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Pakistan today is in the grip of energy crises because of a shortfall in oil, natural gas and hydrothermal energy productions. Against this shortfall scenario, the commercial energy supplies increases by about 4 per cent , thus increasing the gap between production and supplies.
The present situation has been aggravated because of low hydro levels in major rivers and reservoirs and change in the weather cycle. Presently, Pakistan is meeting this energy gap through import of petroleum products worth $3.5 billion annually. This import bill is going to get larger and larger every year unless coal as an alternate resource is developed.
World outlook: The world prices of petroleum products and steam coal have shown substantial increases during 2003 because of slowing down in steam coal productions, higher domestic requirements and substantial increase in imports of iron ores by the steel industry of China.
This phenomenal increase of about 20 per cent in steel production in China has severely pushed the international freight rates on import of steam coal by nearly 90-95 per cent against the price level of 2001-02.
The steam coal prices were at record high level during 2003 (over US $91 ex-Karachi port) mainly because of shortfall in production, increased domestic requirement of steel industry of China and increased imports of steam coal by the USA, Japan, Korea and European and Asian countries.
The outlook viz a viz steam coal prices and freight rates during 2004-05 is not expected to be brighter unless production is substantially increased by China, South Africa and Indonesia, and pressure on import of steam cola is reduced by Japan, Korea and the USA.
Energy demands: There is an urgent requirement to fill in the energy gap which is increasing every year. On short term basis it can be met through increased thermal power production and on long term basis through construction of major multipurpose hydroelectric projects.
The energy gap is expected to peak around 2010 giving only five years to plan, initiate and execute new projects. All projects of which the planning and feasibility is nearly complete and to be initiated now so as to get into production by 2010-12.
However, there is limitation on availability of natural gas and oil resources for power production. All new projects if based on furnace oil for thermal power production will surely further increase the import bill. Implementation of new projects thus may create an additional burden close to $1 billion for year 2006 onwards.
Alternatively, the energy situation also could not be overcome in a shorter period by building large hydroelectric projects, as execution of dams of the size of Tarbella or Mangla Dam takes longer to build say 10-12 years.
The coal resources of Thar are the only assured resources available which could meet all current and future requirements of thermal power production. The reserves (estimated to contain 175 billion tonnes) at 50 per cent availability and 60 per cent recovery are likely to hold a potential equal 16 billion tonnes oil equivalent. It is indeed a very big energy resource.
Economics of lignite deposits: Results of preliminary studies carried out indicate that the deposits can be economically exploited through open cast mining for Thermal power generation. A large open pit mine with an annual coal production of 6.5 million tonnes was considered economically feasible.
It was estimated that the Thar coal could be exploited at a pit head price varying from Rs800 to 900 per tonne. The open pit could be developed at an estimated cost varying from Rs13 to 16 billion with an equity-debt ratio of 26-74 per cent and with total coal mining of 140 million tonnes spread over 22 years.
This open pit is estimated to take three years to develop and start producing coal (2.88 million tonnes during fourth year from year 1 of coal production. Therefore, the mining of Thar coal through open cast mining worth power generation is sure to provide a long lasting cheaper and consistent alternate fuel resource in a shorter time of three years and at an economical feasible cost.
The feasibility of Thar coal at the pit head price of Rs. 800 to 900 per tonne compared to currently quoted price of imported coal ($91 per tonne ex-Karachi port) will be far more attractive.
Development of one pit of 6.5 million tonnes will replace about two million tonnes of furnace oil valued at $393 million (1:60 rupee parity). The development of Thar coal will thus end or substantially reduce dependence on costly foreign import of petroleum products.
Strategy: The development of a six million tonnes annual capacity open cast mine is to entail a pre-production gestation period of minimum three years which in comparison to a hydroelectric project is much shorter.
Still such a gestation period with continued inflow of heavy capital investment is not considered palatable. Also, power is required for developing the open pit. Therefore, the strategy is:
a) To develop an underground mine on the periphery of an open cast mine. Thin coal seams developed in the top most part of coal measures could be mined through underground methods while the open pit is being developed. Such a mine could support thermal power production of 15-20 mw to support open pit development.
An underground mine could be developed in about 2 years time which besides reducing the gestation period will develop cash flow and power for developing the open pit.
b) In order to overcome energy shortfalls an integrated approach is to be adopted and small multi purpose projects having shorter period of construction will have to be undertaken on priority.
c) Small dams and reservoirs need to be constructed in the upper reaches of Indus and Jhelum river drainages for power cum water storage development.
d) Thermal power be utilized to build de-salination plants near coast and at other appropriate locations. e) To utilize thermal energy for re-claiming water from water logged areas and thus augment water resources.
The comparison of Thar open pit mine and development of a mega Hydroelectric project clearly shows the necessity to implement smaller projects by adopting the strategy as detailed above.
Comparison: The aforesaid comparison clearly shows the advantages in basing thermal power generation on coal rather than on a hydroelectric project or power production based on furnace oil.
The advantages of getting early power generation from a Thar open cast mine cum mine mouth thermal power generation facility 5 years before availability of power from a major hydrothermal project is considered extremely significant.
Cost of two open cast mines with 13 MTA coal production and with a captive power generation of 4600 MW is estimated to be Rs.80 billion less than the feasibility cost of Basha Hydroelectric Project (4500 MW) of over Rs.397 billion.
Sequential planning: 1) Re-assess power requirements of next 25 years either on mixed fuel basis or 100 percent based on Thar coal. 2) Develop least cost approach to energy infra-structure requirements considering the following options:
a) Develop heavy duty highway between Islamkot and Naukot to facilitate transportation of mining equipment and coal from Pit head to Jamshoro power plant if the same is to be converted to coal.
b) Upgrade railway track between Naukot and Mipurkhas for running coal unit trains from Naukot to Jamshoro power plant.
c) Assess alternate location of power plant near the coast west of DIPLO if required water for cooling will not be available from the pit.
d) To assess and develop railway track between mine head to sea coast for running unit coal trains.
e) Alternate 'c' and 'd' be examined in the light of exporting power to India.
f) If 'e' is affirmative, possibilities of joint venture in mining and power plants be explored with some Indian enterprise.
g) To assess and establish power transmission grid as may be needed viz a viz location of power plants to join the national grid/ south region grid.
h) Find ways and means to lower surface moisture in Thar coal with a view to recover surface moisture for cooling as well as to reduce transportation cost of coal to power and other industries.
i) In case more than 50 percent moisture is possible to be squeezed out of Thar Coal, it could then be blended with imported coal and used in cement plants.
j) Finally, the development of Thar coal will have to be undertaken on the pattern of oil exploration and participation in equity by the Government.
The writer is the former Director-General, Geological Survey of Pakistan.
