The abandoning of many coal-fired power projects including the Gadani Power Park has not gone down well with the Chinese government, which has strongly protested against the dwindling interest of Pakistan in such energy schemes.
The Chinese objection comes in the backdrop of putting the massive Gadani Power Park costing an estimated $14 billion on the back burner. Some planned coal-based power plants in Punjab have also been shelved because of coal transportation constraints and the government’s focus has turned to the liquefied natural gas (LNG) plants from the coal plants.
According to officials, participants of a meeting of the Cabinet Committee on Energy, held on February 12, told Prime Minister Nawaz Sharif that the Chinese ambassador had aired concern over reports that the government had decided to abandon coal-fired power projects.
They said the ambassador argued that Beijing had done a lot of work on these projects and was expecting progress from the Pakistan side.
However, they categorically stated that coal power plants were still a priority of the government and Muzaffargarh and Rahimyar Khan projects were delayed because of development work required for establishing the railways infrastructure.
Water and Power Secretary Younus Daga insisted that up to 7,000MW coal-based power projects were still being processed on a fast-track basis.
A representative of the Punjab government sought guarantees for the transportation of coal to the power projects including the Sahiwal plants, saying in the absence of guarantees the projects would not be feasible.
He asked the energy committee to direct the Ministry of Finance to take responsibility of the default in case of failure to transport coal on the basis of the letter of comfort it had already issued to the Chinese investors.
Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi briefed the committee on the 3,600-megawatt LNG-based power plants.
He said open-cycle LNG projects would be completed in April 2017 whereas combined-cycle projects would be ready in February 2018.
The National Electric Power Regulatory Authority (Nepra) is already determining an upfront tariff for the LNG plants while the responsibility of fuel supply would be on the government.
Availability of 45-day working capital would be built in the project structure and the government would have to provide assistance for land acquisition.
He claimed that international and domestic investors had shown their appetite for the projects. However, the financial close could not be achieved in five months as it required a period of one year.
It was suggested that the Ministry of Water and Power should formulate the project ownership and investment structure in consultation with the Punjab government. Other provinces should also be offered a share in equity and if they indicate the desire of becoming the investment partners, the investment structure of the projects may be designed accordingly.
Published in The Express Tribune, March 5th, 2015.