The approval by the government of a local sponsor’s proposal to develop a mega coal-fired power project in Tharparkar District could prove to be a landmark decision, if successfully implemented.

On May 8, 2007, the Private Power and Infrastructure Board (PPIB) has allowed Hasan Associates (Pvt) Limited, Karachi, to establish a 1,000 MW capacity integrated mining-cum-power generation project based on the Thar coal,at an estimated total cost of $1.50 billion. The project will be undertaken on build-operate-and-own (BOO) basis, and is scheduled to go on stream within five years from the issuance of the letter of interest (LOI), as claimed by the sponsor.

Hasan Associates have already been granted an exploration licencee to undertake feasibility activities related to coal mining on lease basis. According to the memorandum of understanding (MOU) signed on January 11, 2007 between the sponsor and the government of Sindh, an area measuring 64-sq km at Block-one of the Thar coalfields has been allocated for the purpose. Based on studies to be undertaken by the sponsor that would ensure extraction of required quantity and suitable quality of coal, a feasibility report and environmental study will be prepared.

This may take at least a couple of years, in spite of the fact that the earlier studies conducted by the Chinese and the Germans are already available. Subsequently, the sponsor will sign agreement with the government for the construction of power plant, as well as for the acquisition of allied services and sale/purchase of electricity.

The proposed investment is considered a great feat on the part of a Pakistani sponsor to enter into the area where even a couple of foreign investors have finally shied away. Nonetheless, some sources are not sure about the implementation of the time-bound project, in the wake of past unpleasant experience of efforts for exploiting the Thar coal for power generation. On the other hand, the sponsor is keen to put the project on a fast-track basis, having initiated processing of selection of world-reputed consultants for the project. A 200-ton sample of the Thar coal will shortly be despatched abroad for conducting analysis of its chemical and physical properties and other characteristics. The sponsor intends to seek state-of-the-art environmental-friendly technology for the proposed 1,000 MW integrated project for which he is in contact with plant designers and manufacturers, and plans to establish coal-liquefaction and coal-gasification units in the second-phase of the project.

On its part, the federal government has commenced work on the development of the necessary support infrastructure in the area, under the title of the Thar Coal Infrastructure Development Project, with a total financial outlay of over Rs5 billion. In addition, the provincial government has invested Rs2.20 billion in the construction of roads network, water and power supply systems and town planning, whereas an additional amount of Rs1.30 billion is to be spent on the schemes in the next two years or so.

Likewise, Water and Power Development Authority (Wapda) is in the process of laying a 500-kV transmission line at a cost of Rs5.50 billion for dispersal of electricity from the proposed power station to the national grid.

It was in 1992 that the Geological Survey of Pakistan (GSP) discovered huge sub-surface deposits of coal--- the second largest in the world --in Tharparkar District, Sindh. The appraisal studies established technical and commercial viability of confirmed reserves of 175.50 billion tons of coal. The Thar coal, classified as lignite A-B, contains low ash and sulfur contents and is suitable for power generation, which would not have, relatively, adverse environmental and ecological effects.

Thar coalfields covering an area of 9,000 sq km have been divided into four blocks of demarcation for administrative and logistic purposes. Two new blocks have been added, thus making a total of six blocks for exploration. The different blocks are being offered to the private sector for installing power plants in the range of 50--1,000 MW capacity each.

In April 2002, a state-run Chinese company Shenhua Group Corporation was assigned to develop Block-two of Thar coalfields, accepting its proposal to establish a 600-MW power plant at the mine-mouth with associated captive coalmines. Shenhua Group carried out studies related to coal-geological and hydro-geological investigations in the area, and a project feasibility report was finalised.

Unfortunately, the project ran into various snags. Since then a number of foreign investors have shown interest to develop these resources, but without any breakthrough. In April 2005, AES-Oasis Ltd of the USA showed interest in developing an integrated mining-cum-power project of 1,000 MW capacity, utilising Block-one Thar resources. The sponsor, after a year finally backed out. This block has now been allocated to Hasan Associates.

President Musharraf on May 5, 2007, has reiterated his continued commitment to full utilisation of Thar coal reserves for power generation in an expeditious manner. But, perhaps he has to take stock of present status of the projects personally and resolve various impediments and constraints hindering effective implementation of the projects. Conducting the studies, though essentially needed, appears to have been a never-ending exercise, causing inordinate delay in taking off the vital projects. Rheinbraun Engineering of Germany has prepared a report, in January 2005, only for the mining project of Block-one in two years' time and at a significant cost.

However, the Asian Development Bank (ADB) has identified major risks and bottlenecks in the mining of Thar coal. It has been argued that previous studies have not resulted in a bankable study and therefore private sector might not engage itself for full-scale commercial development of the Thar resources. The available studies, according to the ADB report, also lack full technical information such as appropriate mining techniques to be adopted.

Suggesting mine-mouth mining to obtain large quantities of coal for intended large-scale power generation, the ADB report is said to have proposed to set mining capacity to the largest output from worldwide experience, which lies between 20--30 million tons annually.

Indeed, special efforts and policy measures augmenting domestic coal producing capability need to be undertaken, rather urgently. There are a number of limiting factors to developing mining-cum-power generation project; the major being the risk involved in coal mining and larger size of investment required for each project. The government therefore decided in April 2006 to unbundle the Thar integrated coal project into mining and power generation. Sadly, it is more than a year that the formation of a mining company to exploit Thar coal has been on the cards, but somehow nothing is on ground as yet.

The government will establish the company, in collaboration with Sindh government and, possibly, with the private sector too, which will undertake mining, handling and transportation of the Thar coal and selling it to the Independent Power Producers (IPPs). Prime Minster Shaukat Aziz is reported to have approved the summary for the proposed Coal Mining Company (CMC), with an investment of $500 million, sometime in September last year. There is no progress on this plan.

The ADB has also cautioned that for developing coal sites in Sindh it was necessary to avoid possibility of conflicts between the province and the federal government, as has been observed in the recent past. Realising provincial ownership of the mineral resources and federal control of the market, the PPIB was established as a one-window-operation facility, with necessary provisions in the power policies.

But the Power Policy 2002 is not being implemented in letter and spirit by the provincial governments, causing lack of meaningful coordination among all stakeholders for achieving the objectives. Another major constraint is the uncertainty of fresh water required for the projects. It is reported that the provincial government has recently completed a detailed ground water study and its findings are awaited.

The coal-based power projects, primarily exploiting the large Thar coal reserves, assume greater significance in the projected energy scenario, as it will reduce country's dependence on imported furnace oil, thus resulting in lower import bill and providing cheaper electricity, besides socio-economic development. The Energy Security Plan has thus set a target of generating total 19,910 MW power from coal by the year 2030, aiming to achieve over 12 per cent share in the power mix by then.

In the first phase coal-based power generation of 900 MW is planned to be attained by 2010, which now seems unrealistic. However, the target of generating additional 3,000 MW power (three projects, each of 1,000 MW capacity based on Thar coal) by 2015 may still be realisable, if concerted efforts are made to remove impediments in exploiting the Thar coal potential.