Thar coal project – on the verge of realisation

Physical work ongoing since May 2014. With EPC Contractor finalised, project moving swiftly towards Financial Close. At optimum mine capacity of 4,000MW, Thar coal can yield a power tariff of approximately Rs 6 per unit – this is the cheapest among the options currently available, as compared to residual fuel oil or imported coal.

Thar coal reserves hold the key to Pakistan’s energy security with 175 billion of indigenous coal reserves buried under the desert. Pakistan is fortunate to have abundant coal reserves that are equivalent to the combined oil reserves of Iran and Saudi Arabia in energy equivalent terms, and have the capacity to produce 100,000 MW of electricity for 200 years.

The Sindh Engro Coal Mining Company (SECMC), a joint venture between the Sindh government and Engro Corporation, has been working on the project for the past 4-5years. Engro, as manager of the project, has been working on the technical and commercial aspects, whereas the Sindh government is developing the requisite infrastructure for the project. As the developer of Thar Block II, SECMC plans to expand the mine in phases and reach a sustainable capacity of coal output for the production of 4,000MW in 10 years, which will remain available for the next 50 years.

In the first phase of the project, mine of 3.8 million tonnes per annum capacity will be developed and the coal will be utilised by a mine-mouth power plant of 660MW. The total investment for the integrated project is estimated to be US $1.9bn. The company has achieved substantial progress on both projects. All technical and environmental studies have been conducted and NOC from environmental authorities (SEPA) have been received. China Machinery Engineering Corporation (CMEC) has been selected as EPC engineering, procurement and construction (EPC) contractor. As a world-renowned engineering contractor, CMEC is ranked among China’s top 10 contractors by the business turnover and has business reach in more than 150 countries and regions. CMEC has already been involved in various projects in Pakistan as EPC contractor including Saif Power (225MW), Muzaffargarh Thermal Power Plant (320MW) and Guddu Thermal Plant (210MW – involved in design, supply, and installation and commissioning). The EPC contract on turn-key basis has been finalised.

Six thousand acres of land has been acquired, for which no resettlement is required. Work for the 113m cubic metre overburden removal in Thar Block II was started with a local contractor on April 30. Use of a local contractor will help expedite the work before the Chinese EPC contractors are mobilised, saving 3-4 months in construction time.

The groundbreaking of the project was jointly performed by Prime Minister Nawaz Sharif and former President Asif Ali Zardari on 31st January 2014. The presence of both gentlemen greatly enhanced the project’s profile. The project has been declared as one of national significance by the prime minister, and assured full support of the government.

The development of regulatory and pricing regime for Thar coal by Thar Coal & Energy Board is also under way, and the reference coal tariff for Thar coal is expected to be announced as early as end of this month. Nepra has already announced acceptable power tariff for Thar coal-based power generation.

The government of Sindh, on the other hand, as the joint venture partner and developer of Thar, has been diligently working on the necessary infrastructure development. Operations in Thar require critical infrastructure, which includes a fresh water supply scheme and an effluent disposal line for disposal of groundwater. These are being executed as per the project requirements.

Sindh government, through the Sindh Irrigation and Drainage Authority (SIDA), is developing freshwater supply from Nabisar, which will support 1,200MW of power generation. Work is ongoing at a fast pace, and 50pc work of Phase I has already been completed, with the installation of a reverse osmosis plant at Nabisar. Meanwhile, the tendering process for Phase II is also completed. The scheme is expected to be completed by end-2016, much before the requirement of the power plant in December 2017.

But there are some concerns on the effluent disposal line, which was expected to be finalised by June, and the contract has not been awarded yet. The Sindh Government has, however, assured SECMC of its timely availability, and as per the project schedule, the line is now required by July 2015. SECMC has been made responsible for supervising the technical specifications for both the projects.

Despite several challenges relating to land acquisition in populated areas, the widening and rehabilitation of the road network is also proceeding at a fast pace, with expansion work being done on bridges, culverts and bypasses of small cities. To further reduce travel time, an airport is being constructed in Islamkot, whose airstrip has been completed and the construction of terminal building has to be initiated. It is expected to be completed by end-2015.

Moreover, for the bankability of projects and timely execution and reliable operations of critical infrastructure, the provincial government is drafting an implementation agreement, with adequate coverage in case of non-performance, which will be signed with the SECMC. Other infrastructure requirement such as the transmission line, which is the responsibility of the NTDC, has also been assured.

The federal and Sindh governments are also facilitating the SECMC in achieving financial close. With their support, the Thar coal projects of SECMC have been listed among ‘Prioritized Projects’ under the China-Pak Economic Corridor based on readiness. The Chinese government has already approved 14 power projects that have the ability to generate 10,400 megawatts (MW) of electricity.

China and Pakistan have agreed to give due priority to the development and utilisation of indigenous resource in Pakistan and is not only willing to provide the technical expertise for exploiting these resources but also help in financing these projects.

Discussions are ongoing with Chinese and local banks for the finalisation of term sheets. SECMC is confident of achieving financial close within this year, with the availability of sovereign guarantee for mining and an acceptable security package (IA, PPA, tariff) for the power plant in place. The integrated project is expected to come online by December 2017, if financial close is achieved within this year.

Thar dream is on the verge of realisation, and this has been made possible through the federal and provincial governments’ unwavering commitment towards the development of Thar. Thar, undoubtedly, is the most viable power generation option for Pakistan. Development of this indigenous reserve will not only address the severe power shortage crisis in medium to long term, but also bring the much required energy security to the country.

(The writer is the CEO, Sindh Engro Coal Mining Company-The views expressed in this article are not necessarily those of the newspaper)