Disapproval: China objects to shelving of coal-fired power projects

Published: March 5, 2015
Email
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. PHOTO: REUTERS

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. PHOTO: REUTERS

ISLAMABAD: 

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.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (16)

  • Indian
    Mar 5, 2015 - 3:02AM

    voh baat saare fasaane meN jiskaa zikr nahiiN
    voh baat unko bohat naagavaar guzrii hai

    **Sunte Hain Ki Mil Jaati Hai Har Cheez Dua Se

    Ik roz power projects maang ke dekhenge Nawaz** seRecommend

  • asim
    Mar 5, 2015 - 10:25AM

    PMLN has no vision they 1st planned 06 coal fired plants in Punjab and now just cancelled them to go for LNG. Although Pakistan has world’s 6th largest coal reserves it is strange they will import LNG to run power plants. It similar to IPP projects of PPP that destroyed the nation.
    what is the output of PMLN in 18 months? In punjab they planned 18 months to set up coal fire plants and now cancelled them to go for LNG; This is the decision making and planning of PMLN on critical national affairsRecommend

  • bozo the clown
    Mar 5, 2015 - 10:53AM

    To Nawaz, coal power plant is nothing but constructing Metro with continuous rework. Make one bridge, demolish it and rebuild it again, then demolish it .. and so onRecommend

  • B.A.
    Mar 5, 2015 - 11:01AM

    OK, help me out here. First it was reported that these projects were shelved because the Chinese called them not feasible and now its being reported that Chinese are not happy for them being shelved? Which story is true?Recommend

  • Saud
    Mar 5, 2015 - 11:13AM

    Summary: Govt is saying they have not NOT cancelled coal power projects. Everybody criticizing govt for cancelling power projects!Recommend

  • Rahul
    Mar 5, 2015 - 11:42AM

    all weather friends.Recommend

  • observer
    Mar 5, 2015 - 12:25PM

    The Pak establishment expected the Chinese to give the $14B as free money for the proposed coal fired plants. Once the Chinese revealed the financial terms and asked for the down payment, the Pak establishment changed its mind. The same thing happened with the much hyped Iran-pipeline (or pipe dream?)Recommend

  • Fawad
    Mar 5, 2015 - 1:06PM

    China dictating Pakistan policies It is not the way to convey message, it seems like Pakistan is being forced to follow policies which benefit China, and it seems it is just the beginning.Recommend

  • Mar 5, 2015 - 1:53PM

    @observer: You read it correctly, my friend. If a down payment had been requested for a metro or highway project…….a supplementary budget would have hit the media news. SalamsRecommend

  • woody
    Mar 5, 2015 - 2:32PM

    @asim:

    Although Pakistan has world’s 6th
    largest coal reserves it is strange
    they will import LNG to run power
    plants.

    Thar Coal was never going to be used for these proposed coal fired power plants – quality is too poor and it’s extraction cost is too high. Even the ADB which was going to assist in financing specifically excluded using Thar Coal in their proposals. Regardless of coal source Pakistan’s railway system would need major revamp/upgrade in order to facilitate heavy coal trains (cost Billions).Recommend

  • azmat
    Mar 5, 2015 - 2:58PM

    Why don’t they install coal fired power plants closer to the source or near the coast if they are importing it, Karachi, Gawadar. Why in Panjab? Recommend

  • shiraz
    Mar 5, 2015 - 4:02PM

    @woody:

    Dont comment without having any knowledge. Coal available in Pakistan is of high quality otherwise Chinese would never have agreed to invest there. From across the border you always tend to make everything Pakistani Cheap and of low quality. Recommend

  • Z I Ahmed
    Mar 5, 2015 - 5:30PM

    Why projects are based on imported fuel (LNG, coal etc). The alternative is hydro power. There are innumerable identified sites in Pakistan for this purpose.
    Moreover, if Kala Bagh dam cannot be constructed then Punjab Govt may seriously consider to generate electricity at Kala Bagh like Ghazi-Barotha. Let those who oppose this dam suffer for ever water shortage.Recommend

  • Sami
    Mar 5, 2015 - 8:38PM

    PMLn is only best in distributing public money for their political motives.Recommend

  • Woz Ahmed
    Mar 5, 2015 - 11:31PM

    @shiraz:
    Shiraz, lignite is known as brown coal, poor quality and easily combustible, so to be economic must be burnt on site or as near as.
    Power stations also need a great deal of water, which Thar is short of.

    Apparently the Chinese are assisting in mining and setting up a power plant in Thar, if it happens and is successful will be amazing, but I suspect that the fact the reserves have laid untouched since their discovery suggests that they are a non starter.

    Only time will tell, but since their discovery in 1991 nothing has happened and energy is money with plenty of kickbacks for those who need them to get involved in Pakistani projects !Recommend

  • Naveen
    Mar 8, 2015 - 8:00PM

    Why Chinese? Their products are one of the most unreliable in the world. Checkout the their latest coal fired power plant in Srilanka. Srilanka tried to run that plant, could not and it broke down frequently. Now Chinese are running it. Checkout the article titled “A New Coal Power Station the Coal Industry Won’t Boast About” from internet.Recommend

More in Business