KARACHI: The Karachi Electric Supply Company (KESC) and the Global Mining Company Limited of China on Friday signed a memorandum of understanding for fuel replacement initiative through conversion of two of the six generation units of Bin Qasim Power Station from furnace oil to coal.

According to the KESC, the initiative was aimed at addressing the prevailing fuel crisis.

The GMC is part of the China MCC Group, primarily engaged in natural resource development, equipment fabrication, real estate development and provision of related services.

The Metallurgical Corporation of China, a 64.2pc subsidiary of the MCC, is publicly listed in Hong Kong and Shanghai.

KESC’s owned generation fleet is largely dependent upon provision of gas from the Sui Southern Gas Company Limited which has shown a declining trend over the past few years.

The remainder of KESC’s generation fleet is furnace oil fueled which is impacted by increasing fuel prices and dues pertaining to the federal government which puts considerable constraint upon the purchasing power of the KESC.

The Karachi Electric Supply Company and the GMC intend to undertake a conversion project of two of the six power generation units of KESC’s Bin Qasim Power Station, each such unit having a capacity of 210 MW, which will result in conversion of these units from furnace oil fueled generation to coal fueled generation through a retrofit or installation of new boilers.

The conversion project aims to diversify KESC’s fuel basket and consequently reduce reliance on furnace oil and to increase dependability on coal to generate power, as at present the delivered cost of coal is about $5.5 to 6 per mmbtu as compared to furnace oil which is approximately $13.5 to 14 per mmbtu.

The GMC will also undertake the responsibility of providing funding for the project.

The KESC and the GMC intend to finalise their negotiations regarding joint development of the conversion project, conducting required studies and obtaining financing of the project in an expeditious manner and shall approach the National Electric Power Regulatory Authority (Nepra) for an appropriate adjustment in KESC tariff structure and to permit a saving sharing mechanism to adequately provide incentive for conversion project for welfare and benefit of KESC consumers.

The salient points of this project would be lower capital cost and reduced completion time as compared to those of a green-field coal project.

Upon successful completion, this model would be replicated across the remaining oil-based generation of KESC and could prove to be a viable solution for the whole country to address the prevailing energy crisis.