Electricity fuel: Govt opts to replace coal-run power plants with LNG

Announces upfront tariff of Rs8.85 per unit for gas-fired plants.


Zafar Bhutta February 04, 2015
According to the official, since work is already under way to establish an LNG pipeline in Punjab, it would be easier to develop LNG-fired power plants at load centres. PHOTO: AFP

ISLAMABAD:


Addressing the acute energy crisis, the federal government has suggested abandoning the plan of developing two coal-based power plants in exchange for liquefied natural gas (LNG) power plants, which will be established in Punjab.


The proposal recommends fixing the upfront tariff for 3,600-megawatt LNG-based plants at Rs8.85 per kilowatt hour (kWh).

Giving a detailed briefing, a senior official of the Water and Power Ministry said that gas-fired power plants can be established in two to three years.

“LNG prices across the globe are coming down which provides an opportunity to Pakistan to set up LNG-based power plants.”

The Ministry of Water and Power has proposed Rs8.85 per unit upfront tariff to the National Electric Power Regulatory Authority (Nepra) for the LNG-based power plants. The official added that the “government will work towards establishing LNG-based power plants in Punjab.”

“By providing upfront tariff, we have kept the field open for power plants. It is up to the investors to establish energy plants whatever capacity they desire, so that it is not felt that the government is supporting a specific party or company,” he added.

Earlier, the government intended to establish three imported coal-fired power plants in Punjab but now the focus is on LNG. The official further stated that the government has replaced two imported coal-fired plants with LNG plants. However, one imported coal-fired plant in Sahiwal is being pursued by the government.

“The Punjab government, the Ministry of Railways and the Chinese agreed that heavy investment is needed at the port to handle coal and transport it to the plant, in addition to environmental issues,” he said.

Another argument was that the price of imported coal is very close to LNG so priority should be given to LNG as these plants will be established in a reduced time.

According to the official, since work is already under way to construct an LNG pipeline in Punjab, it would be easier to develop LNG-fired plants at load centres in place of imported coal power plants.

“Work on LNG power plants and LNG pipeline will progress simultaneously,” he said.

Three power distribution companies of Punjab, Lahore Electric Supply Company (Lesco), Gujranwala Electric Power Company (Gepco) and Faisalabad Electric Supply Company (Fesco) face shortfall in supplies.

“If LNG power plants are established in load centres of Fesco, Lesco and Gepco, losses in the transmission system and the transportation cost will be minimised,” he said.

According to the official, the government has started replacing old meters with smart meters in the areas covered by Multan and Peshawar electric supply companies as pilot projects. In the next phase, smart meters will be installed in the areas covered by Islamabad and Lahore electric companies. These meters will control the power load and also run on installation of cards.

In reply to a question, sources said that a separate mechanism will be formulated to ensure payment for imported LNG through an Escrow account.

The Ministry of Water and Power is not in the loop with regard to LNG to be imported by the Ministry of Petroleum. However, prevalent prices of LNG at the global level are around 8.5 cents per million British thermal units (mmbtu).

According to the information provided by the ministry, China is the only country which has shown interest in coal-fired power plants whereas investors across the globe are interested in gas-based power plants.

The official said that the amount of circular debt is Rs254 billion due to the steps taken by the Ministry of Water and Power and Ministry of Finance with the latter arranging Rs65 billion for the power sector.

He claimed that the Ministry of Water and Power owes Rs131 billion to Pakistan State Oil (PSO).

The government intends to bridge the gap between demand and supply in the shortest possible time and this can only be done through the establishment of gas-fired power plants.


Published in The Express Tribune, February 5th,  2015.

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COMMENTS (8)

woody | 9 years ago | Reply

The real reason is that Pakistan doesn't have the money to upgrade the railways in order to transport the coal. Overall LNG is a better choice anyway - cleaner and price is lowest its been in a long time.

Parvez | 9 years ago | Reply

This is repeating BB deliberate disastrous choice of fossil fuel over hydel energy.....and again for the same reason......when will this selfish short term thinking end ?

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