Much ado about nothing: Energy talks with US fizzle out without gains

Sources say that not much can be expected until IP project is ditched.

ISLAMABAD:

Scuttle the Iran-Pakistan (IP) pipeline, and then we’ll talk. This seems to be the strategy employed by the US during recent talks with Pakistan on the possibilities of cooperation in the energy sector.

The talks were not a complete waste of time, however. According to officials, Pakistan and the US did sign an agreement under which the latter will fund an international consultant to assist Pakistan acquire liquefied natural gas (LNG).

“The consultancy [plan] will require around $2.1 million,” sources said.

Sources said that Pakistani authorities had been hoping that the US would also make a proposal for the financing of the multibillion dollar Diamer Bhasha Dam project, which has stalled due to the reluctance of international donors to fund its construction.

“The US has neither identified nor committed any volume of funding for the Diamer Bhasha Dam,” an official said.

Sources also said that the Pakistani team briefed US officials about the progress made on the TAPI gas pipeline project, apparently in an attempt to lure some investment. However, the US team refrained from formally committing any amount.

During the talks, the US team expressed serious reservations over the poor implementation of power sector reforms and the ballooning circular debt. They called for a resolution to the circular debt issue, and also demanded that power firms be privatised in order that they may improve their working efficiencies.

The Energy Working Group meeting was part of an ongoing bilateral dialogue, designed to help address Pakistan’s challenges in the energy sector, which include power generation, fuel, gas, and reform priorities. However, at the conclusion of the meeting, the only announcement worth noting was that the US government will fund an international consultancy to assist Pakistan acquire liquefied natural gas (LNG).



During the meeting, Water and Power Secretary Nargis Sethi highlighted the need for an improved and sustainable governance structure as a key element for sustainable power sector reforms, says a press release for the event. The US’ Special Envoy and Coordinator for International Energy Affairs Ambassador Carlos Pascual welcomed the Pakistani government’s commitment to the reform process, improving governance, improving the financial viability and efficiency of the power sector and energy sector in general, and attracting private sector investment in energy production and distribution. Pascual also welcomed Pakistan’s adoption of the Petroleum Exploration and Production Policy 2012, noting that it has the potential to attract and boost investment in exploration throughout Pakistan.

“Today, the United States government and the government of Pakistan launched a new initiative to help Pakistan acquire liquefied natural gas more efficiently,” was what Ambassador Pascual had to say at the end of the event. “This initiative shows the United States and Pakistan working together on concrete actions to relieve Pakistan’s shortage of electricity. It will accelerate the liquefied natural gas procurement process and offer a cheaper alternative to Pakistan’s current fuel oil imports.”

The LNG consultancy, which will commence before the end of the year, will assist the Pakistani government in the terms and assessment of LNG supply and delivery from international suppliers. The effort will speed the procurement process, saving the government the expense of fuel oil imports that are currently used to generate much of the nation’s electricity, says the press release. The consultancy will also provide market analysis and technical assistance to the government’s implementer of LNG imports.

Even as they failed to move ahead on the more headline projects, the US and Pakistan are currently carrying out other large-scale energy projects that will add 900 megawatts of electricity to the power grid by the end of next year – enough to supply electricity to an estimated two million households. These projects include renovating the power plant at the Tarbela Dam; modernising the generators at the Mangla Dam; upgrading the Guddu, Jamshoro and Muzafaragarh power plants; and building the Satpata and Gomal Zam dams. US technical assistance is also supporting crucial policy and management reforms underway in the Ministry of Water and Power. The reforms are focused both on reducing technical losses on the power grid and on increasing collections.

Published in The Express Tribune, December 8^th, 2012.