China's $10 Billion Investment in Pakistan Energy Sector Could Close Power Gap

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Today, a delegation from China's Three Gorges Corporation arrives in Pakistan with the promise of investing $10 billion in the country's energy sector by 2018.

United Energy Group Limited of China (Hong Kong) also plans to set up a 2,000-megawatt (MW) power project in Sindh province, and a delegation from the company will visit Pakistan in March. A memorandum of understanding has been signed between Sindh's coal and energy department with both of the companies, which have shown interest in developing coal-fired power plants in the Thar and Badin coal fields, according to officials.

The government is hoping that the Thar underground coal gasification project will encourage foreign investment and energy project development. Thar contains about 850 trillion cubic feet of coal deposits, covering more than 9,840 square kilometers. The World Energy Council reports that Pakistan has 2 billion tons of proven, recoverable coal reserves.

The success of the Chinese connection could be crucial to the country's efforts to close the power supply gap. At present, with demand running at 25,000 MW, supply is less than 20,000 MW.

The Daily Times reports that, "The entire country is confronting ruthless power load shedding during the ongoing winter season, and it looks like the problem will further intensify in the coming summer season."

Pakistan Electric Power Company (PEPCO) sources trace some of the causes of the current power crisis back to 2003-08, when no projects were initiated and foreign investment in the power sector disappeared. At that time, the public sector was prevented from increasing power generation from thermal sources because of fears of increased negative reaction from the population.

In the same period, demand rose from 7% to 14% on the back of a growth strategy and major village electrification, plus more than 80,000 new agricultural connections. Air conditioning power consumption is also adding more than 5,000 MW of demand. The increase in demand in 2003-07 was not accompanied by tariff increases. Lack of maintenance of the distribution network and generation capacity has caused power output losses, and increased non-payment of electricity bills has compounded the funding crisis.

For related information see January 11, 2011, article - Pakistan Fast-Tracks Transmission, Infrastructure for Thar Coal Fields and January 6, 2012, article - New and Stalled Projects Reflect Pakistan Power Sector's Frustrations.

Currently, the government is planning short-term measures to add 3,090 MW by the end of 2013. But to achieve this modest target, there must be greater cohesion among the power utilities and project developers, and secure project funding must be put in place.

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