,434,811 3,224,215 3,180,326 3,225,269 3,296,661
Production

Annual
Growth 2.84% 3.73% -5.87% -1.36% 1.41% 1.93%
Crude Oil
Rate
Supply
Imports 8,504,072 8,708,331 8,333,105 7,121,119 6,883,073 6,319,342

Annual
Growth -4.35% 2.40% -4.31% -14.54% -3.34% -8.19%
Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

-41-
 16-295-2014-2

Exhibit 9 (p2 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Petroleum Products Consumption by Sector (TOE)

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

Domestic 109,502 124,781 100,403 93,157 88,148 81,957

-5.60%
(% share) 0.64% 0.68% 0.55% 0.48% 0.46% 0.43%

Industrial 1,623,346 1,082,885 977,451 998,396 1,356,404 1,423,423

-2.30%
(% share) 9.47% 5.87% 5.36% 5.14% 7.07% 7.48%

Agriculture 101,406 113,889 72,710 60,499 42,294 24,271

-24.90%
(% share) 0.59% 0.62% 0.40% 0.31% 0.22% 0.13%

Transport 8,399,371 9,881,537 9,306,722 9,338,001 9,373,686 9,777,775

3.00%
(% share) 49% 53.60% 51.10% 48.10% 48.90% 51.40%

Power 6,566,628 6,910,062 7,384,157 8,601,831 7,932,662 7,409,913

2.40%
(% share) 38.30% 37.50% 40.50% 44.30% 41.30% 38.90%

Other 341,705 325,631 385,328 339,403 392,406 310,362

Govt. -1.90%

(% share) 1.99% 1.77% 2.11% 1.75% 2.05% 1.63%

Total 17,141,959 18,438,785 18,226,771 19,431,286 19,185,600 19,027,701 2.10%

Annual
Growth 15.18% 7.32% -0.94% 6.81% -1.28% -1.10%
Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

-42-
 16-295-2014-2

Exhibit 10
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

PSO Receivables

Receivable from Amount

PIA Rs. 2,855 million

KESC Rs. 6, 973million

OGDCL Rs. 404 million

Pakistan Railway Rs. 1,357 million

WAPDA Rs. 54,817 million

HUBCO Rs. 102 , 854 million

KAPCO Rs. 29,896 million

Audited Price Differential Claim Rs. 1,382 million

(HSD)

Price Differential on LSFO/HSFO Rs. 3,407 million

Price differential under GLAMP Rs. 8,612 million

& NDTC –KESC

Source: USAID Report Circular Debt 2013

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 16-295-2014-2

Exhibit 11 (p1 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Coal Supply (TONNES)

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

Punjab 508,168 553,453 571,493 591,420 620,245 624,285 4.20%

(% share) 13.95 13.42 15.29 16.99 17.98 17.28

Baluchistan 1,831,289 2,268,623 2,057,309 1,503,013 1,342,059 1,335,387 -6.10%

(% share) 50.27 55.01 55.04 43.18 38.90 36.96

Sindh 999,902 1,058,862 840,526 1,200,031 1,100,500 1,258,188 4.70%

(% share) 27.45 25.68 22.49 34.48 31.90 34.83

KPK/FATA 303,504 242,969 268,794 186,210 387,287 394,943 5.40%

(% share) 8.33 5.89 7.19 5.35 11.23 10.93

Total 3,642,863 4,123,907 3,738,122 3,480,674 3,450,091 3,612,803 -0.20%

(Tonnes)

(TOE) 1,629,817 1,845,036 1,672,436 1,557,254 1,543,571 1,616,368

Annual
Growth -25.22% 13.21% -9.35% -6.89% -0.88% 4.72%
Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

-44-
 16-295-2014-2

Exhibit 11(p2 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Coal Imports (Tonnes)

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

Tonnes 4,251,195 5,986,940 4,651,751 4,657,829 4,267,058 4,056,897 -0.90%

TOE 2,796,861 3,938,808 3,060,387 3,064,386 2,807,297 2,669,033

Import
Value
15,720 36,210 47,321 34,937 44,832 50,367
(Million
Rs.)

Annual
growth
49.54% 40.83% -22.30% 0.13% -8.39% -4.93%
rate of
imports

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

-45-
 16-295-2014-2

Exhibit 12
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Coal Consumption by Sector (TOE)

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

Domestic
445 447 364 0 0 0
(% share)
0.01% 0.01% 0.01%
Brick Kiln
1,466,341 1,682,540 1,465,141 1,344,523 1,343,812 1,390,608
Ind.
-1.10%
(% share)
33.13% 29.09% 30.96% 29.09% 30.89% 32.45%
Cement/Other
2,682,255 3,721,727 2,427,497 2,937,538 2,681,567 2,667,070
0.20%
(% share)
60.59% 64.35% 51.29% 63.56% 61.63% 62.24%
Pak Steel
204,087 306,560 789,480 283,438 282,320 180,923
-2.40%
(% share)
4.61% 5.30% 16.68% 6.13% 6.49% 4.22%
Power
73,551 72,568 50,341 56,141 43,169 46,800
(WAPDA)
-8.60%
(% share)
1.66% 1.25% 1.06% 1.21% 0.99% 1.09%
Total
4,426,678 5,783,844 4,732,823 4,621,639 4,350,868 4,285,400 -0.60%
Annual
2.33% 28.08% -17.02% -3.00% -5.18% -0.61%
Growth Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, pp.1-125,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

-46-
 16-295-2014-2

Exhibit 13
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Key Players in the Energy Sector

Source: Syed Sajid Ali and Sadia Badar, ‘’ Dynamics of Circular Debt in Pakistan
and Its Resolution,’’ The Lahore Journal of Economics 15. (2010):61-74,
http://www.lahoreschoolofeconomics.edu.pk/JOURNAL/LJE%2015,%20SE/04%20
Syed%20Sajid%20EDITED%20TTC%2011-10-10.pdf

-47-
 16-295-2014-2

Exhibit 14 (p1 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Oil and Gas Sector

Pakistan Oil and Gas Sector

Upstream Mid-Stream Downstream

Function Exploration and Oil Refineries and Gas Marketing and Distribution
Production Companies Transportation Companies
Companies

OGDCL, PPL,POL, PARCO, NRL, ARL, PSO, SHELL, CALTEX,

Companies Mari Gas, OMV, ENI, PRL, SNGPL, SSGCL AOC, SNGPL, SSGCL
MOL, BHP

Key facts of major companies (2012)

% Share of % Share of
Date Oil Gas Key Function Operation Other Info
Production Production

-National oil & gas NOC-joint -listed on all

company of Pakistan ventures and three stock
partnerships exchanges
-Flagship of the with IOCs in Pakistan
country‘s E&P sector. and also on
OGDCL 1961 57% 25% the London
-Local market leader in
Stock
terms of reserves,
Exchange
production and
since
acreage.
December
2006.

-Exploration & NOC-joint

Production ventures and
PPL 1950 10% 18%
partnerships
with IOCs

0.5% 11 % -Exploration & IOC ( Italy)

ENI
Production

-Exploration & IOC

OMV negligible 9%
Production (Australia)

-48-
 16-295-2014-2

Exhibit 14 (p2 of 2)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Oil and Gas Sector

- - - -Leading oil marketing NOC-joint 74% of

entity with -Most wide- ventures and Pakistan‘s
spread retail network in partnerships total storage
the country --Major with IOCs capacity.
fuel supplier to aviation,
PSO
railways, power
projects, armed forces,
marine and agriculture
sectors

Sources: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
Company Websites

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 16-295-2014-2

Exhibit 15
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Installed Capacity

2007 2008 2009 2010 2011 2012

Hydel (WAPDA + 6,479 6,480 6,481 6,481 6,481 6,556

AKHJEB)

Thermal(WAPDA) 4900 4900 4900 4900 4900 4720

Thermal(KESC) 1756 1756 1,955 1,955 1,946 2,381

Thermal (IPPs) 5,822 5,822 5,987 7,123 8,363 8,353

Nuclear 462 462 462 462 787 787

Total 19,420 19,420 19,786 20,922 22,477 22,797

Sources: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
NEPRA Industry Report 2012

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Exhibit 16
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Pakistan Electricity Mix

Pakistan Electricity Mix World Electricity Mix

Coal 0.1 % 40 %

Gas 29.0 % 19 %

Nuclear and Imported 5.8 %( Nuclear + Imported) 16% (Only Nuclear)

Hydel 29.9 % 16%

Oil 35.2 % 7%

Sources: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
NEPRA Industry Report 2012

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Exhibit 17
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Electricity Generation

2007-08 2008-09 2009-10 2010-11 2011-12

PEPCO KESC PEPCO KESC PEPCO KESC PEPCO KESC PEPCO KESC

Installed Capacity

Thermal 10,958 2,257 11,142 2,397 12,067 2,530 13,448 2,447 13,028 3,007

Nuclear 325 137 325 137 325 137 650 137 650 137

Total 11,283 2,394 11,467 2,534 12,392 2,667 14,098 2,584 13,678 3,144

Available Capacity

Thermal 6,564 1,644 9,353 1,854 1,411 2,018 11,865 1,787 11,271 2,287

Nuclear 296 n/a 300 80 300 82 615 84 615 84

Total 6,860 1,644 9,653 1,934 10,711 2,100 12,480 1,871 11,886 2,371

Available Percentage of Installed Capacity

Thermal 59.90 72.84 83.94 77.35 86.28 79.76 88.23 73.03 86.51 76.06

Nuclear 91.08 n/a 92.31 58.39 92.31 59.85 94.62 61.31 94.62 61.31

Total 60.80 68.67 84.18 76.32 86.43 78.74 88.52 72.41 86.90 75.41

Sources: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
NEPRA Industry Report 2012

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Exhibit 18
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Electricity Surplus/Deficit

Actual Figures

Year Ending 30th Generation Demand during Peak Surplus/Deficit (MW)

June Capability (MW) hours

NTDC KESC* NTDC KESC NTDC KESC*

2008 12,442 2,265 16,838 2,443 -4,396 -178

2009 13,637 2,403 17,852 2,462 -4,215 -59

2010 12,751 2,393 18,467 2,562 -5,716 -169

2011 13,193 2,237 18,521 2,565 -5,328 -328

2012 13.733 2,371 20,058 2,564 -6,325 -193

Projected Figures

Planned Projected Projected Surplus/Deficit

Generation Demand Demand during (MW)
Capability Growth Rate Peak hours
(%)

NTDC KESC* NTDC KESC NTDC KESC* NTDC KESC*

2013 21,299 2,371 7.42 5.00 24,126 2,692 -2,827 -321

2014 21,668 2,419 7.43 5.00 25,918 2,827 -4,250 -408

2015 30,510 2,437 7.70 5.00 28,029 2,968 2481 -531

2016 20,352 2,737 5.50 5.00 24,018 3,116 -3,666 -379

2017 24,075 - 5.50 - 25,352 - -1,277 -

*includes own generation and imported sources

Source: NEPRA Industry Report 2012

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 16-295-2014-2

Exhibit 19
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Electricity Consumption by Sector (TOE)

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

Domestic 2,714,814 2,744,868 2,629,079 2,791,112 2,922,446 2,898,379

1.30%
(% share) 48.58% 45.92% 45.87% 46.10% 46.54% 46.36%

Commercial 436,727 453,782 427,686 456,506 470,899 468,612

1.40%
(% share) 7.38% 7.59% -7.46% -7.54% -7.50% -7.50%

Industrial 1,715,579 1,688,171 1,574,199 1,614,415 1,727,068 1,775,501

0.70%
(% share) 28.97% 28.24% 27.47% 26.66% 27.51% 28.40%

Agriculture 665,861 689,948 716,297 789,095 730,636 696,122

0.90%
(% share) 11.24% 11.54% 12.50% 13.03% 11.64% 11.14%

Street Light 31,506 33,789 35,006 37,288 37,142 38,888

4.30%
(% share) 0.53% 0.57% -0.61% 0.62% 0.59% 0.62%

Traction 971 625 425 186 71 81

-39.10%
(% share) 0.02% 0.01% 0.01% 0.00% 0.00% 0.00%

Bulk 345,798 353,620 340,146 359,753 384,014 366,676

Supplies 1.20%

(% share) 5.84% 5.92% 5.94% 5.94% 6.12% 5.87%

Other Govt. 10,380 12,893 8,194 6,564 6,671 7,161

-7.20%
(% share) 0.18% 0.22% 0.01% 0.11% 0.11 0.11%

Total 5,921,635 5,977,697 5,731,032 6,054,921 6,278,947 6,251,421 1.10%

Annual
Growth 7.56% 0.95% -4.13% 5.65% 3.70% -0.44%
Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 20
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Thermal Power Generation

Source 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

6,566,628 6,910,062 7,384,157 8,601,831 7,932,662 7,409,913 2.40%

Oil
(42.97%) (44.66%) (48.37%) (54.56%) (54.82%) (52.22%)

8,640,208 8,491,536 7,830,065 7,106,962 6,493,766 6,732,876 -4.90%

Gas
(56.54%) (54.88%) (51.30%) (45.08%) (44.88%) (47.45%)

73,551 72,568 50,341 56,141 43,169 46,800 -8.60%

Coal
(0.48%) (0.47%) (0.33%) (0.36%) (0.30%) (0.33%)

15,280,387 15,474,167 15,264,564 15,764,934 14,469,597 14,189,589 -1.50%

Total

Annual
7.95% 1.27% -1.35% 3.28% -8.22% -1.94%
Growth
Rate

Source: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf

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 16-295-2014-2

Exhibit 21
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Source Wise Power Generation and Fuel Cost (2011-2012)

Source Generation (%) Fuel Cost (Rs./KwH)

Hydel 31.92% 0.16

Coal 0.07% 3.12

HSD 1.64% 18.89

RFO 34.18% 15.94

Gas 26.12% 4.24

Nuclear 4.92% 1.13

Import 0.33% 8.99

Mixed 0.81% 12.78

Wind Power 0.01% 9.12

Source: NEPRA Industry Report 2012

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 16-295-2014-2

Exhibit 22
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

DISCO’S Recovery of Electricity Bills (2011-2012)

DISCO Unit Billed Amount of Amount % Recovery to

(GWh) Billed Unit Realized Billed amount
(Million Rs) (Million Rs)

PESCO
(including 8,528 79,594 54,042 67.90%
TESCO)

IESCO 7,537 74,987 71,874 95.85%

GEPCO 6,178 61,591 60,643 98.46%

LESCO 14,467 157,111 151,033 96.13%

FESCO 8,580 85,562 84,240 98.45%

MEPCO 10,049 98,264 95,559 97.25%

HESCO 3,381 32,054 22,155 69.12%

SEPCO 2,226 29,434 15,726 53.43%

QESCO 4,086 34,027 12,302 36.15%

KESC 10,279 114,350 101,430 88.7%

Source: NEPRA Industry Report 2012

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 16-295-2014-2

Exhibit 23 (p1 of 3)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Payment Flow

Source: Syed Sajid Ali and Sadia Badar, ‘’ Dynamics of Circular Debt in Pakistan
and Its Resolution,’’ The Lahore Journal of Economics 15. (2010):61-74,
http://www.lahoreschoolofeconomics.edu.pk/JOURNAL/LJE%2015,%20SE/04%20
Syed%20Sajid%20EDITED%20TTC%2011-10-10.pdf

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 16-295-2014-2

Exhibit 23 (p2 of 3)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Circular Debt (Billion Rupees)

Source: USAID, 2013, The Causes and Impacts of Power Sector Circular Debt in
Pakistan, pp. 1-42, http://www.pc.gov.pk/hot%20links/2013/Final_USAID-
Pakistan%20Circular%20Debt%20Report-Printed%20Mar%2025,%202013.pdf

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 16-295-2014-2

Exhibit 23 (p3 of 3)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Trend in Oil Prices

Source: WcP.Watchful.Eye, ‘’ Alarming charts: oil price spike since 2003 - petroleum is
vital to industrialized civilization, the global economy as a whole,’’WcP Blog- World
Culture Pictorial (blog), June 26, 2008,
http://www.worldculturepictorial.com/blog/content/alarming-charts-oil-price-spike-
2003-petroleum-vital-industrialized-civilization-global-econ

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 16-295-2014-2

Exhibit 24
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Structure of Power Sector

Agency Generation Transmission Distribution

LESCO
Wapda+ AJKHEB 14+6 Hydel**
KESC
GEPCO
Transmission
NTDC FESCO
PEPCO 4 GENCOs
IESCO
NTDC
MEPCO
IPPS 39 Units*
PESCO
HESCO
PAEC 2 Units
QESCO
TESCO
KESC 4 Units KESC
Transmission
KESC Distribution

Sources: Hydrocarbon Development Institute of Pakistan, 2013, Pakistan Energy

Yearbook 2012, p.3,
http://www.kpkep.com/documents/Pakistan%20Energy%20Yearbook%202012.pdf
NEPRA State of Industry Report 2011

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 16-295-2014-2

Exhibit 25
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Transmission and Distribution Losses (as of Net Supply of Electricity)

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ACGR

T&D
Losses 23.2% 20.3% 21.6% 20.3% 16.6% 17.3% -5.7%

Total Units Sold, Purchased and Losses

Total Units Total Units Sold Loss Incurred

DISCOS (as on
purchased (GWh)
30th June 2012)
through NTDC (GWh) %
+CPPS (GWh)

PESCO 13,101 8,528 4,573 65.19%

IESCO 8,331 7,537 794 9.53%

GEPCO 6,959 6,178 781.37 11.23%

LESCO 16,727 14,467 2,260 13.51%

FESCO 9,616 8,580 1,036 10.77%

MEPCO 12,456 10,049 2,407 19.33%

HESCO 4,679 3,381 1,298 27.74%

SEPCO 4,398 2,226 2,172 49.39%

QESCO 5,159 4,086 1,073 20.8%

Total in PEPCO 77,028 62,805 14,223 18.46%

system

KESC 15,259 10,279 4,980 32.64%

Source: NEPRA, State of Industry Report 2012

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 16-295-2014-2

Exhibit 26 (p1of 3)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Development in Hydel Power Projects

Project River Capacity (MW) Completion Date

Diamer Bhasha Indus 4500 2018-2019

Bunji Indus 7100 2023-2024

Yulbo Indus 2800 2027-2028

Bhasho Bhasho 28 2014-2015

Phandar Ghizar 80 2015-2016

Harpo Harpo 33 2014-2015

Kohala Jhelum 1100 2016-2017

Neelum-Jhelum Neelum 969 2015-2016*

Dhudinal Neelum 800 2025-2026

Details of incomplete hydel projects

Capacity Project Cost Completion Reason for delay

Project (MW) PC-1 (Rs. Date
Million)
-Inadequate release of funds
Gomal Zam 17.4 12,829.000 Oct 2010
Dam -Security Issues

-Inadequate release of funds

-Contractual issues
Mangla Dam 120 62,553.000 Dec 2009
Raising -Resettlement issues are
being settles with AJK govt.

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 16-295-2014-2

Exhibit 26 (p2 of 3)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Development in Hydel Power Projects

Satpara Dam 17.3 4,480.021 July 2010 - Inadequate release of funds

Allai - Inadequate release of funds

121 8,577.624 Oct 2011
Khawar -Contractual technical issues

Khan - Inadequate release of funds

72 8,301.479 April 2010
Khawar -Contractual issues

Duber - Inadequate release of funds

130 16,234.476 August 2011
Khawar -Contractual technical issues

Jinnah 95 13,456.800 May 2011 -Contractual technical issues

Neelum
969 Nov 2016
Jhelum*

Source: Private Power and Infrastructure Board, PDF, [p.8],

[www.ppib.gov.pk/Major_Hydro_Projects.pdf]

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 16-295-2014-2

Exhibit 26 (p3 of 3)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Hydel Power Potential

Source: Private Power and Infrastructure Board, PDF, [p.8],

www.ppib.gov.pk/Major_Hydro_Projects.pdf

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APPENDIX A (p1 of 3)

ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL

AND RISING COSTS

Comparison of Energy Sources

Source Advantages Disadvantages

High initial investment

Non-polluting Supplemental energy may be needed in low

sunlight areas
Solar Most abundant energy source available
Energy Requires large physical space for PV cell
Systems last 15-30 years
panels

Limited availability of polysilicon for panels

No emissions Output is proportional to wind speed

Affordable Not feasible for all geographic locations

Wind
Energy Little disruption of ecosystems High initial investment/on-going maintenance
costs
Relatively high output
Extensive land use

No emissions Environmental impacts by changing the

environment in the dam area
Reliable
Hydel Hydelelectric dams are expensive to build
Power Capable of generating large amounts of
power Dams may be affected by drought

Output can be regulated to meet demand Potential for floods

Widely available Transportation costs are high

Cleanest-burning fossil fuel Lack of infrastructure makes gas resources

unavailable from some areas
Often used in combination with other
Natural fuels to decrease pollution in electricity Burns cleanly, but still has emissions
Gas generation
Pipelines impact ecosystems
Made safe by adding artificial odour so
that people can easily smell the gas in
case of a leak

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APPENDIX A (p2 of 3)

ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL

AND RISING COSTS

Comparison of Energy Sources

Efficient transportation fuel for the world High CO2 emissions

Basis of many products, from Found in limited areas

prescription drugs to plastics
Supply may be exhausted before natural
Petroleum
Economical to produce gas/coal resources

Easy to transport Possible environmental impact from

drilling/transporting

Abundant supply Source must be near usage to cut transportation

costs
Fewer emissions than fossil fuel sources
Emits some pollution as gas/liquid waste
Can be used in diesel engines
Biomass
Increases emissions of nitrogen oxides, an air
Auto engines easily convert to run on pollutant
biomass fuel
Uses some fossil fuels in conversion

Abundant supply Emits major greenhouse gases/acid rain

Currently inexpensive to extract High environmental impact from mining and

Coal
burning, although cleaner coal-burning
Reliable and capable of generating large technology is being developed
amounts of power
Mining can be dangerous for miners

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APPENDIX A (p3 of 3)
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Comparison of Energy Sources

No greenhouse gases or CO2 Higher capital costs due to safety,

emissions emergency, containment, radioactive
waste, and storage systems
Efficient at transforming energy into
electricity Problem of long-term storage of
radioactive waste
Uranium
Uranium reserves are abundant
Heated waste water from nuclear plants
harms aquatic life
Refuelled yearly (unlike coal plants
that need trainloads of coal every
day) Potential nuclear proliferation issue

Minimal environmental impact Geothermal fields found in few areas

around the world

Efficient
Expensive start-up costs
Geo
Thermal Power plants have low emissions
Wells could eventually be depleted

Low cost after the initial investment

Source: energy4me, ‘’Energy Source Comparison,’’ http://www.energy4me.org/energy-

facts/

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APPENDIX B
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS

Pakistan’s Economy at a Glance (2010-2012)

 Largest sector of the economy employing over 44.7

per cent of the total employed labour force.
Agriculture
 3.1 per cent growth rate for the fiscal year 2011-
2012.

 Second largest sector of the economy

 Growth rate of 3.6 per cent for the fiscal year 2011-
Manufacturing 2012

 Severely affected by energy crisis, deteriorating

law and order situation and rupee devaluation.

 Inflation has declined for the third consecutive

year.
Inflation
 CPI was 10.8 per cent during July-April, 2012
from a high of 25 per cent in October 2008.

 FDI stood at $ 668 million during July-April 2011-

12 as against $ 1293 million last year.
Foreign Direct Investment
 The share of Oil and Gas Exploration in total FDI
during July-April 2011-12 stood at 70 per cent

 Pakistan‘s foreign exchange reserves reached to $

16.5 billion at the end-April 2012 compared to $
17.0 billion at end-April 2011.
Foreign Exchange Reserve
 The Pak Rupee depreciated by 3.4 per cent during
July-April 2011-12 over the depreciation of 2.2 per
cent in July-April 2010-11 period.

Source: Pakistan Economic Survey 2012

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APPENDIX C
ENERGY SECTOR OF PAKISTAN (2006-2012): THE IMPACT OF SHORTFALL
AND RISING COSTS
1994 Power Policy

The 1994 Power Policy was designed to attract foreign investment in Pakistan. The founding
of a new institution called the Private Power and Infrastructure Board (PPIB) accompanied
the policy‘s implementation. The 1994 policy offered several concessions, including many
fiscal incentives (GOP, 1994a p. 5–7):

 Low taxes, duties, and fees;

 Foreign Exchange Risk Insurance (FERI) by the State Bank of Pakistan and the
freedom to choose insurance companies (GOP, 1994a p. 5–7);

 Security packages (which are standardized agreements like the Power Purchase
Agreement [PPA] and the Fuel Supply Agreement) to spare WAPDA, KESC, and
the IPPs from prolonged negotiations. These also include guarantees given by the
Government for the continued performance of WAPDA, KESC, and public sector
fuel suppliers (GOP, 1994a p.7).

The policy‘s most important feature was its ―bulk power tariff‖, which was calculated
assuming a 60 per cent capacity factor. The tariff consists of two components:

 The capacity payment has to be paid by WAPDA every month, whether or not it
actually receives any electricity from the IPP that month. It includes the fixed
costs—operations and maintenance, insurances, administrative, and debt servicing—
and the return on equity.

 The energy payment depends on the amount of electricity purchased. It accounts for
the variable costs, namely the usage of fuel, variable operations, and maintenance
costs.

A tariff per KWh was calculated according to set assumptions for these payments. The
average for the first ten years was not allowed to exceed US cents 6.5/KWh (then PKR
1.952/KWh). The rate was later revised to US cents 6.1/KWh (the FERI payment was
subtracted). The levelled tariff over the lifetime of the power plant was to be US cents
5.91/KWh at the most. Tariff adjustments can be made when necessary, for example, to
changing fuel prices. The tariff is structured according to debt servicing - it falls as debt
servicing decreases. These very rates were offered to every IPP irrespective of technology or
fuel used. The tariff could of course be lowered if an IPP showed that its costs were less than
assumed in the policy.

Source: Fahd Ali and Fatima Beg, ‘’The History of Private Power in Pakistan,’’
Working Paper Series # 106, 2007, http://www.sdpi.org/publications/files/A106-A.pdf

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