Byco SPM facility receives first shipload

Ever since this blog started I have been talking about problems being faced by Pakistan’s energy sector. Today, I am extremely delighted to talk about a new facility which is a proof of confidence of investors in the country.

Byco has achieved yet another historic milestone by bringing the first ever oil tanker carrying 70,000 tons crude oil from Abu Dahbi to its newly established deep sea single point mooring (SPM) facility.

In the initial stages, the SPM shall be used to handle crude oil for Byco's newly completed 120,000 bpd and the existing fully operative smaller refinery of 35,000 bpd.    

This marks the commissioning of 3rd port which will be used for import of crude oil and petroleum products. With a clear draft of 25 meters this facility can accommodate larger size vessels carrying crude oil/POL in cargo sizes of over 100,000 tons.

The full operation of SPM will create adequate availability of other oil piers leading to reduced waiting time and consequential demurrage.

Presently imported crude oil/POL products are being handled at Karachi and Bin Qasim ports. Both these ports have a draft limitation and as such cannot accommodate larger ships.

Oil imports eroding Pakistan’s forex reserves

Many of the experts had expressed fears that soon a person would have to pay Rs100 to buy a US dollar and it was linked to hike in crude oil price which would also touch US$100/barrel. They had warned if this happens Pakistan’s economy would come under severe stress. Both the forecast have come true and it is to be seen how the whiz kids of Pakistan will behave?

The much expected copybook reply will be “Pakistan’s economy is under extreme stress because of ongoing war on terror, country’s sensitive installations are under attack, multilateral financial institutions have not been very supportive and above all the embedded enemies are causing more losses than the external conspiracies”. Most of these are true one way or the other but there is hardly any acknowledgement that rulers have been too busy in ‘honeymoon’, policy planners complain last minute change in the policies and no one seems to be ready to take corrective steps.

Pakistan’s foreign exchange reserves have not carbonated overnight, it was writing on the wall. The country faced two contentious issues: 1) shrinking exportable surplus and 2) eroding competitiveness of local exporters. The cause is common, omnipresent energy crisis. Experts are of the consensus that the demand has not exceeded supply but inefficiencies and mismanagement is the mother of all evils.

It may also be sad that over five years foreign direct investment has dropped to dismal level. The reason are also known to all that 1) if existing productive facilities are not operating at optimum capacities, no entrepreneur would be keen in investing, 2) if local entrepreneurs are shy no foreign investors would look towards Pakistan and 3) if law and order situation is precarious investors in search of safe heavens will not be comfortable about the security of their investment.

The best evidence is that every investor knows that Pakistan needs billions of dollars in the investment because the country is ‘energy corridor’ and there is also needs to invest in oil and gas exploration, construction of LNG terminal, revamping of electricity and gas transmission and distribution networks but no investment is being made. The reason is also known ‘failure of the government to resolve the circular debt issue’.

Even bigger problem is that policy planners believe that some savior will come and remove all the odds. In the past United States has been the savior but the country has to pay a huge cost. Savior of the past is already disbursing for the power sector but most of the eyes are set at release of millions of dollars from the coalition support fund.

As US-led Nato forces are getting ready to vacate Afghanistan, Pakistan will soon be asked to play to protect the US interest in the country that has been in the state of war for more than four decades. However, the latest assault of terrorist under the disguise of Taliban makes many Pakistan jittery. The dollars may flow but not without more attacks on Pakistan’s sensitive installations.

In the prevailing scenario, where the very existence of Pakistan faces serious threats, a home grown plan has to be prepared to contain trade deficit and improve current account position and avoid accepting aid that may subjugate country’s sovereignty. 

SSGC and SNGPL spreading incorrect information

The Supreme Court of Pakistan adjourned the hearing without fixing retail price of CNG as it was bogged down by another revelation that gas marketing companies face bankruptcy.

It was believed that the apex court would approve a price which is acceptable to all the stakeholders, particularly Ogra and owners of CNG stations.

While the consumers and owners of CNG stations continue to suffer, the legal battle seems to be extending into new areas, which needs to be dealt separately.

In a reply filed by advocate Abid Hassan Minto, the honorable attorney pleaded, “The two gas marketing companies, i.e. SSGC and SNGPL could go bankrupt if they were penalized for not meeting the international standard of maintaining gas losses at three to five per cent of the total supply. Their overall losses currently stand at 16 per cent”.

The counsel for the Sui twins requested the court to withhold its decision to the extent of gas losses, or unaccounted for gas (UFG). Justifying the UFG at about 16 per cent, the two companies expressed fears if they go bankrupt gas supply to most parts of the country would be suspended.

The money that will be required to be injected by the federal government to put the companies back to their feet would cost the national exchequer far, far more than what Ogra naively aims to save through prescribing unrealistic, unlawful and plainly wrong UFG targets,” was stated in the reply filed by Minto.

It seems that the honorable court is being misled because SSGC and SNGPL are trying to put together two types of gas losses 1) leakage of gas due to depletion of transmission and distribution networks and 2) outright theft.

While it is true that gas marketing have not been able to revamp their transmission and distribution networks due to omnipresent circular debt issue, the real problem is blatant theft by those having access to power corridors. All stakeholders are simply asking the companies to contain theft that goes on with the connivance of their staff.

The primary mandate of any regulatory authority is to protect the interest of all the stakeholders, particularly the consumers. Condoning gas theft is: 1) direct loss to the Government of Pakistan that owns majority shares in SSGC and SNGPL, 2) penalizing consumers who pay their bills regularly and above all 3) criminal negligence because the country needs every kilogram of gas to be used diligently.

Geopolitics fueling Pakistan's energy crisis

A closer look at post fall of Dacca era indicates that the strategic plans followed by the successive governments in Pakistan were dictated from outside. From super powers to multilateral lenders and from locals seeking power to policy planners followed strategic plans that were not in the larger interest of the country.

One of the latest evidences is that President Asif Ali Zardari skipped his visit to Tehran and went to UK to meet Malala Yousufzai. He was scheduled to stopover in Tehran to sign some important agreements pertaining to Iran-Pakistan gas pipeline. There is a consensus in Pakistan that the pipeline has not become reality only because of opposition of United States.

Examining the power sector alone supports this perception. Everyone knows that Pakistan enjoys enormous potential to produce 40,000MW electricity from hydel plants. In the earlier days country succeeded in constructing three dams/hydel plants i.e. Warsak, Mangla and Tarbella. The plan was to complete one dam in a decade. Mangla was completed in mid sixties and Tarbella in mid seventies but then no more funds were made available for contraction any mega size das after Kalabagh Dam project ran into controversy.

Over the years also came a paradigm shift in the policies of multilateral donors. They decided not to lend more funds to WAPDA and encouraged contraction of fossil oil based thermal power plants by the private sector. Pakistan faces double edged sword as more than 75% of total power generation capacity is oil based and oil prices are hovering around US$100/barrel. It the recent past oil price also touched record level of US$147/barrell.

Pakistan is blessed with natural gas but turmoil in Balochistan affects drilling of new wells in the province. Fortunately reasonably large oil/gas reserves have been discovered in Sindh but excessive reliance on gas has led to present gas crisis. Gas can’t be produced from some of the mega fields discovered lately due to ongoing litigation.

Little has been the progress on exploitation of Thar coal, capable of producing 50,000MW electricity over the next half a century. Over the years enough funds were not allocated for the construction of required infrastructure and lately Chinese working in the area were forced to stop their work.

The latest controversy about the quality of Thar coal and process of mainlining seems to be driven by groups having vested interest. While things were moving smooth for establishing mine-mouth power plant, entered a group insisting of coal gasification process. Though, the available data suggests coal gasification technology can’t be used for commercial purposes, this group is insisting on release of millions of dollars for the deployment of economically unviable technology.

Some of the groups are also suggesting exploitation of other sources of energy i.e. introduction of E-10 and granting sugar mills IPP (independent power plant) status. The entire required infrastructure is present in the country but oil lobby is opposing this, it knows very well that going for E-10 and granting sugar mills IPP status will hurt its interest.

Some experts also say that much of the hype about shortage of gas is aimed at creating a justification for the import of LNG and creation of LNG handling infrastructure. Earlier Rental Power Plants (RPPs) melodrama was created that fizzled out due to credible evidence of massive corruption.

US pressurize Zardari to skip Iran visit

According to Financial Times, the visit of Pakistani President Asif Ali Zardari to Tehran to seal a US$1.5 billion gas pipeline deal was unexpectedly cancelled due to extreme pressure from the United States. The news has been received in Pakistan with extreme disgust and some of the quarters term it an attack on country’s sovereignty.

Pakistanis are fully aware that Iran has offered hundreds of millions of dollars to finance the long-delayed gas pipeline and Iranian stance has offended United States. Mahmoud Ahmadinejad, Iran's president visited Islamabad last month to offer the financing. It was said to be just the first installment. There were also clear indications that if Pakistan show determination and seriously go ahead with this project it could get more money.

Reportedly President Zardari skipped his visit to Iran on some flimsy excuse. While President House official sources said the Iran trip was not on the itinerary but it looked all certain that he would stop over in Tehran on way to UK, France and Turkey as he was expected to sign some agreement pertaining to Iran-Pakistan gas pipeline. Earlier on Tuesday, Presidential Spokesman Farhatuallah Babar had confirmed to IRNA that President Zardari will visit Iran on December 7 for talks on bilateral and regional issues.

Many Pakistanis wanted President Zardari to go to Iran to sign this crucially important agreement. They are losing patience due to inordinate delay in implementation of the project primarily because of stiff US opposition. The agreement was to be inked between Tehran and Islamabad during the November visit to Pakistan by Iranian President Ahmadinejad but was differed due to text of contract not being ready.

It sounded like a big joke that the President met Malala Yousafzai, a 14 year old peace activist, who is being treated at Birmingham’s Queen Elizabeth Hospital in UK rather than stopping over in Iran. Critics termed the visit an unprecedented gesture by the president because he did not have any diplomatic engagements in the UK other than meeting Malala.

Pakistan is keen in going ahead with the project. Dr. Asim Hussain, Advisor to Prime Minister on Petroleum and Natural Resources has recently visited Tehran to finalize text. He met several Iranian officials, including President Ahmadinejad. A delegation of Iranian oil industry experts also visited Islamabad early in November to discuss the agreement on the payment of a $250mln loan to Pakistan to fund the project.

In addition to the investment, Iran is also due to build the Pakistani part of the multi-billion-dollar pipeline. A special team has been set up in the Iranian oil ministry to specify the method of investment and credit line for the pipeline on Pakistani soil.

DAP dispatches from FFB disrupted

Fauji Fertilizer Bin Qasim, the only producer of DAP, situated in outskirts of Karachi is unable to dispatch the commodity to other parts of Pakistan. Inventory pile up is touching 25,000 tons at a time farmers need it the most.

It is feared that if dispatch of DAP is not resumed immediately the sowing of wheat crop may be affected in the country, as its application is highly recommended at the time of sowing.

CNG crisis which has been affecting intra city public transport has now also started affecting dispatch of goods to other cities from Karachi, the reason being vehicles going off road in protest.

While long-chases trucks may not be operating on CNG, groups having vested interest are creating havoc by stopping their movement.

OGDC finds gas in Sindh 

Great news for energy starved Pakistan.

Oil and Gas Development Company (OGDC) has struck a discovery of 20mmcf gas at Suleman-1, District Khairpur Sindh.

OGDC holds 95% working stake in the field. Soon other details will be made public.

Supreme Court being misled in CNG case

Supreme Court of Pakistan has recently fixed per kilogram price of CNG at Rs54.16. While owners of CNG stations say that selling gas at the price fixed by the apex court leads to per KG loss of Rs16, Oil and Gas Regulatory Authority (Orga) has failed in convincing the court as well as the owners of CNG stations on a mutually acceptable price.

While the legal battle is likely to continue for a while, consumers face the worst miseries because deliberations are being made on other issues, rather than arriving at a price that is acceptable to all the stakeholders. It is single line agenda and all the stakeholders have to agree on a mutually acceptable price at the earliest rather.  

A news item posted on the website of daily Dawn says the Supreme Court on Wednesday rejected a request submitted by the CNG station owners seeking an increase in the price of CNG and sought records pertaining to the details of tariff accounts.

This raises a question did the apex court fixed the price arbitrarily? To be honest no one could suspect this and strongly believe that court had done this on the basis of authentic data provided to it by the concerned authorities. However, one just can’t abstain from saying that those having vested interest are trying to mislead the honorable court.

According to the news report the court sought records pertaining to the tariff accounts of 3395 CNG stations, pointing out the existence of filling stations operating without licenses and asked four questions in this regard. The court also inquired about the number of license requests rejected by Ogra and the number of licenses ‘pocketed’ by station owners. In his remarks, Justice Khawaja termed the CNG association a cartel, adding that, the government appeared to oblige to the demands made by the cartel.

One can very humbly suggest to the court that its attention must remain focused arriving at a mutually acceptable price rather than venturing into uncharted waters. It has been heighted in one of the previous posts that the GoP is collecting Rs20.50 as levies and taxes on one KG of gas, whereas the cost is just Rs28.50. The recently imposed DIDC alone is Rs10.95 per KG. If these numbers are correct it is the Government of Pakistan fleecing the consumers and not the CNG cartel, as described by an honorable judge.

Experts suspect that those having vested interest are misleading the court, else fixing the price does not require any rocket science. The price being paid by gas marketing companies to exploration and production companies is on record and the tariff being charged from CNG stations fully documented as well as various taxes and levies imposed.