Thar - The Energy Pill for

Pakistan

Maida
THAR COAL RESERVES Siddiqui
Moiz Tapal

C Ayesha
oal -the black gold is found in all the four
provinces of Sarfaraz Pakistan. Country has huge
coal resources, Usman about 185 billion tons
(making Pakistan stand 18th in the world), out of which
3.3 billion tons are in proven/measured category
and about 11 billion are indicated reserves, the bulk of it is found in Sindh province.
The current total mine-able reserves of coal are estimated at 2 billion tones (60% of the
measured reserves)1.

The largest coalfield of Pakistan, Thar, is a resource potential of about 175 billion tones
sufficient to meet country’s fuel requirements for centuries. The rank of Thar coal
ranges from lignite-B to sub-bituminous-A with high moisture and low sulfur content 2.
The average chemical analyses of the coal samples from the entire Thar coalfield are:

Moisture 46.77%

Volatile Matter 23.42%

Fixed Carbon 16.66%

Ash 6.24%

Sulfur 1.16%

Heating Value (Dry) 10,898 Btu/lb

It is one of the world’s largest lignite deposits discovered by the Sindh Arid Zone
Development Authority. In 1991, enormous coal deposits were conferred by the
Geological Survey of Pakistan and the United States Agency for International
Development, spread over more than 9, 000 sq. km. Estimated lignite deposits in Sindh,
suitable for electric power generation and other applications are around 218 billion
tons- about 98% of coal deposits of the country3.

If all the oil reserves of Saudi Arabia and Iran are put together these will be
approximately 375 Billion Barrels, but a single Thar coal reserve of Sindh is about 850
trillion cubic feet, which is more than oil reserves of Saudi & Iran. These reserves

1
Seminar/ Symposia/ Workshop Coal, Granite, China Clay And Other Resources Of Thar,
http://www.gsp.gov.pk/resources/seminars2.htm
2
Thar Coal Reserve Quality, http://www.khwarzimic.org/takveen/thar-gas-coal.pdf
3
Geological Survey of Pakistan, http://www.gsp.gov.pk/resources/seminars2.htm
estimated at 850 trillion cubic feet (TCF) of gas, are about 30 times higher than
Pakistan's proven gas reserves of 28 TCF4.

Dr Murtaza Mughal president of Pakistan Economy Watch in a statement said that

these reserves of coal worth USD 25 trillion not only cater the electricity requirements of
the country for next 100 years but also save almost four billion dollars in staggering oil
import bill5.

THE ENERGY FIASCO

The Taliban may be plotting bombings, and the economy is on the brink. But these days,
the single biggest woe tormenting Pakistanis is as basic as an electric light bulb.

To say Pakistan's power crisis is worsening on a daily basis is to say the least. With an
electricity shortfall that is spiraling out of control and unannounced power cuts of up to
12 hours in many areas of the country, the government of Pakistan is trying to figure
out how to pull the plug on Pakistan's energy crisis. Unfortunately for them, it will take
more than a bit of effort.

The problem with Pakistan's energy crisis is bad planning. Electricity consumption has
increased over the years, but successive governments failed to plan for the future. As a
result, Pakistan now needs a huge supply of electricity, and has very few power
generation plants that can cope up with the demand. The current government has
announced plans to set up power plants and build dams to help generate power, but
building power plants afresh takes a lot of time -- and a lot of money, which this cash-
strapped government will not be able to pay for on its own6.

Amidst this anger and frustration over power shortages, there a plethora of solutions
about how to tackle this crisis but there seems to be no sign of implementation and
improvement. Many argue that why is there a need to look outside for a solution when

4
Shamim Ahmed Rizvi, http://www.pakistaneconomist.com/issue2001/issue34/i&e1.htm
5
Engr. Waseem A Khokhar http://www.opfblog.com/9262/pakistan%E2%80%99s-%E2%80%9Cthar%E2%80%9D-
coal-reserves/
6
Huma Imtiaz, April 21 2010, Power Plays in Pakistan,
http://afpak.foreignpolicy.com/posts/2010/04/21/power_plays_in_pakistan
the country possess enough resources of a fuel that has been well known for producing
energy for centuries: Coal. As quoted by the former president himself.

"If 2% of the whole coal reserves at Thar gets utilized, the country could generate
20,000MW of electricity for 40 years and if the whole reserves are utilized, then it could
easily be imagined how much energy could be generated," Pervez Musharraf 7.

During recent years the interests in the use of low-ranked coals and lignite as energy
sources have greatly increased. Investigations are being carried out for the possibility of
the conversion of lignite into gaseous fuels. Biological gasification processes of coal and
lignite will play an important role for energy requirements in future because these
processes may offer potential advantages of lower cost and higher efficiencies than the
various conventional thermal processes8.

It has been quoted that Sindh province could generate at least 7000-8000 MW electricity
using Thar reserves by 2012, which would not only cater to the country’s 3,500MW
power shortage, but would also be exported to the neighboring countries 9.

Thar reserves can really be a cost effective, viable and long term solution to this crisis,
compared to other short term solutions such as use of RPPs, and the controversial Iran
gas pipeline.

THE CONSPIRACIES

Thar coal has extraordinary importance for power generation, industrial development
and economy, Sindh government and GOP are making all out efforts to develop this
huge deposit for power purpose.

Pre-feasibility study to utilize this coal resource for 2x300 MW indigenous, mine mouth,
coal fired power plants had been carried out along with hydro geological investigations
over an area of around 650 sq km. Estimated lignite deposits in Sindh, A feasibility
7
Ali Hamza, Internal Auditor, Alghurairgiga Pakistan (Pvt) Ltd, http://www.friendskorner.com/forum/f39/thar-
coal-reserves-pakistan-133024/
8
Thar Coal Reserves, http://www.accessmylibrary.com/coms2/summary_0286-35154718_ITM

9
http://rupeenews.com/2010/04/25/colossal-thar-coal-reserves-solutions-beyond-energy/
study on coal gasification had also been undertaken and the gasification of coal was
found feasible where the gas has to travel less in pipelines.

The GSP had successfully completed coal resources evaluation in the four specific
tracts/ blocks of Thar coal field. The evaluation study of the GSP consisted of drilling
167 bore holes with a cumulative depth of over 50, 000 meters and chemical analyses of
more than 2, 000 coal samples. On the basis of these studies, the required coal potential
of a minimum of 500 million tons in each block has been established by the GSP10.

Gasification of coal, under which technology will also be used besides extracting coal
for gasification of 'black gold' underground and the gas, which will be produced by
coal, to be provided to the powerhouse at Thar provides a good opportunity11.

The ex-Finance Minister Shaukat Aziz had visited China and discussed the Thar coal
project. The Minister held detailed discussions with Mr. Ye Quing Chairman of a
leading Chinese company specializing in coal mining development, which showed keen
interest in the project and found it commercially viable. Quing expressed willingness to
invest in the project and a team of Chinese experts was to later visit Pakistan to make on
the spot studies.

Chinese and other international investors were to form a joint venture for the
development of Thar coal project and it was most likely that Chinese would have been
our partner in this venture according to Mr. Mian Soomro12.

Chinese and other companies had not only carried out surveys and feasibilities of this
project but also offered 100 percent investment in last 7 to 8 years but the “Petroleum
Gang” always discouraged them in a very systematic way.

This Petroleum lobby is very strong in Pakistan and they are against any other means of
power generation except for the imported oil. This lobby is major beneficiary of the
increasing oil bill that is estimated above 15 billion dollar this year. Even government is
planning to sell all these reserves to a company on a very low price.
10
The Geological Survey, http://www.gsp.gov.pk/resources/seminars2.htm
11
The News International, Go ahead given to exploit energy potential of Thar coal,
http://www.thenews.com.pk/top_story_detail.asp?Id=12859
12
Shamim Ahmed Rizvi, http://www.pakistaneconomist.com/issue2001/issue34/i&e1.htm
When Pervez Musharraf was president he gave green signal to embark upon the
initiation of work on exploiting energy potential of these coal reserves of Thar under a
modern strategy.

The coal power generation would have costed Pakistan PKR 5.67 per unit while power
generated by Independent Power Projects presently cost PKR 9.27. It required just 420
Billion Rupees initial investment, whereas Pakistan receives annually 1220 Billion from
tax only13.

But the delay in implementation of project as per the Sindh government letter to the
Federal Finance Minister, has been due to policy and regulatory ambiguities, lack of
enough technical data such as on-surface and sub-surface water resources in Thar, an
absence of a build-out plan for Thar coal blocks and the need for clear definition for
roles and responsibilities with regard to Thar and power development. All previous
attempts at bringing international investment in exploiting Thar Coal reserves did not
materialize due to above highlighted reasons.

However, the implementation of project has been started once again. According to the
sources in Federal government, quoting the letter of the Sindh government, the Thar
Coal and Power Technical Assistance Project is a World Bank assisted project being
implemented as a partnership between the Province of Sindh (Coal Mining
Department), and Government of Pakistan (Coal Fired Power Development). The
Provincial component of the IDA financed part of the project is estimated at $25.8
million dollars and the federal component at $4.2 million dollars, however the IDA
Credit will finance 100 per cent of identified project costs at $30 million dollars, sources
said14.

Coal can also salvage the cement industry which is in bad shape because of heavy cost
of inputs besides Power Plant producing cheap electricity. The use of coal would result
in a saving of nearly Rs. 495 million per year for a plant producing 3,000 tons of cement
per day. The use of furnace oil for producing one ton of cement is said to cost Rs. 924, as
13
Engr. Waseem A Khokhar http://www.opfblog.com/9262/pakistan%E2%80%99s-%E2%80%9Cthar%E2%80%9D-
coal-reserves/
14
Ramzan Chandio, December 09, 2009, http://www.defence.pk/forums/economy-development/47101-thar-coal-
reserves-3.html
against about Rs. 374 with the use of coal. Among other advantages accruing from the
contemplated shift, the prospect of the national exchequer saving $170 million in the
event of the cement sector running to its full capacity, or at least $100 million a year on
the utilization of 63 per cent production capacity as now is also a big incentive.

A sizeable cut in the cost of production, eventually leading to the much needed
reduction in prices, should cause spurt in demand, providing a boost to production of
cement in the country. Increase in consumption thus prompted, should help solve the
problems. Eventually, reactivation of the national cement industry with an overall
reduction in cost of production, coupled with a marked emphasis on the growth of
housing sector, which figures prominently in the government's development priorities,
can certainly serve as a strong catalyst for the country's economic revival15.

THE LAG

The Thar Coal Project has been suffering from justifying the economic rationale for the

exploitation of the coal reserves. In 2002, a feasibility study was carried out by a

Chinese company, Shehua. According to the preliminary study carried out by the

company, it declared the extraction of coal as highly infeasible at that time. Apparently

the company had a disagreement with the proposed tariff. The Chinese company

considered it insufficient to cover the expenses that were associated with development

of the project. The justification for their conflicting attitude came out as the project being

costly, because at that time the extraction costs were very high, taking into

consideration the international coal prices. Pakistan had previously turned down

Shenhua’s demand for a tariff of 5.7 US cents per unit for the Thar project…….The

Chinese group later expressed its willingness to install the power plant at a price of up

to 6.5 cents per unit, but the government had not yet made a final decision on the tariff 16

After doing a comparative analysis of outsourcing versus manufacturing, the most

feasible solution in terms of economic efficiency came out proposing that coal imports

15
Shamim Ahmed Rizvi, http://www.pakistaneconomist.com/issue2001/issue34/i&e1.htm
16
Syed Fazl-e-Haider (2007) China quits $1.5bn Pakistan coal project, Asia Times
was the best alternative at that time. However, the company did propose that the Thar

Coal project could propose itself as a solution to the social development of the

population residing in Thar.

Building upon the argument of imports versus extraction, the project has always been

subject to assessment s as to what is the best route to utilize the coal reserves. This

decision cannot be made in isolation and is directly impacted by the international coal

prices. Developing the mining infrastructure is a much more time consuming process as

compared to installing a power plant and is likely to take anywhere between 6-8 years.

Therefore, the previous Sindh government could have started work on the mining of

coal as that phase is likely to take about six years.  In the mean time, it could have

commissioned a bankable feasibility study for power generation.  Furthermore,

additional uses of Thar coal could have been investigated (as is being done now) like

gasification, rather than unnecessarily focusing on making it an exclusively power

generation project17.

This is not the first time the project has been subject to policies injustice or incorrect

assessments of its potential. During 1994-95, the country evoked the interests of

international mining giants who were interested in getting concessions for mining

rights for Thar Coal. Many companies did come to Pakistan, signed MOU’s, set up

offices and field camps and started importing equipment. However, after the

government changed in 1996, it was decided that an increased focus would be directed

towards Hydel Power instead and coal power was completely neglected. At the time,

the serving Petroleum Minister went on record to announce this sudden and dramatic

policy shift in 1996-97. Lack of consistent policies and attempts to save further losses,

the international companies chose to withdraw their investments. Current lack of

17
Kamran Riaz (2009) Pakistan’s Thar Coal: A COmparitive Study, retrieved from
http://www.opfblog.com/9533/pakistan%E2%80%99s-thar-coal-a-comparative-study/
interest by international mining companies is largely due to lack of credibility,

primarily caused by Government policy inconsistencies rather than any deficiency in

the resource base of Thar Coal.

Reported in the May of 2010, the World Bank has chosen to withdraw its support to the

Thar Coal Project. "Major Reasons for the World Bank's withdrawal from the project is

lack of emphasis on Thar coal resources in our national energy policy and our failure to

highlight these reserves as critical for our national security," sources stated 18.

The Sindh government regarded this act as discriminatory as the World Bank chose to

support coal projects in many countries including India, South Africa and Botswana. It

has adopted a dual policy. It is entertaining coal projects in those countries where coal

has been declared as a component of national security and where there is no other

alternative available.19 On Pakistan’s front, the reason for withdrawing the funding can

be assumed to be labeled as ineffectiveness on part of the GoP. The government has

failed to highlight the employment and extraction of coal as a matter of strategic

national interests and as a component contributing to national security.

Earlier the World Bank has instructed Pakistan, to conduct studies in evaluating the

populations that were to be most affected by the project. These plans were also

supposed to include resettlement plans for the displaced people. Last year, the World

Bank team visited Pakistan to meet up with the communities that had a stake in the

project in terms of relocation. These people expressed little confidence in the

government’s plans and exhibited apprehension. The Bank highlighted three concerns

of the populations that were resided in the vicinity that would be the focus during the

Project: lack of trust in the government’s plans for resettlement; loss of land title that

18
Economy and Development (2010) World Bank withdraws support to Thar Coal Project, Pakistan Defence Forum
19
Ibid.
may never be reimbursed wholly after disintegration and loss of topsoil that is deemed

critical for fruitful agriculture.

Based upon the negligent attitude of the GoP towards the Project, the World Bank chose

to reduce its stakes in the extraction efforts.

FUTURE OUTLOOK

It has been seen that coal plays an important part in the economic development of
countries and plays a major role in economic, social and environmental sustainable
development. Dr Murtaza Mughal president of Pakistan Economy Watch in a
statement said that 185 billion tunes of coal worth USD 25 trillion can not only cater the
electricity requirements of the country for next 100 years but also save almost four
billion dollars in staggering oil import bill. Other sources point out that the Thar coal
reserves alone are estimated at 185 billion tons having the potential to produce 100,000
MW for 300 years, which is the solution of the power crisis20.

Two international and two local companies are working in various Thar blocks to set up
coal-fired power plants. A UK firm Cougar Energy is exploiting Block III for
underground coal gasification, which will lead to a 400mw power plant. Another UK
firm, Oracle Gas Fields, also plans to develop 1.4 billion tons coal integrating the mine
with the construction of a mine-mouth power plant.

The Thar Coal Power Project (TCPP) would attract over $20 billion foreign investment
within a year. According to sources, a host of interested companies from United States,
China, Britain, Singapore, South Korea, Germany, Poland, Australia etc would invest
over $20 billion in the Tharparkar based energy project. Also after long standing
negotiations, a contract has been awarded to an Indian company called Mittal which
will invest in the Thar coal reserves 21.

20
Dr Murtaza Mughal, http://www.marketwatch.pk/news/pakistan-business-news/thar-coal-reserves-can-
produce-100,000mw-for-300-years

21
Future Prospects of Thar, http://www.articlesbase.com/history-articles/thar-coal-reserves-can-turn-around-
pakistani-fortunes-619987.html
Besides Power Plant producing cheap electricity Coal can also salvage the cement
industry which is in bad shape because of heavy cost of inputs. The use of coal would
result in a saving of nearly Rs. 495 million per year for a plant producing 3,000 tons of
cement per day.

One important aspect that companies that are interested in these coal reserves have to
keep in mind is that of the environment. Coal is an energy source that pollutes the
environment because of the emission of more carbon per unit of energy. Therefore,
those companies that want to operate in the area should follow stringent environmental
policies22.

With an apparent energy crisis looming in Pakistan, the Thar coal reserves have become
a vital option to fulfill the nation’s energy needs. The Government has to consider
options that will help bring in investments in that area and at the same time cater to the
energy needs for generations to come.

RECOMMENDATIONS

 In the attempts to gain complete confidence and secure investments in the Project,
Pakistan needs to focus primarily on two issues:

 Consistencies in government policies

 Gaining complete confidence of investors

 The government needs to undertake planning in a consistent manner. The business

plan needs to be part of a research based ongoing process that justifies the feasibility

of the Project and assures the changing governments of its viability. there needs to

be protection from the personal interests of the government parties. The Project

needs to consider in isolation, and as contributing to the success of the country at

large.

22
http://www.pakistaneconomist.com/issue2001/issue34/i&e1.htm
 The GoP needs to express its dedication to the project in terms of the foreign policies

and commitment as directed by the external parties willing to fund the project.

There needs to be an ongoing monitoring and evaluation scheme that justifies the

efforts and gains sustained investments in the long run.

 To exploit the massive energy potential of Thar, South Asian countries including
India, Pakistan, Nepal, Bangladesh and Bhutan should pool their financial resources
and technical expertise and start mega energy projects in Pakistan and develop a
consensus energy distribution formula for meeting their energy needs. There are
many examples of power sharing among countries of Africa, Latin America, Central
Asia and South East Asia and South Asian countries should also take benefit from
such arrangements23.

 There have been views about the Petroleum lobby which is alleged to have hindered

the process of the development of the Thar coal reserves. The Government should

make sure that there is no interference from such lobbyists and they should think for

the greater good of the nation and its people. There needs to be protection from the

personal interests of the government parties. The Project needs to consider in

isolation, and as contributing to the success of the country at large.

 Pakistan lacks the resources and expertise to fully utilize the reserves. Therefore,
Pakistan needs to attract foreign firms that have expertise in dealing with coal
reserves.

 Industries that are facing huge energy costs due to the rising prices of oil should
pool their resources to make use of the coal reserves as an alternative form of
energy24.

23
http://thedawn.com.pk/2010/05/03/can-pakistan-waste-huge-coal-reserves-by-burning-black-gold/

24
http://www.opfblog.com/9262/pakistan%E2%80%99s-%E2%80%9Cthar%E2%80%9D-coal-reserves/