Hitting a roadblock: Abu Dhabi, PARCO oil-based plant project hits snag

Power ministry disallows establishment, saying all future power plants should be coal-based.


Zafar Bhutta October 10, 2012

ISLAMABAD:


The 500 megawatt (MW) power plant planned by the Abu Dhabi government as a joint-venture with Pak Arab Refinery Limited (Parco) hits snag after Ministry of Water and Power refused to allow the installation of oil-based plants.


Parco is a joint venture between the Government of Pakistan and the emirate of Abu Dhabi in which Pakistan holds 60% shares while Abu Dhabi has a 40% stake through the Abu Dhabi Petroleum Investment Company – a subsidiary of International Petroleum Investment Company (Ipic). Parco – a fully integrated energy company – is one of the largest companies in Pakistan’s corporate sector with an asset base approaching Rs141 billion.

Ipic had planned to install an independent power generation plant of 500MW at a cost of $700 million in the vicinity of Kot Addu in alliance with Parco.

Sources told The Express Tribune that Ipic and Parco had signed a memorandum of understanding (MoU) to construct the power plant but the Ministry of Water and Power disallowed it, saying that all future plants will be operated on coal.

A senior official of the Ministry of Water and Power said that the Ministry of Petroleum and Natural Resources had taken up the issue with the power ministry to allow Parco to set up the plant but the ministry clung to its stance. The Ministry of Water and Power was of the view that oil-based power plants were the root cause of the hike in power tariffs, and the government has to pay billion of rupees in subsidy to curtail tariff inflation.

Prime Minister Raja Pervez Ashraf had also recently agreed to disallow establishment of power plants that were not coal-based as in the future Thar coal reserves will be utilised for generating cheaper power.

When contacted, Parco spokesperson said that the feasibility study of the project was under process and different options were being considered to initiate the project.

The joint-venture plant was envisaged to be dual-fired so that gas can also be used to generate power thus, if the government sticks to its stance the project had the capability to run on the alternative fuel.

Sources said that Parco’s and Ipic’s management had sought sovereign guarantees like other independent power producers to start operations in Pakistan. However, now the proposed plant was facing bottlenecks due to the refusal of the power ministry and the follow-up decision of the premier. The project was scheduled to kick-off its operations in 36 months after the construction process was initiated, but it might take longer after this decision.

Published in The Express Tribune, October 11th, 2012.

COMMENTS (2)

Feeka | 11 years ago | Reply

Remembering Musharraf's Pakistan First slogan.

Moise | 11 years ago | Reply

Although this is a good option but oil based plants should be used for peak hours.

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