IGCEP: Nepra should consult all key stakeholders

Dr. M. Ilyas Fazil

The National Electric Power Regulatory Authority (Nepra) should consult all stakeholders on the indicative generation capacity expansion plan (IGCEP) 2021–30 to avoid serious supply disruption issues.

In a letter addressed to the Registrar of NEPRA, different concerns have been raised that Nepra should address by taking all stakeholders on board.

The Indicative Generation Capacity Expansion Plan (IGCEP) 2021-30 is a long-term outlook related to the Power Sector, with its main focus being to shut down inefficient electricity generation and replace it with new plants based on other than fossil fuels.

Any Plan worthy of its name must take into account all the stakeholders affected directly or indirectly by its implementation. Otherwise, the results, far from being as envisaged by the Plan, could be very counter-productive and self-harming.

The stakeholders involved in ensuring Pakistan’s Energy Security are

The Upstream Oil Sector Exploration and Production

The Downstream Oil Sector Refining, Oil Marketing

The Oil Transportation Sector Pipelines, Road, Railways

The Ports & Shipping Sector Port Qasim Authority (PQA), Karachi Port Trust (KPT)

The LNG Sector Regasified Liquefied Natural Gas, Engro Vopak

The Natural Gas Sector Primarily locally available Natural Gas and Associated Gas, SNGPL, SSGC

The Power Sector WAPDA, K-Electric, Power Distribution Companies (DISCOS), Independent Power Producers (IPPs)

The Hydropower Sector

The Nuclear Power Sector

The Solar Energy Sector

Additionally, the Regulators – NEPRA, OGRA, Ministry of Energy

All of the foregoing stakeholders play a role in ensuring sustainable energy for the citizens of Pakistan. Any action by any of them impacts the energy supply chain in one form or the other. Each of these stakeholders has short-, medium-, and long-term plans underway to meet the growing needs of the energy sector.

For example, our local refineries provide 30 percent of our gasoline needs and 50 percent of our High Speed Diesel needs. These refineries depend on 15 percent of local crude and 85 percent of imported fuel to keep them operational.

Our Local Refineries have been operating at close to or less than 60% over the last few years: Reduced lifting of Furnace Oil by OMCs/Power Plants was the main reason. Some refineries also shut down in November/December 2021.

The shutdown of a local Refinery not only leads to lower availability of Refined Products but also directly impacts local Oilfield Production and that of Associated Gas (especially for ARL, which is solely dependent on local crude).

All the Refineries are targeting collective investment of Billions of Dollars in upgrading their facilities to not only enhance local availability but also improve the quality of the transport fuels Petrol and Diesel that they produce.

What is disconcerting to note, however, is that the authors of the NTDC/NEPRA IGCEP are either not aware of these very capital-intensive Refinery plans or have chosen to ignore them completely.

How else would one explain the proposal to totally phase out Residual Fuel Oil (RFO) by ‘retiring’ most power plants using RFO by the year 2023 (i.e. next year?)? Please refer to Table 5-2 on Page 41 of the IGCEP, where the closure of 3,620 MW by 2023 is proposed. Another 1,423 would be retired in 2027. As per Chart 6-6, Page 78 by 2025 RFO use would reduce to only 3,506 MW from the 6,506 MW in 2021.

The Refineries of Pakistan collectively produce about 8,300 Metric Tons per Day of Residual Fuel Oil, capable of feeding about 3,000 MW of electricity generation.

Their Up gradation Projects will take 3-4 years from Financial Close which is dependent on the terms of the new Refining Policy still under discussion with the Ministry of Energy Petroleum Division (MoEPD).

This means that they would be able to reduce their RFO production to almost less than 5% from the present 20-30% by the year 2026/2027.

These projects will be able to ensure payback only if the Refineries are operating at close to 100% capacity and generating revenues. Imagine what happens when they cannot dispose of their RFO from 2023.

They will be forced to shut down thereby not supplying the Petrol and Diesel as well as the Jet Fuel that they do now, leading to more imports, and more pressure on the already under-pressure Ports, thereby impacting adversely the entire supply chain. Furthermore, the local Oil production would start shutting down thereby impacting the availability of associated gas and possibly impacting the E&P sector irreversibly.

We do not have enough financial resources to meet our ever-growing needs for the basic essential commodities to keep our populace supplied. The poor segment of our population is growing and facing survival challenges on a daily basis.

All our indigenous resources have dwindled and we continue to rely more and more on costly imports at a time when our Rupee/Dollar parity is seriously compromised and the international market keeps heading north due to war and pandemic

The bottom line

Maximum Use of Indigenous Energy Resources, Reducing Consumption, and Minimizing Imports are the only solution

The recent developments on the international markets as well as the local scenario due to wars, political upheavals, and pandemics, are adding to Pakistan’s woes due to the continuous increase in the price of Petroleum Oil Liquids (POL) as well as of RLNG.

The situation at the country’s borders and the fight against terrorism being addressed by our valiant Armed Forces, furthermore, requires a National strategy that ensures timely and without-disruption POL supplies, especially for the Armed Forces.

It is proposed that all stakeholders impacted by the IGCEP must coordinate to readdress the proposals in order to avoid serious impacts on the Energy supply chain of the Country.

It is hoped that the hearing planned by NEPRA on the issue on October 19, 2022, will discuss this and other related issues in detail.

LET US DO WHAT IS BEST FOR PAKISTAN

Sd. Dr. M. Ilyas Fazil is Former Member Oil (OGRA)/Former CEO (OCAC)/Energy Expert