Six power project proposals rejected: Gas shortage cited as reason
By Khaleeq Kiani
ISLAMABAD, Nov 1: The federal government has rejected total six proposals of local and foreign investors, including two from the US, for fast track development of power projects in Karachi, owing to non-availability of gas, Dawn has learnt.
The decision comes at a time when the Karachi Electric Supply Corporation (KESC) faces a shortfall of about 600mw in the current year, which might rise to about 1,300mw by 2009-10.
A senior government official told this reporter on Monday that in view of looming gas shortfalls, the government had also decided in a major policy shift to reject investment proposals for gas-fired power plants at raw sites and has put in place a new gas allocation plan.
Background discussion with government authorities suggest that the two gas-based power projects with a total capacity of 900mw- 600mw Hawksbay and 300mw Gadani power stations- had been shelved, though the ministry of water and power had itself invited applications from private sector last year.
The only reason being given by government officials is that the Sui Southern Gas Company (SSGC) and the KESC did not show any keenness in the two projects owing to non-availability of gas and non-finalization of a feasibility study, respectively.
The rejection of four proposals of sponsors also attributed to non-availability of sufficient gas. These sponsors included the Consolidated Power International of the US, Crestar International Pakistan, Emirates Global Investment of the UAE and the Global Resources Consultants of the US.
Notwithstanding these rejections, the government has decided to develop a 200-mw barge-mounted gas-based project near Bin Qasim in a record period of nine-months without any bidding, although original sponsor of the project M/S GSB Technologies Inc has been replaced by another firm M/S e-Planet Ventures even before the launch of the project.
The SSGC has confirmed 32-mmcfd (million cubic feet of gas per day) for this project. The KESC has committed to make available its own facilities and land for the project which is being taken in hand on the directives of the president.
A senior official said it would have been appropriate to club together all the seven proposals or at least five of the unsolicited proposals and sponsors would be asked to bid for the time period and tariff etc., as a matter of transparency to trigger a competitive environment and select the best and cost effective proposal for implementation.
"Such a severe energy problem is foreseen in Karachi and elsewhere in the country that we have to set aside the rules and regulations specified under the 2002 power policy to complete at least the 200-mw project at Bin Qasim on a war-footing basis," explained a senior government official.
Asked why the other proposals have been rejected, the official said non-availability of gas is the only reason and added that it should not be seen as a favour to one company.
The official said serious objections were also raised by the Planning Commission and the Board of Investment on the grounds of ensuring transparency at a recent meeting, but were overruled.
Wada has informed the government that shortages in its system will be to the tune of 1000mw by next year and it will increase every year. Hence, the total shortage in both Wapda and KESC system is over 1500mw at present, the officials said.
Replying to a question, the official said nobody other than the government should be blamed for the emergency situation because it failed to foresee the shortage for the last five years.
Now it is left with no option, but to resort to fast track development of projects like the PPP government had done in 1994 and in the process finalized agreements in haste that resulted in high energy prices.
He said the military authorities had been managing the two power utilities for the last six years, but had failed to forecast the shortage and develop hydel power projects for cheap electricity. "It is an irony that we failed to learn the lesson and are again in the same trap we faced about a decade ago," the official said.
The PPIB has so far received around $4 billion worth of two-dozen unsolicited proposals for gas-based power plants throughout the country with a total capacity of 3,548mw. "In view of the projected gas shortfalls, all these plans, except one or two, have no future at least in the given circumstances and would have to be rejected," said a senior government official.
The gas shortfall has sent alarm bells in the government circles because if proposals for investments in the gas-fired power plants on raw sites are accepted, the government is exposed to substantial financial risks against the sovereign guarantees it is required to provide under the 2002 power policy.
In this situation, the government has imposed a moratorium on accepting raw-site proposals based on pipeline quality gas.
Sources said the SNGPL and SSGCL have stated that they are unable to commit gas beyond five years from now and that too only on a nine-month rather than annual basis, which makes these projects unviable.
