Power production: Country to stop consuming furnace oil over time

Will switch to LNG and alternative fuels to generate about 21,000 megawatts.

ISLAMABAD:

In a new policy, the government has decided to put a cap on oil consumption in electricity production and produce about 21,000 megawatts with the help of coal, gas, wind and liquefied natural gas (LNG) in an effort to achieve a better fuel mix, ease pressure on foreign currency reserves and reduce power tariffs.

“The country will gradually stop using expensive furnace oil, which will not only bring down power tariff, but will also lead to an improvement in environment,” an official said.

Participants of a meeting of the cabinet committee on energy, held on December 29 and chaired by Prime Minister Nawaz Sharif, said a cap should be imposed on fuel oil consumption in medium- and long-term energy projects.



Planned coal-based power projects would generate 11,373 megawatts, of which 4,920MW would be produced by 2018 and 6,453MW by 2019. Gas, wind and solar-run electricity plants would add 580MW in 2015, they said.

Though LNG-based energy projects might appear expensive in the long run, they would give an advantage in terms of time, economic activity and appropriate energy mix. Therefore, the meeting participants suggested, the government should start new projects of 3,600MW, replace the more expensive fuel oil with LNG in projects of 1,000MW and plan further to switch to LNG from fuel oil for another 5,000MW power plants.

The plan will also help ease the burden of subsidy payments on the government and provide significant relief to the consumers with a decline in electricity tariffs.

Since the Musharraf government, over Rs2 trillion has been paid to the power sector on account of subsidy.

At present, the country has a poor energy mix as thermal plants account for a dominating share in electricity generation.

In November, however, oil consumption had dropped, which led to a substantial reduction of Rs2.32 per unit in electricity tariffs under the fuel price adjustment formula.

Earlier, the prime minister had directed the Ministry of Water and Power to frame proposals for restricting oil consumption in power plants in order to improve the fuel mix.

In response to the directive, the water and power secretary developed a strategy that suggested shutting down inefficient power plants and running the most efficient ones.

However, the government has been hesitant to take action against the captive power plants of the powerful textile lobby, which are the most inefficient, but still they are receiving gas. Such plants have an average efficiency of 18-20%.

For a short time, the gas distribution companies, though, had stopped providing gas to the captive plants, but the premier stepped in and supplies were restored.

On the other hand, many efficient plants such as Saif, Halmore and Orient with 54% efficiency have not been running because of unavailability of gas since 2011. They only produce electricity at times of acute shortages.

With heavy reliance on furnace oil for power generation, the consumers are not only forced to pay a high tariff, but they also face prolonged outages, say officials.

“It is a crime that inefficient power plants are provided gas whereas the efficient ones stay closed,” an official remarked.

During the previous government of Pakistan Peoples Party, he pointed out, the National Accountability Bureau (NAB) had initiated an inquiry into the provision of gas to different sectors and termed its supply to the inefficient plants at the cost of efficient independent power producers a “criminal act.

Published in The Express Tribune, January 14^th,  2015.

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