PAKISTAN is poised to fast-track the construction of multiple thermal power plants based on regasified liquefied natural gas, as well as the conversion of existing natural gas- and oil-based power plants to RLNG.

The programme is being implemented under the new policy initiatives of the government to address power shortages.

Two combined-cycle power plants based on RLNG, each of 1,000-1,200MW installed capacity, are to be located at Balloki in Kasur district and at Haveli Bahadur Shah in Jhang district.

The federal public sector development programme 2015-16 has allocated Rs22.5bn each for the two LNG power plants at Balloki and Haveli Bahadur Shah

The federal government has set up a special purpose vehicle company, the National Power Parks (Pvt) Ltd, to implement the public sector projects. The site-specific environmental impact assessment (EIA) reports for the two projects have already been prepared. Nespak, in partnership with Germany’s Lahmeyer International, has been engaged as a consultant to conduct detailed feasibility studies and complete other formalities.

A number of foreign companies and joint ventures have obtained pre-qualification documents to bid for the EPC contract. These include Siemens, ANSALDO, Hyundai and Doosan of Korea and METKA of Greece, besides various Chinese companies.

The Central Development Working Party (CDWP) had approved Rs162.8bn for the two power projects (Rs81.4bn for each), without any foreign financial assistance. The NTDC will invest Rs7.15bn in providing grid connectivity to the two sites.

Subsequently, the federal public sector development programme (PSDP) 2015-16 allocated Rs22.5bn each for the Balloki and the Haveli Bahadur Shah projects, whereas Rs675m and Rs756m have been respectively allocated for the 500kV transmission line infrastructure.

The National Economic Council (NEC) recently approved the plants at rationalised costs, whereas the provinces have been given the option to participate in an equity investment.

Meanwhile, the Cabinet Committee on Energy had decided in January to construct another LNG-based power plant of 1,000-1,200MW installed capacity at Bhikki in Sheikhupura district. The Punjab government will execute and own the project through a newly-formed Quaid-e-Azam Thermal Power (Pvt) Ltd. Preliminary project studies have been completed, while the provincial government will facilitate land acquisition.

Similarly, the Government Holdings (Pvt) Ltd (GHPL) has been entrusted by the federal government to implementing small capacity RLNG power projects in Punjab, Sindh and Khyber Pakhtunkhwa. The GHPL is supposed to arrange the funding for these projects through its own resources, with an option to avail suppliers’ credit.

These combined-cycle power projects are proposed to be established in Faisalabad (250MW), Multan (250MW), Shahdara, Lahore (125MW), Sukkur (250MW) and Peshawar (125MW).

The 1,000-1,200MW LNG-based projects are to begin commercial operations 18-20 months (open-cycle mode) and 28-29 months (combined-cycle mode) after their financial close. However, the government wants these power plants to be functional by summer 2017.

The RLNG-based power plants will use high speed diesel as alternate fuel. They generally have good fuel efficiency and high operational flexibility, and are constructed primarily for peaking applications.

Meanwhile, the development of infrastructure for the supply of 600m cubic feet per day (mmcfd) RLNG through the networks of Sui Northern and Sui Southern Gas is scheduled for completion by end-2016.

Pakistan has already entered the international LNG market, having imported two consignments in March-April, and another two (each of 143,000 cubic metres) through ship-to-ship transfer at the LNG terminal in Karachi during June-July for CNG stations and other purposes.

Meanwhile, private investors are being attracted to set up LNG-based power plants through IPP mode. It is anticipated that the public sector projects would instill confidence in the LNG-based projects by establishing key benchmarks for capital cost, technology, operational parameters like plant efficiency and other critical standards.

The National Electric Power Regulatory Authority has already announced an upfront tariff for LNG based-combined cycle power plants of 700-900MW, which is applicable for the first projects of cumulative capacity of 3,600-4,000MW. The tariff is Rs11.2 per kWh for the first 10 years, with a 30-year levelised tariff of Rs10.55.

But the government will be well-advised to learn from the 6,600MW Gadani Power Park episode, which was launched amid much fanfare in 2013 also on a fast-track basis. Nonetheless, the government could not achieve substantial progress on the project, having failed to attract potential investors, and consequently had to shelve the entire project within a year of its launch.

The RLNG-based projects would meet a similar fate if they are unable to achieve commercial operations by their deadlines, and if various issues — like circular debt, the price of LNG, and guaranteed availability of RLNG to run the plants etc — are not addressed in a timely and effective manner.

The writer is the chairman of the Institution of Engineers Pakistan

Published in Dawn, Economic & Business, August 10th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play