LAHORE: It is a glaring reality the country is experiencing worst electricity load-shedding but it is also a bitter reality that load-shedding today is almost entirely caused by the acts of omissions and commission of the previous government during its three and half years in power (2018-22).
An impartial and in-depth analysis of the current situation reveals that coupled with high and rising energy prices in the international market, Pakistan’s power sector is almost in the operation theatre and simply keep it going is a miracle of a kind not known before in this sector.
– Causes of Load-shedding –
Slowing Projects: The previous government committed criminal negligence by slowing down “near completion” power projects, thus denying Pakistan cheaper and indigenous plants.
Two projects namely Karot Hydro and Shanghai Thar were delayed: first on account of lack of ownership and project monitoring and the second because of failure to fulfill contractual commitments on already completed projects, thus delaying financial close.
The previous government’s failure to open Revolving Account for completed projects like Sahiwal Coal and Hub Power meant no further financing for energy sector under CPEC umbrella.
The previous government either did not understand the CPEC’s energy framework or was simply out there to strangle it to slow but sure death.
Likewise, another high efficiency project namely Punjab Thermal RLNG Power Plant at Trimmu, Jhang (1,263MW) has been delayed for more than three years by the PTI Government, first due to its ill-placed enthusiasm for witch hunt through NAB and then by its deliberate delay in achieving financial close.
Had these three projects (3200 MW in total) been completed in time, urban Pakistan would not have been witnessing load-shedding today despite high energy prices in the international market. Two of these do not need any imported fuel and the third is high efficiency LNG plant ((more than 60 percent), which is much more feasible than plants based on imported coal or residual fuel oil.
Higher cost LNG because of failure to enter into long-term LNG contracts when international LNG price was low.
There has been lack of planning to execute long term contract for purchasing RLNG. During COVID-19 (Mid 2020) the RLNG prices went far lower in the international market, but that opportunity of buying RLNG at US$3 to 5 per MMBTU was not availed by the then government and no long-term contact was entered at that stage. If such contract had been signed, consumers would have faced much lower electricity bills.
The average purchase price of the RLNG under the long-term contacts which was signed by the PML-N government has been at price of US$ 8.02/mmbtu between 2018 to 2022 whereas during same period on-spot average price has been US$ 9.44/mmbtu, despite huge price dip for two years in the same period on account of Covid.
Much greater loss has been incurred during recent months wherein spot buying of RLNG has been as high as US$ 38/mmbtu.
It is a classic case of missing the stitch in time that saves nine.
High cost of dollar and Circular debt
The Circular debt stock in June 2018 was Rs1,152 billion, which increased to Rs2,467 in March 2022 an increase of 114 percent, despite major injection out of taxpayer’s money. One of the major causes of this rapid rise in circular debt is the depreciation of PKR value from PKR 115 per dollar to PKR 191 per dollar under the watch of PTI Government and under the watch of the caretaker arrangement that was put in place to bring PTI Government into power.
The rise in circular debt has affected Government’s ability to pay privately-owned power plants in a timely fashion which, in turn, has piled up liabilities of coal power plants and dried their credit lines. So much so that three major power plants on coal (total capacity of 3900 MWs) have such low stock of coal that they are running on part load. In case of one coal power plant, coal is stuck at Karachi port because it has no money to clear the imported stock.
Higher Energy Prices in International Market:
Reasons for unavailability of Fuel Mix and What Incumbent Govt have done after 12th April, 2022?
PSO and PLL are engaged in import of LNG in the country. Under the executed LNG Supply Contracts with Qatar Petroleum / Qatar Energy, PSO imports 5+2 LNG cargoes whereas PLL is left with (1)one LNG Supply contract with ENI Italy as the other Suppler i.e, M/s Guvnor prematurely terminated the contract in April, 2022 following a series of consistent default in supply of cargoes since year 2021. Starting from July 22, PSO has managed to secure one LNG cargo from Qatar delivery of which was scheduled from January, 2023:
| Mar
22 |
Apr 22 | May
22 |
Jun
22 |
Jul
22 |
Aug
22 |
|
| Long-Term Cargoes | 8 | 8 | 8 | 9 | 8 | 7 |
| Spot Cargoes | 1 | – | 4 | 3 | – | – |
| Total RLNG (MCFD) | 900 | 800 | 1200 | 1200 | 800 | 700 |
During the ongoing tenure of the incumbent government, spot purchasing of LNG was made starting April till June, 2022 for enhanced RLNG supplies to power sector. The cost of LNG spot purchases during May to June 2022 was US$ 573 million.
Despite PSO and PLL facing issue of huge receivables towards SNGPL and power, the supply to power sector was made to the maximum extent possible against the demand raised. PSO’s shortfall in LNG payments as of June, 2022 is Rs285 billion whereas PLL stands at Rs119 billion receivables.
RLNG Supply to power (excluding K-Electric) against demand w.e.f 12th April, 2022 to 30 June, 2022 is provided here under:
In order to ensure zero load-shedding during Eidul Fitr break, the RLNG supply to Fertilizer, CNG and Industry was curtailed for enhanced supplies to power. CNG continue to remain curtailed whereas captive power (export) is restricted at 50% of their load as of June 30, 2022. Effective July 2022, the RLNG has fully been curtailed for captive (export and non-export) for supply to power sector during 1-8th July, 2022
For procurement of LNG, PLL was granted exemptions from PPRA Rules on 28th May 2022 for July 2022 onward delivery cargoes.
Accordingly, PLL started procurement of July 2022 cargoes after 28th May2022, with three tenders closing in June 2022.
However, due to downgrade in credit rating of the country and LC confirmation issues, participation by suppliers remained less.
The detail of three tenders conducted for July 2022 cargoes is as follows:
The PLL has also floated a new tender for procurement of 10 LNG cargoes for delivery during July 2022 to September 2022. The tender will close on 7 July 2022.
– Petroleum Division Role –
On the other hand, Petroleum Division has been playing its role for arranging RFO requirements as per demand placed by the Power Division. The demand placed and RFO uplifted by Power Division since 16 April, 2022 is given as under:
Existing RFO stocks available with the oil Industry (OMCs and Refineries) as of 30/6/2022 are 277,000 MT, whereas 2 RFO cargoes of 130,000MT are off port at present. Import of around 180,000MT is planned for July 2022. Thus, the above arrangements are sufficient to meet the demand of 436,000 MT placed by Power Division during July 2022.
Oil Industry has arranged product but actual upliftment has remained below the demand placed by Power Division due to lesser orders placed by power plants to OMCs and payment issues.
Accordingly, Petroleum Division is making all efforts for arranging required RFO for power sector and can comfortably meet RFO requirements subject to timely placing of orders and advance payments by respective power plants.
