FUELING the FUTURE: Meeting Pakistan’S Energy Needs in the 21St Century
Total Page:16
File Type:pdf, Size:1020Kb
FUELING THE FUTURE: Meeting Pakistan’s Energy Needs in the 21st Century Edited by: Robert M. Hathaway Bhumika Muchhala Michael Kugelman FUELING THE FUTURE: Meeting Pakistan’s Energy Needs in the 21st Century FUELING THE FUTURE: Meeting Pakistan’s Energy Needs in the 21st Century Essays by: Mukhtar Ahmed Saleem H. Ali Shahid Javed Burki John R. Hammond Dorothy Lele Robert Looney Sanjeev Minocha Bikash Pandey Sabira Qureshi Asad Umar Vladislav Vucetic and Achilles G. Adamantiades Aram Zamgochian Edited by: Robert M. Hathaway Bhumika Muchhala Michael Kugelman March 2007 Available from : Asia Program Woodrow Wilson International Center for Scholars One Woodrow Wilson Plaza 1300 Pennsylvania Avenue NW Washington, DC 20004-3027 www.wilsoncenter.org ISBN 1-933549-17-3 Cover photos: Water Rushes Through the Warsak Dam, Pakistan, © Paul Almasy/CORBIS; Woodcutter in Hunza Valley, © Robert Holmes/CORBIS The Woodrow Wilson International Center for Scholars, established by Congress in 1968 and headquartered in Washington, D.C., is a living national memorial to President Wilson. The Center’s mission is to commemorate the ideals and concerns of Woodrow Wilson by pro- viding a link between the worlds of ideas and policy, while fostering research, study, discussion, and collaboration among a broad spectrum of individuals concerned with policy and scholarship in national and international affairs. Supported by public and private funds, the Center is a nonpartisan institution engaged in the study of national and world affairs. It establishes and maintains a neutral forum for free, open, and informed dialogue. Conclusions or opinions expressed in Center publi- cations and programs are those of the authors and speakers and do not necessarily reflect the views of the Center staff, fellows, trustees, advi- sory groups, or any individuals or organizations that provide financial support to the Center. The Center is the publisher of The Wilson Quarterly and home of Woodrow Wilson Center Press, dialogue radio and television, and the monthly news-letter “Centerpoint.” For more information about the Center’s activities and publications, please visit us on the web at www.wilsoncenter.org. Lee H. Hamilton, President and Director Board of Trustees Joseph B. Gildenhorn, Chair David A. Metzner, Vice Chair Public members: James H. Billington, Librarian of Congress; John W. Carlin, Archivist of the United States; Bruce Cole, Chair, National Endowment for the Humanities; Michael O. Leavitt, Secretary, U.S. Department of Health and Human Services; Tamala L. Longaberger, des- ignated appointee within the Federal Government; Condoleezza Rice, Secretary, U.S. Department of State; Lawrence M. Small, Secretary, Smithsonian Institution; Margaret Spellings, Secretary, U.S. Department of Education; Allen Weinstein, Archivist of the United States Private Citizen Members: Robin Cook, Donald E. Garcia, Bruce S. Gelb, Sander R. Gerber, Charles L. Glazer, Susan Hutchinson, Ignacio E. Sanchez CONTENTS 3 Glossary 5 Introduction Robert M. Hathaway 17 Meeting Pakistan’s Energy Needs Mukhtar Ahmed 35 The Weight of History: Pakistan’s Energy Problem Shahid Javed Burki 57 Energy, Poverty Reduction and Equitable Development in Pakistan Sabira Qureshi 79 Social and Gender Issues in Pakistan’s Energy Sector Dorothy Lele 93 Energy and the Pakistani Economy: An Exploratory Analysis to 2035 Robert Looney 105 Power Sector Reform in Pakistan: Issues and Challenges Vladislav Vucetic and Achilles G. Adamantiades 133 Promoting Private Sector Participation in Oil and Gas Projects—A Financing Perspective Sanjeev Minocha | | 141 The Role of the Private Sector in Pakistan’s Energy Sector Asad Umar 149 The Role of the U.S. Private Sector in Meeting Pakistan’s Energy Requirements John R. Hammond 157 U.S. Chamber of Commerce Energy Overview for the Islamic Republic of Pakistan Aram Zamgochian 167 Clean Energy Options for Rural Pakistan: Lessons from South Asia Bikash Pandey 185 Resolving Environmental Conflicts in Pakistan’s Energy Policy Saleem H. Ali 201 Recent Asia Program Publications | | GLOSSARY AEDB Alternative Energy Development Board BSP Biogas Support Program (Nepal) Btu British thermal unit CCGT Combined cycle gas turbine CHASNUPP Chasma Nuclear Power Plant c-km Circuit-kilometers CNG Compressed natural gas CPPA Central Power Purchasing Agency DISCOs Electricity distribution companies E&P Exploration and production ESMAP Energy Sector Management Assistance Project FDI Foreign direct investment FY Fiscal year GDP Gross domestic product GEF Global Environment Facility GENCOs Thermal generation companies GS Grameen Shakti GW Gigawatts GWh Gigawatt hour HESS Pakistan Household Energy Strategy Study Hydel hydroelectric IMF International Monetary Fund IPPs Independent power producers KANUPP Karachi Nuclear Power Plant KESC Karachi Electric Supply Corporation Ktoe Kiloton of oil equivalent kV Kilovolt KWh Kilowatt-hour | | LNG Liquefied natural gas LPG Liquefied petroleum gas MDG Millennium Development Goals MMcf Million cubic feet MMscfd Million standard cubic feet per day MTOE Million tons of oil equivalent mtpa Million tons per annum MVA Megavolt-amperes MW Megawatt MWe Megawatt (electrical) NEPRA National Electric Power Regulatory Authority NGO Nongovernmental organization NTDC National Transmission and Dispatch Company NWFP Northwest Frontier Province PAEC Pakistan Atomic Energy Commission PEPCO Pakistan Electric Power Company PPA Power purchase agreement PPIB Private Power and Infrastructure Board PPP Purchasing power parity PV Photo voltaic RE Renewable energy REDCO Regional electricity distribution company RERED Renewable Energy for Rural Economic Development (Sri Lanka) RETs Renewable energy technologies Rs. Rupees TOE Tons of oil equivalent WAPDA Water and Power Development Authority WPPO WAPDA Power Privatization Organization | | INTRODUCTION ROBERT M. HATHAWAY Pakistan’s development vision for an expanded economy, increased industrializa- tion, and elevated standards of living will demand enormous amounts of energy; and the links between sustainable development and energy will require major efforts for long term energy security.” —Pakistan Planning Commission1 akistan’s economy is growing, and with this growth comes higher energy consumption and greater pressure on the country’s Penergy resources. At present, demand for energy exceeds sup- ply, and power outages and planned power cuts (euphemistically termed “load-shedding”) are common. In addition to the economic costs, en- ergy shortages can foster political instability. June 2006 saw angry public protests in Karachi and riots in Liaquatabad over repeated power failures. A widespread power outage across much of the country three months later triggered panicky rumors of a coup. This unrest may be only a fore- taste of things to come. Absent drastic action, Pakistan’s energy situation is expected to get worse in the years ahead. Today, oil and natural gas supply the bulk (roughly 79 percent) of Pakistan’s energy needs. However, the consumption of those energy sources vastly exceeds the indigenous supply. For instance, Pakistan currently produces only 19.9 percent of the oil it consumes, fostering a dependency on imports that places considerable strain on the country’s financial position. While the present situation with respect to natural gas production is not nearly as serious, Pakistan’s projected natural gas needs are expected almost to double (from 2004 levels) by 2010. On the other hand, hydropower and coal are perhaps underutilized today, as Pakistan has ample potential supplies of both, at a time when Robert M. Hathaway is director of the Asia Program at the Woodrow Wilson International Center for Scholars. | | Robert M. Hathaway these resources provide for relatively little (a combined total of 20 per- cent) of Pakistan’s energy needs. Pakistan’s proven coal reserves are the world’s sixth largest, and the Pakistani government intends to increase the share of coal in the overall energy mix from 7 to 18 percent by 2018—a course that may make sense from an energy standpoint, but which carries troubling environmental implications. Meanwhile, wide- spread public opposition has significantly slowed the government’s plans to build dams capable of generating electricity. Nuclear power at this point accounts for only 1 percent of Pakistan’s energy consumption. Pakistan has two civilian-use nuclear reactors, while construction on a third began in 2006. The present government has announced plans for Pakistan to develop a generating capability of 8,800 megawatts (MW) of nuclear energy by 2020, compared to the country’s current output of less than 450 MW. Pakistan has denied press reports that it is negotiating with China to buy six to eight additional reactors. But Islamabad has urged the United States and other western countries to help it develop civilian nuclear technology to meet its grow- ing energy needs, an idea certain to meet with resistance in the West. Pakistan’s minister for petroleum and natural resources has identified energy as the most important input for the country’s economic devel- opment. The uninterrupted supply of energy to fuel the nation’s econ- omy, he has declared, should be the highest priority for the country’s economic managers. Salman Shah, a senior official in Pakistan’s finance ministry and adviser to the prime minister on finance and revenue, has underscored Pakistan’s intent to ensure energy security with talk about positioning the country as “a new energy hub for the region.” The need to address