The Sindh Coal Authority is striving to woo private investment to finance the country’s first coal-to-gas project to initially produce 100 million cubic feet per day (mmcfd) to 200mmcfd of synthetic gas (syngas) from coal in the Thar desert.

The project, part of Sindh’s ambitious Thar coal gasification project, proposes to produce syngas to convert it into urea fertilisers at integrated syngas-fertiliser plants along the mouth of the mine or into synthetic natural gas (SNG) at a much larger scale later on.

The Authority’s advisor, Dr Farid Malik, claimed that he is already engaged with a couple of investors in this regard. “We intend to buy 20 gasifiers, small modular plants each with a capacity to produce 10 million British thermal units (mmBtu) of syngas, from a source in Europe for this project.”

According to him, the project will cost $10m. “We are bringing in 20-year-old coal gasification technology, which is being discarded in Europe. The new gasifiers would cost us double or triple this amount,” he added. A larger planned integrated fertiliser plant by Fauji Fertiliser, he said, would cost the company $1.6 billion for which the company is expecting funding from China.

Sindh Coal Authority battles critique and a hostile environment against fossil fuels to rally investments for its Thar syngas efforts

With domestic natural gas resources running out and imported LNG having a high price tag that the local fertiliser industry cannot afford, Sindh is working on the Thar coal gasification project to produce cheaper urea to boost agricultural productivity and ensure food security.

Coal gasification and liquefaction technologies have been around since the 18th century. Their supporters argue that they are relatively less harmful to the environment than directly burning coal for energy. Their critics allege that these technologies have massive capital and operational costs and are too complex to operate smoothly.

Dr Malik says there are two ways of approaching coal gasification: either convert coal into synthetic gas and convert it into fertilisers directly in an integrated fertiliser plant at the mine mouth, or convert coal into syngas and then into SNG and put it in the large pipeline network.

He says the use of the Thar coal gasification project for fertiliser manufacturing by encouraging investors to set up integrated plants to manufacture urea is the major focus of the authorities. “We are facing 2-3m tonnes of urea shortage because gas supplies for fertiliser production are drying up and have to be imported. So it makes sense that we take the first route for food security,” he argues.

There is no denying the theoretical and technical feasibility of coal gasification/liquefaction, says a study on the Thar coal gasification plans by a non-profit based in Islamabad. However, it says its commercial viability varies from region to region, depending upon the availability of state support and the quality of technology employed. It quotes several examples from across the world to illustrate this fact.

China — where gasified coal caters to 3-5pc of the country’s total natural gas consumption — uses a variety of subsidies within its SNG value chain to make the end products competitive with other available alternatives. Studies indicate that China’s coal production industry receives upwards of $2 trillion in subsidies every year.

In the United States, the North Dakota coal gasification facility, the only large-scale operational coal gasification programme in that country, built at a cost of $2bn in 1980 through a federal construction loan, had consistently ran losses till 1986 when the US Department of Energy stepped in and bought it at a discounted price of $1bn.

The gas pricing formula for the Thar coal gasification plans leaves a lot of conjecture. The Sindh Coal Authority claims that $7-8 will be required to produce 1mmBtu of syngas from Thar coal. However, this claim cannot be cross-verified because it is based on several undisclosed assumptions and financial details.

Moreover, the estimated price for gasified Thar coal is certainly less than imported LNG — which varies between $12 to $25 per mmBtu — but Pakistan’s fertiliser industry is used to consuming domestic natural gas at a much lower and highly subsidised rate. Only recently has this price been jacked up from $1 to $5 per mmBtu after several decades. This suggests that any price above $5 per mmBtu will lead to a big increase in fertiliser prices.

Dr Malik also ruled out any state subsidy for coal gasification projects or its derivatives, urea or SNG. “Urea or SNG produced from Thar coal will not get any subsidies. Rather, existing subsidies for urea makers or gas consumers will be abolished.”

Another concern over the coal gasification project relates to carbon dioxide emissions. Pakistan’s coal gasification plans will certainly worsen its carbon emissions profile, effectively derailing its climate goals and ambitions. Coal gasification is costly and its carbon emissions are so high that they require additional expensive carbon capture, utilisation and storage (CCUS) technologies to become environmentally sustainable.

“I have told the government that we will not produce more than 30,000MW power from Thar coal. Coal gasification, too, is a cleaner technology than burning coal directly,” contends Dr Malik.

Nonetheless, he admits it is hard to attract investment from local or foreign investors for the coal gasification schemes. “The business environment in the country is pretty hostile. Then, we have a big import lobby working against this project. Only the Chinese appear interested in the gasification plans. Fauji Fertiliser is talking to Chinese investors for its integrated urea plant,” he says.

Published in Dawn, The Business and Finance Weekly, November 18th, 2024