Sharing Pakistan energy supply situation report prepared in 2011 with detailed analysis of Primary supplies, consumption pattern, issues and recommendation. Unfortunately, Pakistan's energy supplies constraints mentioned in 2011 still broadly remain relevant till date

1. SYED SHARIQUE FARID
May 23, 2011
Pakistan Energy Supply situation
2011
Power Sector- Research Report

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Pakistan Energy Supply situation 2011
Power Sector- Research Report
Introduction
Pakistan’s energy constraints have become more pronounced in the past 5 years, as energy supplies have failed to meet
the demand emanating from a 5- year annualized 4.4% growth of the economy.
During 2005-2010 while the demand for electricity grew by an average of 5.1%, supplies lagged behind, increasing by
only 2.4%. The resultant demand-supply mismatch has affected millions of domestic consumers, industries, and the
economy. According to estimates, the energy crisis cumulatively clipped nearly 2 percentage points from annual GDP
growth during FY 2010.
According to recent figures made available by PEPCO, power deficit has varied between 1,800 –4,500 MW during
peak consumption month of August -2010. Going forward, inaction at this juncture would lead to a widening power
deficit, severely constraining the economic growth of Pakistan.
According to Government of Pakistan (GoP) estimates, energy demand in the country is expected to increase by 8.8%
per annum beyond 2010. If energy consumption increases at the estimated rate, Pakistan’s total energy requirements
by 2030 will reach 361 Million Tons Oil Equivalent (MTOE) compared to 63.08 MTOE in FY 2008-092. According
to GoP estimates, the overall demand for power will reach 36,000 MW by 2015 and a staggering 114,000 MW by
2030. To address the demand gap, Government has focused its efforts on the following set of parallel steps (i) fast track
additions to capacity through mainly oil-based rental plants, and expedited processing of independent power projects
(IPPs) in the pipeline; (ii) developing a portfolio of new IPPs through competitive bidding for new capacity additions;
and (iii) for the longer-term, a diversified program focused on domestic energy resources (mainly hydro and coal),
efficiency improvements and conservation, and electricity imports where feasible.
Source 2005 2006 2007 2008 2009 2010 CAGR
Oil 16,329,979 16,411,834 18,188,280 19,206,441 20,103,060 19,806,314 3.90%
Gas 27,953,380 29,202,951 29,324,316 29,874,989 30,255,885 30,808,523 2.00%
LPG 251,789 400,430 470,998 418,952 401,705 395,583 9.50%
Coal 4,227,842 4,049,654 4,426,678 5,783,844 4,732,823 4,621,639 1.80%
Hydro Electricity 6,127,429 7,366,452 7,626,755 6,851,955 6,631,841 6,705,533 1.80%
Nuclear Electricity 667,234 592,887 546,159 734,537 386,165 690,821 0.70%
Imported Electricity 26,050 34,775 40,781 47,550 54,266 59,537 18.00%
Total 55,583,703 58,058,983 60,623,967 62,918,268 62,565,745 63,087,950 2.60%
Primary Energy Supplies by Source
(TOE: Tonnes of Oil Equivalent)

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SOURCE: ENERGY YEARBOOK 2010
Some of the key points regarding primary energy supplies are as under,
▪ The major contributing source of primary energy supplies is gas with an average contribution of 49% from
2005-2010. With the depleting gas reserves, Pakistan manages a healthy growth (2%) in gas production but
the growth in the gas supplies is 60 bps less compared to the total growth in the primary energy supplies which
is causing concerns of switching of primary supplies with expensive source.
▪ The data also shows that there is a lack of long term planning as the generation of Hydroelectricity and
Nuclear power is almost constant since 2005.
▪ Oil is the second major contributing source of primary supplies with an average of 30% from 2005-2010.
Oil supplies manage a high CAGR of 3.90% due to the ease and availability of international oil supplies but
hurting the economy as it is the most expensive primary energy source.
▪ LPG and Imported electricity manages an excellent growth of 9.50% and 18% respectively but its
contribution in the primary energy mix is very low. As the cost of LPG and Imported electricity is low
compared to Oil therefore measures should be taken to increase its contribution
Comparison with regional and international countries
Source 2005 2006 2007 2008 2009 2010
Oil 29% 28% 30% 31% 32% 31%
Gas 50% 50% 48% 47% 48% 49%
LPG 0% 1% 1% 1% 1% 1%
Coal 8% 7% 7% 9% 8% 7%
Hydro Electricity 11% 13% 13% 11% 11% 11%
Nuclear Electricity 1% 1% 1% 1% 1% 1%
Primary Energy Supplies by Source
Country TWH Mn TOE Primary Energy in TOE % electrcity GDP(USD trillion)
KTOE/GDP
(electrcity)
Energy Intensity
(KTOE/GDP)
Contribution
of Industry
in GDP
China 3725.13 303.37 2177.02 13.9% 5.75 0.05 0.38 46.50%
Pakistan 93.11 7.58 65.85 11.5% 0.17 0.04 0.38 23.60%
India 869.80 70.84 468.85 15.1% 1.43 0.05 0.33 28.60%
Thailand 145.91 11.88 95.12 12.5% 0.31 0.04 0.30 31.10%
Singapore 41.80 3.40 60.76 5.6% 0.23 0.01 0.26 27.20%
Malaysia 106.94 8.71 55.69 15.6% 0.22 0.04 0.25 41.60%
Taiw an 229.69 18.71 105.72 17.7% 0.43 0.04 0.25 31.10%
South Korea 455.85 37.12 237.48 15.6% 0.99 0.04 0.24 31.20%
Bangladesh 27.41 2.23 22.95 9.7% 0.10 0.02 0.23 28.70%
Indonesia 151.68 12.35 128.19 9.6% 0.70 0.02 0.18 46.40%
Philippines 61.38 5.00 24.16 20.7% 0.19 0.03 0.13 31.30%
New Zealand 43.49 3.54 17.61 20.1% 0.14 0.03 0.13 24.00%
China Hong Kong SAR 38.73 3.15 23.89 13.2% 0.22 0.01 0.11 7.60%
Regional Average 460.84 37.53 267.95 13.92% 0.84 0.03 0.24 30.68%

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SOURCE: BP WORLD ENERGY REPORT 2010, PKIC RESEARCH
Some of the significant points regarding the regional and international comparison are as under,
▪ Pakistan ranked first jointly with China in terms of energy intensity (Primary energy per GDP) in the region
and also among the leading developed countries. Energy Intensity explains that in order to increase 1$
in GDP of Pakistan we are required to invest 0.38 US cents in generating 1Kilo of TOE. This is an
alarming number as our country is already facing problems in attracting new investments along
with arranging capital for import of energy supplies.
▪ In case of China high energy intensity is due to massive contribution of industry in GDP (46.50%), however
in case of Pakistan the contribution of Industry in GDP is far low (23%). Hence indicating poor utilization of
primary energy supplies
▪ In terms of Primary Energy supplies in TOE, Pakistan (65mn TOE) is far below in comparison with regional
average of 267mn TOE. The below average number of TOE resulted into low per capital availability which
not only hampering economic development but also decreasing Human Development Index (HDI).
Consumption of Final energy sector-wise
Country TWH Mn TOE Primary Energy in TOE % electrcity GDP(USD trillion)
KTOE/GDP
(electrcity)
KTOE/GDP
(Primary
energy)
Contribution
of Industry
in GDP
China 3725.13 303.37 2177.02 13.94% 5.75 0.05 0.38 46.50%
Pakistan 93.11 7.58 65.85 11.52% 0.17 0.04 0.38 23.60%
Canada 634.12 51.64 319.19 16.18% 1.55 0.03 0.21 20.00%
US 4149.60 337.94 2182.03 15.49% 14.62 0.02 0.15 22.20%
Brazil 467.40 38.07 225.72 16.86% 2.02 0.02 0.11 26.40%
France 542.39 44.17 241.91 18.26% 2.56 0.02 0.09 19.20%
United Kingdom 371.75 30.28 198.87 15.22% 2.26 0.01 0.09 22.10%
Germany 596.80 48.60 289.78 16.77% 3.31 0.01 0.09 27.90%
Japan 1115.08 90.81 463.91 19.58% 5.39 0.02 0.09 23.00%
Australia 250.97 20.44 119.23 17.14% 1.22 0.02 0.10 24.80%

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▪ Consumption trend of final energy in Pakistan is almost flat
▪ Domestic consumption is on higher side due to inefficiencies and losses in the distribution system
▪ Poor contribution of agriculture sector shows that there is a need of more mechanized and modern farming
techniques to improve overall profitability of sector.
Contribution of Final energy in Domestic sector
▪ Gas is the major source of consumption in the domestic sector. The major reasons of increase is due to 1)
Usage of natural gas based domestic generator during load shedding hours and 2) new gas connections in the
rural areas.
▪ The main reasons for the decrease in the oil usage 1) Increase in the usage of LPG for cooking purpose
instead of oil (Kerosene) 2) Growth in rural electrification.
Contribution of Final energy in Commercial sector
▪ Again Gas is the major source of consumption in commercial sector due to 1) Gas is a cheap source of
electricity especially during load shedding hours, 2) For cooking purpose gas is again the preferred source
due to availability of infrastructure and cost.
Source 2005 2006 2007 2008 2009 2010 CAGR
Oil 2.92% 1.88% 1.44% 1.55% 1.24% 1.11% -14.10%
Gas 59.11% 56.76% 57.09% 59.34% 61.92% 61.41% 5.00%
LPG 4.97% 5.90% 5.77% 4.99% 4.35% 4.09% 0.20%
Electricity 32.99% 35.46% 35.70% 34.11% 32.49% 33.39% 4.00%
Coal 0.00% 0.00% 0.01% 0.01% 0.00% 0.00%
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 4.20%
Source 2005 2006 2007 2008 2009 2010 CAGR
LPG 10% 14% 15% 14% 14% 14% 13.30%
Gas 59% 55% 53% 55% 57% 57% 6.30%
Electricity 31% 31% 32% 31% 29% 30% 6.60%
Total 100% 100% 100% 100% 100% 100% 7.20%

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▪ Strong growth in LPG consumption is due to 1) Ease of availability as distribution of LPG improved during
recent years 2) Also where commercial gas connection is not available or gas is expensive compared to LPG
Contribution of Final energy in Industrial sector
▪ Again more than half of the industrial consumption of industrial sector is provided from gas due to 1)
Increase in the captive power generation from gas instead of HSD or FO 2) Increase in the capacity of
fertilizer sector which consumes gas as a feedstock.
▪ Increase in the consumption of coal is due to the switching of gas from coal by the cement sector because of
high gas tariff.
Contribution of Final energy in Transport sector
▪ HSD is the main source of consumption in the transport sector due to heavy dependence of goods
transportation from road. The reason of decrease in the usage of HSD is due to the lifting of subsidy (Price
differential Claim touched the peak of RS 37.07/liter on June 2008 but it reduced to zero since October 2008)
therefore small vehicle users motivated to switch to CNG cars.
▪ Decrease in the usage of Furnace Oil and Electricity is due to the poor performance of railway transportation.
▪ Strong growth in the consumption of Natural gas is again cost driven as it is 50% lower compared to Motor
Spirit or HSD.
▪ Although consumption of E-10 (0.04%) is very low but it is a positive sign as the source is indigenous and
environment friendly.
Contribution of Final energy in Agriculture sector
Source 2005 2006 2007 2008 2009 2010 CAGR
Oil 12.0% 11.6% 10.3% 6.4% 6.6% 6.4% -8.2%
Gas 50.2% 52.7% 52.6% 51.3% 56.6% 55.8% 6.4%
Electricity 11.9% 11.0% 10.9% 10.0% 10.6% 10.3% 1.3%
Coal 25.9% 24.6% 26.3% 32.2% 26.2% 27.4% 5.3%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 4.1%
Source 2005 2006 2007 2008 2009 2010 CAGR
Aviation Fuel 5.4% 5.9% 5.6% 3.8% 4.1% 4.2% -2.0%
Motor Spirit 13.8% 12.9% 12.2% 13.2% 14.0% 17.4% 7.8%
HOBC 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.3%
E-10 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Kerosene 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -19.2%
HSD 74.8% 71.2% 68.4% 68.4% 63.6% 58.4% -2.0%
LDO 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% -24.7%
Furnace Oil 0.1% 0.2% 0.1% 0.1% 0.1% 0.0% -21.9%
Electricity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -28.2%
Natural Gas 5.7% 9.6% 13.6% 14.6% 18.2% 19.9% 32.3%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 3.0%

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▪ Electricity is the major source of consumption which is mainly utilized for pumping water. As the power is
subsidized for tube well purpose therefore farmers are encouraged to use electricity instead of using biofuel
or wind pumping stations
Fossil Fuel Consumption in Thermal Power generation
As shown in the table below, dependence on Furnace oil for power generation has increased significantly (20.60%)
over the last couple of years. Gas production has increased by a mere 2.1% in the past five year period. The consequent
low availability of gas has not only exacerbated the overall power deficit, but has led to higher cost oil being used as the
primary source for power generation. The ratio of oil/gas in the generation mix which stood at 24:74 back in FY 2005
has increased to 55:45 in FY 2010. Higher share of oil in the overall generation mix has invariably resulted in higher
costs per kWh. Increased dependence on oil came at a time when oil prices reached their record peaks. High reliance
on oil, lack of commensurate increase in tariffs till 2007, coupled with collection indiscipline led to high level of inter-
corporate debt stock. Consequently, the changing profile of the power generation fuel mix has had huge implication
for the current crisis being faced by Pakistan’s energy sector. Increased reliance on FO has exposed the sector to oil
price volatility. Recent increase in tariffs, in turn, has had the unintended effect of higher receivables and consequently
bloating of the inter-corporate debt stock. The price of energy source in terms of $/MMBTU shows that oil is three
times expensive option compared to gas and coal.
Recommendation and Summary
Source 2005 2006 2007 2008 2009 2010 CAGR
Oil 19% 11% 12% 13% 8% 7% -16.40%
Electricity 81% 89% 88% 87% 92% 93% 6.80%
Total 100% 100% 100% 100% 100% 100%
Source 2005 2006 2007 2008 2009 2010 CAGR
Oil 24.48% 29.04% 42.97% 44.66% 48.37% 54.56% 20.60%
Gas 74.94% 70.49% 56.54% 54.88% 51.30% 45.08% -7.20%
Coal 0.59% 0.47% 0.48% 0.47% 0.33% 0.36% -7.00%
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 2.80%

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The reason of high energy intensity is due to the consumption of expensive supplies of primary energy sources (31%
dependence on oil) as shown in the table above. Some of the recommendations are as follows,
Long- term Strategy:
▪ Increase in the share of hydropower generation as out of 45,000 MW potential we are currently able to tab
6,481 MW.
▪ Switching to local or imported coal is very essential as coal is almost four times cheaper compared to Oil
▪ LNG terminals and import of natural gas from Iran or central Asian states projects must be expedited
▪ Aggressive exploration of Oil and Gas both conventional and unconventional must be carried out. Policy for
unconventional gas such as tight gas and shale gas must be formulated quickly.
▪ Share of energy from renewable resources such as wind and biofuels should be increased
Short- term Strategy:
▪ Losses of energy supplies should be reduced in line with international standards. The average distribution
and line loss of power sector is 22%, however, the approved limit is in the range of 7.5% - 11%. Also UFG
losses in gases should be controlled by SSGC and SNGPL
▪ Inefficiency of the boilers, power plant and other energy equipment in the commercial, domestic and
industrial sector should be controlled with in the approved limits.
▪ Rehabilitation of Power GENCOS should be expedited
▪ Railway and transportation from rivers must be improved to reduce consumption of expensive HSD
▪ Use of renewable energy in the agriculture sector especially in case of pumping water through hybrid solar
system or wind based pumping system.
▪ Hike in the gas prices in order to 1) discourage gas based domestic power through low efficient generators
2) To avoid unnecessary usage of gas in heating 3) Solar heating system will be able to gain share as it will be
more competitive with gas based geysers.

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