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Thar Coal: Pakistan’s best bet to ensure energy security?

Pakistan’s energy needs have outpaced its national energy supply, Thar Coal allows the country to develop its own indigenous fuel sources, allowing it to produce affordable and reliable energy.

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During the period 2008-2010, with a rising population and an expanding economy, Pakistan’s energy needs have outpaced its national energy supply. Exacerbating the demand-supply gap was Pakistan’s unsustainable power generation fuel mix, which contained a high share of oil-based power generation up to 32%, resulting in a high cost of electricity production.

Moreover, there was, and still is, a heavy reliance on imported fuels which result in constant depletion of foreign exchange and insufficient control over the fuels supply chain. This inappropriate fuel-mix leads to energy losses at each level of the value chain and inadequate recoveries leads to power outages, unaffordable electricity and the circular debt.

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It was, therefore, important for Pakistan to develop its own indigenous fuel sources which would allow the country to produce economical, abundant, affordable and reliable energy – thus the case for Thar coal projects came into the context of the country’s energy scenario.

Tackling the Energy Crisis Through PPP

To provide incentives for the development of local coal and encourage mining and power projects in the region, the Govt. of Pakistan through the ECC approved a number of incentives for such projects in October 2010. These included declaring Thar Coalfield a Special Economic Zone & approving the provision of sovereign guarantee for the debt portion of the mining project of up to USD 700m with the condition that GoS shall hold the majority shareholding in the project.

The Thar Coal Mining project has been undertaken by Sindh Engro Coal Mining Company (SECMC) – a Joint Venture Agreement (JVA) between Government of Sindh (GoS), Engro Energy Limited (formerly Engro Powergen Limited) and its Partners namely; Thal Limited (House of Habib), Habib Bank Limited (HBL), Hub Power Company (HUBCO) and China Machinery Engineering Corporation (CMEC); whereas Houlinhe Open Pit Coal Mine, subsidiary of SPI (State Power International) Mengdong (SPIM), formerly CPIM, has joined the SECMC board as a strategic investor with preference shares’ subscription.

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SECMC was created with the vision “to develop a technically and commercially viable Coal Mining Project in Thar Block – II to bring energy security to Pakistan”. The total reserves of Block-II are sufficient to support 5000MW of energy for 50 years; enough to provide long-term energy security to the country.

The total allocated area of 95.5km2 has been leased to SECMC for 30 years, further extendable to another 30 years for extraction of coal. The approximate project cost for the 3.8 Mt/annum coal mine is USD ~845 Mn with a construction timeframe of 42 months.

Initiating Mining Activities at Thar Block-II

Thar coalfield, located in Sindh Pakistan, is bounded in the North, East and South by India, in the West by flood plains of the Indus River. Town of Islamkot, a population center, is 44 km to the West of the mining project site in Thar coalfield. The Thar coalfield was discovered in 1991 by Geological Survey of Pakistan (GSP) and the United States Agency for International Development bearing 6th largest coal reserves in the world – approximately 175 billion tons – enough to meet Pakistan’s current energy shortfall and meet fuel requirements for centuries, relieving the country of the prevalent energy crisis.

Bankable Feasibility Study (BFS) was developed by Sinocoal International Engineering Research & Design Institute of China, RWE of Germany, SRK (UK) and Hagler Bailly, Pakistan in 2010, for a Mine capacity of 6.5 Mt/ annum. The study concluded that the project is technically, commercially, environmentally and socially feasible.

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In 2012- 13 RWE amended the original Feasibility Study for the Mine size of 3.8 Mt/annum, which was done to reduce the capital cost of the overall project. In 2012, RWE also developed a Competent Person Statement (CPS) for the Lignite Resources in Thar Block-II, confirming that the total resources in Thar Block-II are 2.039 bn tons of which 1.57 bn tons are mineable.

The Thar mining project is categorized amongst the ‘early harvest’ projects under CPEC to generate electricity utilizing Thar’s untapped coal reserves. The mining project completed all tests, inspection and declared commercial operations date on July 10, 2019. The total planned mining capacity of the project will be 20.6 MT/annum with a capacity to scale it to 30.4 MT/annum while the power generation capacity is projected to be 3,960 MW at full capacity.

In order to combat poverty in the region and to in particular to improve the lives of the underprivileged communities living in Tharparkar district of Islamkot

The mining project is planned to be executed in phases with phase I completed in June 2019, and Phase II commenced thereon. In the first phase, the mine has been developed for a capacity of 3.8 MT/annum whereas two 330 MW subcritical plants have been constructed as part of the project by Engro Energy’s subsidiary – Engro Powergen Thar (Pvt.) Limited utilizing the complete capacity of 3.8 MT/annum.

In the second phase the mine will be further expanded to 7.6 MTPA and additional 2 x 330 MW of power plant will be added whereas in the third phase Mine will be expanded to a capacity of 15.2 MT/annum with an additional power generation capacity of 1,320 MW.

Generating Power to Address the Energy Shortfall

The first-ever Thar based 660MW Lignite Coal Power plant has made rapid progress and successfully achieved commercial operations date on July 10, 2019, thereby providing 660MW of electricity to the national grid. Engro Energy is the majority shareholder of Engro Powergen Thar Private Limited (EPTL), with CMEC; HBL; and Liberty being the remaining shareholders.

Read more: Thar Coal: Powering Pakistan

Together EPTL and SECMC are the largest private investment under China Pakistan Economic Corridor (CPEC) and are part of the early-harvest component of the CPEC framework being the only investments which are 95% owned by Pakistanis.

Empowering and Uplifting Communities in Thar

 

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In order to combat poverty in the region and to in particular to improve the lives of the underprivileged communities living in Tharparkar district of Islamkot, Sindh, Engro Energy in collaboration with SECMC and EPTL have set up the Thar Foundation.

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Interestingly, the majority of the programs they are undertaking started even before the mine & power projects were commissioned. In a unique initiative by the Government of Sindh the inhabitants of the project area have been made project beneficiaries; done by diluting 3% of the Government’s shareholding for the project affected persons who will become shareholders in the project.

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In addition, as part of the Sustainable Development Goals the Thar Foundation works on some key impact areas including education; health; livelihoods; gender equality; water and women empowerment amongst other focus areas.

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