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Energy sector reforms: Earnest intentions for structural changes necessary – V

Expanding the thought process

1. Proven integrated model of K-Electric needs to be replicated in other power DISCOs and also in GAS DISCOs instead of repeating unsuccessful concept of privatizing them and then passing on the buck to the provinces.

a. Focus should be to merge, hand over 51% stake under P3P or even 100% stake for Re1 each of the DISCO to IPPs (maybe also PAEC, WAPDA, GENCOs) and similarly distribution regions of SSGC/SNGPL (GASDSICOs) with E&Ps (MOL, PPL, MGCL maybe OGDCL) while one regulator (NEPRA and OGRA combined) who can assure open access of the transmission network.

b. A transparent auction process should encourage consortiums and insulate them against interference from NAB, FIA, CPEC Authority.

c. Implementation of CTBM should be taken in small steps in Sindh and with power plants of Gul Ahmed, Tapal, KAPCO, in Jhimpir and Hubco upon expiring of its PPA. Similarly, third party access of gas transmission and distribution networks to be expedited.

2. Supply chain, energy mix planning and regional integration requires homing in accordance with the objective of defining the mechanism for undertaking economic diplomacy under a national plan for development and reforms by a “NDRC” of Pakistan.

a. Regional market/cooperation mandate be exercised by ISGS/NTDC (Oil storage, refinery, petrochemical and liquefaction facility in Gwadar, gas, electricity, LPG, oil from Central Asia and China using the Iran-Pakistan Railway link, Haulers and Pipelines including trading using PMEX).

b. Note that new world is much more geopolitical and is evolving a multipolar order.

c. Pakistan Railways (PR) can handle more fuel transport and PSO had increased furnace oil (FO) handling in 2016 on Saad Rafique’s initiative that benefited PR. Capacity upgrade to handle MOGAS, LPG, LNG and HSD using indigenous engineering and technical expertise to modify the FO tankers and build new ones at HMC/Mughulpura is pending.

d. The non-competitive clause for white oil pipeline that monopolizes transport of HSD/MOGAS and restricts transport by PR needs amendment.

3. Various entities are indebted to one another due to Circular debt (CD). A pragmatic approach may be adopted to reconcile the outstanding amounts and consider on ‘net principal’ basis.

This may help streamline the accounting process, prevent further disputes over levying of markups, and enable sector and stakeholders to finally get out of this vortex of debt. Under the PM’s directives, various task forces have been established to address the challenges and may oversee a quick resolution of the subsidy funds (e.g., TDS, ISP, etc.) stuck with the fiscals of DISCOs and K-Electric.

a. CD reduction known solution is of having energy priced at cost (electricity at price of diesel and gas at price of LNG to provide funds for subsidy) to all-in-one unit (mmbtu) and only funded subsidy be directly paid to recipient.

b. Implement one source of energy deliverance to residential consumers.

4. Cost of losses justifies investment in upgrade.

a. Tariff determinations should include actual losses with incentives to reduce them and incorporated in tariff petitions by DISCOs/Gas companies with regulator under a performance bonus to employees.

b. In the power sector these losses stand at 18.32%: gas distribution losses are 13.86% and 14.14% for SNGPL and SSGC, respectively.

c. Collectively, the two represent ~600 mmscfd (~ USD 3-7 bn pa at USD 30/mmbtu LNG) and up to 14,000MWs (approx. USD 14bn investment in generation capacity excluding yearly OPEX and capacity charges based on the 2031 IGCEP Installed Capacity planning.)

d. Employees’ entitled units of mmbtu, litres or kWh per month under a compensation policy should be taxable and have a limit.

5. Infrastructure needs focus for energy security and demand growth for a growing population.

a. Monopoly of FOTCO terminal over import infrastructure at Port Qasim limits competition and increases demurrage charges due to the limitations of the KPT berths and Port Qasim’s water channels.

b. Solution for connecting the ports by pipeline has been in the works for close to a decade between KPT, PSO and PAPCO. PRL should have taken the lead on this much earlier being a significant beneficiary. ‘Oil city’ in Gadani and Gwadar needs execution

c. SSGC/SNGPL’s construction abilities and experience be used for oil and gas pipeline laying.

d. PLL/PLTL should be under PSO and SSGC. SSGCLPG can own and manage FOTCO, EVTL, SSGCLPG, PGPL and EETL terminals as their agreements expire

e. Combination of OGDCL and PPL needs to focus on offshore exploration and act as institutions providing confidence and guarantees to international E&P firms by ensuring security and should compete internationally in both the gas and oil segments; also purchase equity in liquefaction facilities in the USA/Australia/Qatar.

f. LNG and oil procurement should start with tendering for volumes auctioned by refineries and liquefaction facilities in addition to signing long-term contracts on timely basis as our arrangements in place will expire soon.

They may be seen as disruptive measures but reducing the burden of government and its entities, ensuring ease of doing business, merging redundant departments, and placing organizations with similar portfolios under one umbrella is critical.

a. Departments and entities should merge on functional levels, consolidate or be shutdown altogether particularly those under provincial mandates e.g., Azad Jammu Kashmir Private Power Cell, Energy Department Sindh/Punjab, Sindh Transmission and Dispatch Company, Pakhtunkhwa Energy Development Organisation.

Sheikh Imran ul Haque, "Energy sector reforms: Earnest intentions for structural changes necessary – V," Business recorder. 2023-03-15.
Keywords: Social sciences , Social crises , Energy crises , Electric issues , Power shortage , Energy development , Punjab , Sindh , Pakhtunkhwa , SSGC. SSGCLPG

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