Economics Analysis For Managers Report on:

Coal Resources in Pakistan

By:

Aamir Sheikh 39100

Muhammad Gulzar Deedhi
Prakash Naik 34170
Syed Mujtaba Maroof Naqvi
Uzair Ahmed 36674

16th Dec 2017

Submitted as mandatory requirement for the course “Economics Analysis for Managers” in the
Program, Masters of Business Administration
 Iqra University

ACKNOWLEDGEMENT
"Starting in the name of ALLAH the most beneficent and the most merciful whose blessings are

abundant and favors are unlimited”

Our gratitude will be meaningless if we are not grateful to almighty Allah for his kindness upon

us. His benevolence and blessings have made us capable.

Iqra University have been a wonderful plat form for polishing and grooming. It has surely

given us a place to use our skills and give our best to the world. A great thanks to our

respected instructor Mr. Khurram Ali Zaidi who taught us smoothly all the relevant

concepts and a big thanks to all my group members who actively participated in this

project.

This project has given us a lot of learning that what Economics Analysis is and how it is

practiced in the corporate world.

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EXECUTIVE SUMMARY

The report so designed is on the Coal resources in Pakistan. Pakistan is a place with many

natural topographical features and Pakistan's largest coal reserves are found in Sindh with

approximately 184.623 billion tons. The presence of coal deposits in Pakistan was known

before independence, but its economic value was highlighted in 1980 when large reserves

of coal were discovered.

The purpose of this report is to highlight the changes in economy and to show the impact

on the country’s economy coal reserves and resources has made till now. Pakistan is

undergoing an unprecedented energy crisis. There is a demand and supply shortfall of

8000MW in the country, resulting serve repercussions for the economy as a whole. In

order to address the mammoth of this power shortage, government needs to formulate a

definite strategy for the future.

In many other developed countries coal is being used as the primary source for power

generation. In Pakistan, coal currently makes up merely 0.10% of the electric power

generation.

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TABLE OF CONTENTS
S.No Contents Page no.
01 Introduction 05-06

02 Coal Resources 07-09

03 Utilization of Pakistan’s Lignite Coal 10-13

04 Impact of coal on GDP 14

05 Import and Export of coal in Pakistan 14-19

07 Issues and prospects: Coal power generation in Pakistan 20-26

08 Coal Production Tables 27-28

09 Conclusion 29

10 References 30

Note: The page numbers given above are only for demonstration; they should not be
taken as recommended length of a section/part.

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INTRODUCTION
Pakistan is a coal-rich country, but, unfortunately, coal has not been developed for power

generation for more than three decades due to lack of infrastructure, insufficient

financing and absence of modern coal mining technical expertise. The Government has

now determined to facilitate private investors to promote investment in coal development

and coal power generation. Unavailability of reliable coal is the main obstacle to

significant progress in coal power generation. The Federal Government and Provincial

Governments, however, are continuously trying to facilitate private investors in

developing and promoting indigenous coal for power generation. Coal is primarily

classified into four major categories, or 'ranks': lignite, sub-bituminous, bituminous and

anthracite. One of the most valuable content of coal is its carbon content which supplies

most of its heating value.

However, various other factors as moisture content, ash content and sulphur are also

important in determining the rank of a particular coal. Anthracite is top ranked coal, with

highest carbon content that ranges between 86-98 per cent and has a heat value of nearly

15,000 BTUs (British thermal units) per pound.

The discovery of coal in Baluchistan during the late 18th century led to its commercial

utilization mainly by the North-Western Railways during the colonial regime. At present,

our total coal reserves are estimated around 184.5 billion tons which include the lately

discovered deposits of low sulphur coal at Thar. The largest deposits are in Thar desert,

which is about 850 trillion cubic feet spanning over 10,000 square kilometers,

surprisingly more than the oil reserves in Saudi Arabia having a collective quantity of

approximately 375 billion barrels.

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The local coal falls in the lignite and sub-bituminous categories. Coal from Lakhra and

Sonda fields of Sindh has relatively higher moisture, sulphur and ash contents.

As opposed to this, Thar coal having estimated reserves of 184.6 billion tons is much

superior in quality due to low sulphur content and higher heating value. Well-developed

coal-fields are located in Punjab, Baluchistan and Sindh.

On November 28, 2014, Minister of State for Petroleum and Natural Resources Jam

Kamal Khan claimed that there will be a 50 per cent increase in primary energy demand

between 2014 and 2030. Forewarned should ideally mean one should then be forearmed,

but when it comes to fulfilling this demand, progress is being made at a snail’s pace.

What has changed in recent times, however, is the diversification of energy sources.

From relying mainly on hydro and oil power, Pakistan has now progressed to harnessing

alternative energy to meet the energy shortfall.

Coal is presently world’s fastest growing fuel particularly in the developing countries.

Coal’s importance can be judged from the fact that it provides 26 % of primary energy

and 40 % of world electricity supply.

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COAL RESOURCES

The presence of coal deposits in Pakistan was known before independence, but its

economic value was highlighted in 1980 when large reserves of coal were discovered in

the Lakhra and Sonda areas of Sindh Province. The discovery of another huge coal

deposit of 175.5 billion tons in an area of 10,000 sq. km in Tharparkar District of Sindh

has provided a quantum increase in the coal resources of Pakistan. After this discovery,

Pakistan is now the 6th richest nation of the world in respect of coal resources. Pakistan

did not appear even on the list of coal-rich countries before the discovery of Thar Coal.

Coal resources available to Pakistan exist in all four provinces and in AJK. The total coal

reserves are estimated at 185.5 billion tons.

Sindh Coal Resources

The Province of Sindh is located in the south of Pakistan. Coal was discovered in Sindh

in 1853 when Baloch nomads reportedly struck a coal seam 2.43 meters thick at a depth

of 125 meters by sinking a well for water at Lakhra, a village on the western bank of the

River Indus in district Dadu. Burmah Oil Company in 1948, and Pak Hunt International

in 1953, recorded the presence of coal at Lakhra in holes drilled in search of oil. The

Habibullah Mines Ltd. started commercial mining of coal in Lakhra in 1959. Sonda coal

was discovered in 1980 and Thar coal in 1992 by GSP. The total coal resources of Sindh

have been estimated to 184.6 billion tonnes whereas the coal deposits of Thar alone are

estimated at 175.5 billion tonnes, which can ideally be utilized for power generation. In

addition to Thar, the other coalfields of Sindh are at Lakhra, Sonda, Jherruck and Indus

East. The Lakhra coalfield is fully developed, and contains mineable coal reserves of 146

million tonnes. Sindh coal is classified as ‘Lignite’ with calorific value ranging from

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5,219 to 13,555 Btu/lb. Thar coal has low sulfur and low ash content but high moisture,

whereas Lakhra coal contains high sulfur. The feasibility study conducted by John T.

Boyd & Co. of USA has confirmed mineability and suitability of Lakhra coal for power

generation. The feasibility study of Thar coal is yet to be completed to confirm its

mineability and suitability for large scale power generation. The Sonda coalfield,

including Indus East, is the second largest coalfield of Sindh. The feasibility study of

Sonda coal for power generation is yet to be initiated.

Baluchistan Coal Resources

There are number of coalfields in Baluchistan. However, the major coalfields are Sor-

Range/Degari, Khost/Sharigh/Harnai/Ziarat, Mach and Duki. The total coal reserves are

about 217 million tons, of which 32 million tons are considered mineable. The thickness

of coal seams ranges from 0.3 to 2.3 meters. Baluchistan coal is classified as sub-

bituminous to bituminous and the heating value ranges from 9,637 to 15,499 Btu/lb. It

has low ash and high sulfur coal, and is considered suitable for power generation. Small

power plants up to 25 MW can be set up in each coalfield

Punjab Coal Resources

The main coalfields of Punjab are in the Salt-Range and at Makarwal. The total coal

resources are estimated at 235 million tons, of which 33 million tons are mineable.

Punjab coal is classified as Sub-bituminous, and the heating value ranges from 9,472 to

15,801 Btu/lb. It has low ash and high sulfur, and is considered suitable for power

generation

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KPK Coal Resources

The coalfields of NWFP are not yet fully explored. Its coal deposits are located in two

areas, namely Hangu and Cherat. The coal resources of Hangu and Cherat are estimated

to be 91 million tons. The coal is classified as Sub-bituminous and its heating value

ranges from 9,386 to 14,217 Btu/lb. It has low sulfur and low ash. The coal beds in

Hangu area are up to 3.5 m thick whereas the coal beds in Cherat area are generally less

than one meter in thickness.

Azad Jammu & Kashmir Coal Resources

The AJK coalfield is located near Kotli about 80 km south-east of Islamabad (Map 7).

One or two coal beds occur in the steeply dipping Patala Formation. The coal beds have

an average thickness of 0.6 m. The total coal resources of AJK are estimated at 0.06

million tons. The coal is classified as Sub-bituminous and the heating value ranges from

7,336 to 12,338 Btu/lb.

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UTILIZATION OF PAKISTAN’S LIGNITE COAL

Power Generation While considering the development of power stations based on lignite

coal, it is important to take into consideration the following factors:

a) The power station must be located at the mine site, because the low energy and

high moisture content of lignite coal do not justify the transportation cost.

b) Transmission and power line losses require the load center to be in reasonable

proximity to the power station (200 km) and, consequently, relatively close to the

mine.

c) Lignite coal has certain characteristics which require special consideration

when selecting the type of equipment for mining and power generation, e.g. high

moisture content will reduce the efficiency of power generation and add to the

cost of capital for the equipment required to burn the coal. On the other hand,

boiler efficiency and the coal feed rate increases as the moisture content of the

coal increases. Similarly, the ash content of lignite may contain mineral matter

bound with the organic material, and these elements, especially sodium, can cause

severe slugging and fouling problems in conventional boiler.

Despite these problems, lignite coal is used extensively for power generation throughout

the world. In many areas, there is abundance of lignite reserves, as in Pakistan. Pakistan’s

enormous deposits of lignite need to be developed, because it is relatively cheap to mine

and suitable for power generation. Open-cut mines using Bucket Wheel Excavators are

able to recover lignite from the thick coal beds located in the Thar coalfield. This type of

mining is very common in Germany, Greece, Spain, Australia and India. The Thar lignite

of Sindh has 50% moisture. SFBD technology, now commercially developed, however,

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removes moisture from coal by direct evaporation in a steam heated exchanger, and

produces dry coal with very little moisture. Another technology for power generation

from lignite coal is Circulating Fluidized Bed (CFB) which is also very effective. In CFB

technology, coal mixed with limestone is burned in a fluidized bed. The sulfur in the coal

is absorbed by the calcium carbonate, and the emission is free from sulfur dioxide.

Pakistan has large very deposits of limestone

ROLE IN POWER GENERATION

Coal is important factor of electricity production and it is commonly utilized in different

countries for electricity production. Pakistan has also number of coal reservoirs available

and they can be utilized for the production of electricity in order to prevent load shedding

in the country.

Coal is at present world's fastest growing fuel, particularly in the developing countries.

Coal's importance can be judged from the fact that it provides 26% of primary energy and

40% of world electricity supply.

Coal-based power projects will reduce the supply-demand gap in the country, these

would certainly have quite harmful effects on the environment in the long run. The

government’s plan to accelerate domestic coal production from 4.5 to 60 million tonnes

annually stands in stark contrast with global trends at a time when the world is turning to

more and more renewable forms of energy. Coal contributes 0.2 % towards meeting

Power requirement. Some use in Heat requirement Huge domestic resources May resolve

within 6 months Captive Heat and Power requirement at reasonable price. Availability of

useable coal is still problem not Environment friendly, need some innovative approach,

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need people who may take initiative, who can contribute to quantum jump if right Coal

policies adapted.

Electricity Generation 2007-08

Total 95,860 GWh

Oil Hydel
32.16% 29.96%

Coal Nuclear & Imported

0.10% 3.41%

Gas
34.37%

Current dependable power supply hovers around 14000 MW in summer whereas it drops

down in winter. On the other hand power demand in year 2030 would reach more than

100,000 MW. In view of the power generation and energy demand, Thar’s rich coal

reserves not only promise energy independence for Pakistan but also offer lots of

opportunities for prospective investors

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Cumulative savings of over USD 87 Billion from Block II alone due to PKR devaluation
and oil price increase. (Fuel replacement savings)

NPV of USD 31 billion Discounted @ US CPI 3%

Benefit to Economy – Reduction in Power Generation Cost

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IMPACT OF COAL ON GDP

Energy plays an important role in the industrial and economic growth of the nations.

Pakistan has been experiencing energy crisis especially of electricity since its

independence. Energy has adversely affected the growth and the development of all

economic sectors.

Coal rents (% of GDP) in Pakistan were 0.024 as of 2014. Its highest value over the past

44 years was 0.117 in 2008, while its lowest value was 0.000 in 1970. Coal rents are the

difference between the value of both hard and soft coal production at world prices and

their total costs of production.

IMPORT AND EXPORT OF COAL IN PAKISTAN

A readily combustible black or brownish-black rock whose composition, including

inherent moisture, consists of more than 50 percent by weight and more than 70 percent

by volume of carbonaceous material. It is formed from plant remains that have been

compacted, hardened, chemically altered, and metamorphosed by heat and pressure over

geologic time.

Pakistan’s first coal-dedicated import terminal has started operations on a commercial

basis at Port Qasim, ahead of the initiation of several power projects. “The company has

successfully completed its project i.e., a terminal to handle bulk cargo vessels at Port

Qasim and has formally commenced commercial operations,” Pakistan International Bulk

Terminal Limited (PIBT)

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“At present, we are only importing coal,”

Pakistan: Coal imports, thousand short tons:

For that indicator, The U.S. Energy Information Administration provides data for

Pakistan from 1980 to 2014. The average value for Pakistan during that period was

2161.59 thousand short tons with a minimum of 355 thousand short tons in 1981 and

a maximum of 6600 thousand short tons in 2007. See the global rankings for that

indicator or use the country comparator to compare trends over time.

“Pakistan will be importing huge quantities of coal in a couple of years, for which proper

handling and transport infrastructure needs to be established,” said Shariq Siddiqui, chief

executive officer of Pakistan International Bulk Terminal (PIBT).

year imports change

1980 383.00 NA
1981 355.00 -7.31 %
1982 666.00 87.61 %
1983 573.00 -13.96 %
1984 541.00 -5.58 %
1985 789.00 45.84 %
1986 939.00 19.01 %
1987 1,013.00 7.88 %
1988 940.00 -7.21 %
1989 988.00 5.11 %
1990 992.00 0.40 %
1991 1,071.00 7.96 %
1992 1,086.00 1.40 %
1993 1,206.00 11.05 %
1994 1,208.00 0.17 %
1995 1,196.00 -0.99 %
1996 926.00 -22.58 %

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1997 1,058.00 14.25 %

1998 1,003.00 -5.20 %
1999 1,055.00 5.18 %
2000 1,047.00 -0.76 %
2001 1,192.00 13.85 %
2002 1,739.00 45.89 %
2003 3,074.00 76.77 %
2004 3,645.00 18.58 %
2005 3,134.00 -14.02 %
2006 4,686.00 49.52 %
2007 6,600.00 40.85 %
2008 5,129.00 -22.29 %
2009 5,135.00 0.12 %
2010 4,704.00 -8.39 %
2011 4,472.00 -4.93 %
2012 3,606.00 -19.36 %
2013 3,048.00 -15.47 %

Coal that has a high degree of coalification with a gross calorific value above 23,865

KJ/kg (5,700 kcal/kg) on an ash-free but moist basis and a mean random reflectance of

Vitrinite of at least 0.6. Slurries, middling and other low-grade coal products, which

cannot be classified according to the type of coal from which they are obtained, are

included under hard coal. There are two sub-categories of hard coal: (i) coking coal and

(ii) other bituminous coal and anthracite (also known as steam coal). Coking coal is a

hard coal with a quality that allows the production of coke suitable to support a blast

furnace charge. Steam coal is coal used for steam raising and space heating purposes and

includes all anthracite coals and bituminous coals not classified as coking coal.

The international trade of energy commodities is based on the 'general trade' system, that

is, all goods entering and leaving the national boundary of a country are recorded as

imports and exports. Coal imports, despite high global prices, are set to surge manifolds

in the coming years as demand from cement and energy firms under the China-Pakistan

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Economic Corridor projects would spur buying, a senior official said on Wednesday.

Infrastructure spending in the country is beginning to pick up after lengthy delays, a

welcome relief for cement manufactures and the Pakistan Muslim League government’s

plan to jumpstart south Asia’s second largest economy by building new roads, ports and

power stations. Demands from cement manufacturers and coal-based power plants would

give a major boost to imports, which are expected to surge to 15 million tons/year in the

next five years from the current five million tons/year. Coal prices hit the $107/ton level

last month, highest since the start of 2014. The price spike has been spurred by domestic

mining cuts in China, which required electricity generators and also steel makers to make

up for the shortfall via imports, taking much of the market by surprise. The $250 million

PIBT, which is expected to come live by January 2017, is the country’s first bulk

terminal having coal handling capacity of 12 million tons a year. It also has cement and

clinker export capacity of four million tons a year.

Currently, Pakistan imports five million tons of coal, which is totally utilized by cement

manufacturers. Almost all the cement manufacturers have announced expansion plans in

the wake of the China-Pakistan Economic Corridor (CPEC) related increase in

demand. A federal government’s 1,320-megawatt coal-fired plant in Sahiwal is likely to

come live by early 2018 and it will need four million tons of coal every year. Moreover, a

number of imported coal-based power generation facilities by HUBCO, Lucky Cement

and K-Electric will commence operations within the next three to four years, taking the

country’s coal demand to around 15 million tons per year.

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“Thar coal is only good for mine mouth power generation and its transportation to other

destinations is not feasible because of its lower heating values. Coal based plants in any

other part of the country can only be fed on imported coal,” Siddiqui added.

The government, well aware of the situation, is establishing infrastructure. A five-

kilometer long conveyor belt is planned from PIBT to a railway yard being setup along

the existing

Railways at Port Qasim. However, the Bin Qasim Association of Trade and Industry

(BQATI) vehemently opposed the railway yard and coal conveyor belt because of the

environmental implications on the area clustered with industrial units. Talking about the

issue, Siddiqui said coal is the only viable solution to Pakistan’s energy needs. He added

that the environmental implications attributed to the coal movement are easily

manageable.

“Billions of dollars are being invested in coal-fired electric generation plants, which will

need the coal, and the coal will be transported to them one way or other,” he said. “So, it

is better that proper and standardized infrastructure is developed for the purpose.”

Pakistan’s coal imports have risen from around 2 million tons in 2007 to just under 4

million in 2009 and are forecast now to reach 4.5-5 million by the end of calendar 2010,

importers said. Earlier this year imports into Pakistan were projected at 3.7-4 million

tons. Pakistan’s economic growth may be knocked down to between zero and 2 percent,

Pakistani officials said But reconstruction could begin as early as November or

December, according to the Pakistan Planning Commission, and the authorities have said

that, despite the fragility of the economy, whatever needs to be imported will be. South

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Asian and South East Asian coal demand, led by China, has been by far the most

important price-supporting factor this year, more than compensating for weak demand in

South Africa’s traditional European market. India accounted for 34 per cent of South

Africa’s exports in 2010, an average of around 2 million tons a month. Pakistan is a much

smaller importer of South African and Indonesian coal than India but has been a steady

buyer during the past four years. Unlike India, which mostly uses imported coal for

power generation, Pakistan’s imports in 50,000-75,000 ton vessels are almost all used to

make cement. Despite the floods, coal shipments have continued with few interruptions

or delays, the importers said. We have had a couple of cargoes delayed discharging for

two weeks, maybe four weeks maximum, but there were no major problems, an Indian

supplier of South African coal to Pakistan end-users. Just prior to the floods, Pakistan

cement companies had ramped up imports to build stocks at the ports ahead of the

Ramadan religious celebrations. There were very high stocks at the ports. They were all

full when the floods hit, but the problems were more to do with roads being washed

away, so it took a long time to move coal further inland, and this held up some shipments,

the Pakistan importer said. Over 750,000 tons of coal was imported in August alone, he

added. Rates for conversion KARACHI (APP) - The following rates will be applicable

for conversion into rupees of Foreign Currency Deposits, Dollar Bearer Certificates,

Foreign Currency Bearer Certificates, Special U.S. Dollar Bonds and profits thereon by

all banks and for providing Forward Cover on Foreign Currency Deposits (excluding

F.E.25 deposits) by the State Bank on August 26. The rates are U.S. Dollar Rs 85.6344,

Japanese Yen Rs 1.0120, Pound Sterling Rs 132.1168 and Euro Rs 108.6786.

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ISSUES AND PROSPECTS: COAL POWER GENERATION

IN PAKISTAN

Coal has gained special importance due to growing concerns for energy security

prompted by the abnormal surge in world oil prices mounting tensions of the western

countries with Iran, interruptions in the international supply network of gas from Iran and

Russia and ongoing stand-off in the Arabian Gulf.

Coal offers a solution, which is still found in abundance locally in most parts of the

world. World coal consumption is expected to increase by 74% from 2004 to 2030.

World trade of coal is expected to increase about 40%, from 800 million tons in 2007 to

1122 million tons in 2030. Coal share in world energy consumption is expected to

increase to 28% by 2030 but its share in power generation is expected to remain 41%

roughly at the current level. Coal as an indigenously available resource has a strategic

importance and is world's fastest growing fuel.

Today China is world's largest producer as well as the biggest consumer of coal which

accounts for 78% of its total energy requirement. Realizing importance of coal many

countries in other parts of the world have switched over to coal to meet their energy

needs. India, Indonesia, Germany, USA, Australia and UK are among those countries that

have embarked upon new coal based power plants. USA is world's second largest user of

coal whose 60% requirements for energy are met with coal.

Usage of coal as a source of energy, in the developing countries, has been downplayed by

powerful multinational oil companies and cartels who do not wish to see coal as a

substitute of oil that they sell. Negative perceptions about the utility of coal have

somehow, adversely affected policies of the countries such as Pakistan. Coal as a fuel had

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been ranked low on the list of Pakistan's development priorities primarily due to concerns

about its quality and requirement for huge upfront capital. Apart from this, in the absence

of a strong political will to promote coal based power projects, foreign investors have not

been supported as much as they ought to be.

Quite a few were forced to withdraw their initiatives after incurring heavy losses. As a

result, what we see today is that share of coal in Pakistan's energy mix is about 5 % and

in power generation even less than 1 %. Pakistan is one of the lucky countries which are

blessed with vast deposits of coal. By increasing the share of coal in our energy mix we

could have conserved more valuable gas, which is deplete able resource. Unfortunately,

we have compromised our future by relying excessively on natural gas, and are now

running the risk of energy security.

Pakistan's major known coal reserves are located in the province of Sindh, specifically in

Thar, estimated at 175.5 billion tons which account for the bulk of Pakistan's total

reserves, estimated at 185 billion tons. Other coal deposits of significance in Sindh are

located at Sonda (Jharruk) 5.5 billion tons and Lakhra (Dadu) 1.33 billion tons. Current

estimated value of the Thar coal deposits is S 8 trillion and if converted into energy its

values comes to $25 trillion.

It has the potential to generate 100,000 MW of electricity for 300 years. Pakistan is 6th

largest coal rich country in the world and the aggregate energy potential of these

resources is more than the combined energy potential of the resources that Saudi Arabia

and Iran possess. Unfortunately there are factors, other than those mentioned above, that

have not supported investor's initiatives for the exploitation of Pakistan's coal resource in

the past which are as follows;

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1) Lack of necessary infrastructure (roads, water, life support systems, community

services and communication network) to support project activity.

2) Inconsistent government policy.

3) Inaccessibility to national grid.

4) Political uncertainty.

5) Security concerns - Law and order situation.

6) Tariff issues originating from uncertainties surrounding price instability of the capital

equipment and other input costs as well as inherent risks associated with a typical coal

mining and power generation venture.

7) Uncertainties in the lead time required in the delivery of capital equipment.

8) Mining is a provincial subject. Thus hostage to vested interests.

9) Coordination with Federal and Provincial Government departments and ministries.

Consequently, Pakistan continues to rely considerably on imported coal to fulfill

requirements for a range of industrial applications. Major industrial consumers are

cement industry, brick kilns, power plants, chemicals and steel industry. Major suppliers

are China, Indonesia and South Africa.

In recognition of the growing importance of coal, it should be the cornerstone of our

future energy policy. GoP is committed to increase substantially the share of coal in

Pakistan's current energy mix. Under the Vision 2030 strategic plan, Pakistan's coal

power generation is planned to be increased from present 200 MW (which is about 1 %

of total power generation) to 1060 MW by 2010 and to 19,910 MW by 2030. Also share

of coal in the overall energy mix is planned to be increased from 5% to 19% by 2030 and

to 50% by 2050.

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According to IEA estimates presently known reserves of crude oil with project demand

will last 41 years, natural gas 67 years and coal 192 years. Given the relative importance

of coal in relation to highly inflated prices in the international oil market, these targets are

well justified. However, given the checkered history of the plans to exploit existing coal

reserves in Pakistan, these targets appear to be over ambitious.

GoP will have to bring about a drastic shift in the list of its development priorities and

demonstrate its seriousness through a strong political will to make these goals look real.

The exploitation of cheaply available indigenous coal would help Pakistan benefit in two

ways. Firstly it would help achieve objective of self-reliance and relieving burden of

costly oil imports and secondly to generate power, as a least cost solution.

THE QUALITY ISSUE:

Unfortunately, utility of the coal deposits found at Thar had been viewed doubtful.

Lignite coal has certain characteristics that makes it a low BTU fuel and difficult to

extract and transport. It has high moisture content (almost 40-50%) and mineral matter

(especially sodium).

These can affect adversely the efficiency of the plant by causing severe slugging and

fouling in conventional boilers and thus make operation costly. But SFBD technology

designed to produce dry coal, now developed commercially, provides a solution to these

problems. The other concern about the quality of locally available coal relates to the

presence of high sulfur content which can be dealt with Circulating Fluidized Bed (CFB)

technology. Also the Integrated Gasification and Combined Cycle (IGCC) technology is

designed to make best use of high moisture lignite coal for power generation. Coal found

in Pakistan has high Sulphur content.

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Therefore for certain applications, Pakistan has to rely on imported coal. However local

coal can be processed to produce clean coal by setting up Sulphur washing plants at

respective mine sites. Thus appropriate technologies are available to ensure desired utility

of the available coal deposits in Pakistan.

EMISSIONS AND ENVIRONMENTAL CONCERNS: While coal is going to be the

fuel of next century, the issue of emissions control and pollution abatement shall have to

be properly addressed in the context of climate change under Kyoto protocol. In the

longer term one must also keep in mind that CO2 mitigation initiatives down the road

may become mandatory for countries like Pakistan. This may add to the cost of coal

power generation as has happened in the developed world.

The pollution abatement costs in the developed world have reached levels where projects

have started yielding negative returns. One must keep in mind that a typical power coal

plant generates 3 million tons of CO2 or 17 tons of carbon per megawatt and draws about

2.3 billion gallons of water per annum from nearby source while on land, whereas Sindh

is seriously deficient in the supply of water even for agriculture; produces mercury which

not only renders water useless for human consumption but also for irrigation purpose as

well.

So the challenges are ahead in the use of coal as a fuel which involves adoption or the

development of technologies that minimize the environmental impact. This would

certainly mean higher up-front costs as a compromise too much higher long-term costs

that will have to be paid in the form of environmental impact. Use of coal presents a

challenge in preserving the quality of the environment.

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TARIFF ISSUES: Issue of tariff remains to be a point of contention between the

sponsors of coal based power projects and NEPRA. Demands for 9.5 cents per KWh have

been contested by NEPRA with the argument that a tariff of over 7.8 per KWh cannot be

justified.

From a sponsors viewpoint the matters at the heart of the issue are the risks associated

with so many unknowns involved in a typical coal based project within an entirely new

environment lacking fully developed infrastructure and a track record. The argument that

goes in favor of up-front tariff is that international price of oil is uncontrollable and a

deeply embedded upward trend in prices may persist till an indefinite future.

Project sponsors use price of oil, prevailing in the international market at a particular

time, as a benchmark. While intricate and time consuming tariff negotiations are

underway sudden upwards movement in the price of oil invalidate the whole rationale of

the predetermined tariff and the exercise has to be done all over.

Delays cost money and keep on adding to the cost of the project till it becomes unfeasible

or the investor is forced to look for better opportunities elsewhere. Under the Power

Policy 2002, competitive bidding process is time consuming and takes two years to

conclude which no investor can afford in times of uncertainty of prices of everything and

supply constraints while risking losing US $7-9 Million in development costs.

In order to alleviate investors’ concerns, government should be willing to share the risks

and contingencies that investors perceive subject to certain conditions. There is a need for

an equitable policy that would enjoy the confidence of all stakeholders. GoP needs to

come up with a cost based pricing formula which should form basis for competitive

bidding on the tariff to avoid recurrence of bitter experience of 1994 power policy. But at

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the same time the proposed approach would ensure incentives to the investor without

putting excessive burden on the domestic consumer and conserving competitiveness of

the industrial consumer.

Adjustments can be made to tariff based on a cost based formula in line with shifts in

prices upward or downwards. Another approach should be that demand for the up-front

tariff(as an indicative tariff) should be accepted right away subject a review based on

actual costs with the condition of a strict monitoring role jointly by NEPRA, Sindh Coal

Authority and PPIB.

The idea would be to ensure a reasonable rate of return to the project sponsors with

minimum risk in the spirit of private-public partnership. This should be done at least for

the first project sponsor for Thar as a showcase to attract other international investors.

Costs should be monitored closely along with overall project activity for necessary

adjustments to the indicative tariff to ensure that consumer is not overly burdened with a

highly inflated tariff.

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COAL PRODUCTION TABLES

Table - 1
Coal Production (Thousand Tons)
Year Pakistan Punjab Sindh KPK Baluchistan
2002-03 3609.3 502.3 1049.1 266.2 1791.7
2001-02 3511.8 515.2 993.0 237.4 1766.1
2001-02 3285.7 401.3 1005.6 191.3 1687.5
1999-00 3164.3 454.5 981.9 46.3 1681.5
1998-99 3377.9 479.1 1233.1 53.2 1612.5
1997-98 3144.5 365.6 1178.3 59.1 1541.5
1996-97 3496.4 425.3 1093.0 55.7 1922.0
1995-96 3465.1 514.9 1088.1 43.6 1818.5
1994-95 3009.6 416.0 1046.2 55.7 1491.5
1993-94 3214.4 465.4 1093.8 67.0 1588.1

Table-2
COAL RESOURCES
Coal
Resources
(million tons)
Province/ Measured Indicated Interred Hypothetical Total
Coal field
SINDH
Lakhra 244 629 455 - 1,328
Sonda- Thatta 60 511 2197 932 3,700
Jherruck 106 310 907 - 1,323
Others 82 303 1881 - 2266
Thar 3,407 10,323 81,725 80,051 175,506
Sub- Total 3,898 12,076 87,165 80,983 184,123
BALOCHISTAN
Kohst-Sharig-
13 - 63 - 76
Harnai
Sor-Range/Degari 15 - 19 16 50
Duki 14 11 25 - 50

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Mach-Abegum 09 - 14 - 23
Pir Ismail Ziarat 02 02 08 - 12
Chamalong 01 - 05 - 06
Sub-Total 54 13 134 16 217
PUNJAB
Eastern Salt Range 21 16 02 145 235
Central Salt Range 29 - -
Makerwal 05 08 09
Sub-Total 55 24 11 145 235
GRAND TOTAL 4,008 12,113 87,189 81,144 184,575

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CONCLUSION

The overall report shows that Pakistan has blessed with great resources of Coal and the

mining industry has got a scope on larger prospect if the Government of Pakistan pays

attention by taking strong steps towards energy sector by utilizing its natural resource in

order to overhaul its existing infrastructure and transformed it to utilized renewable

energy for future needs.

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REFERENCES

1. https://www.iea.org/statistics/statisticssearch/report/?country=Pakistan&product=

coal

2. https://www.indexmundi.com/energy/?country=pk&product=coal&graph=produc

tion

3. http://www.nepra.org.pk/Policies/Coal%20Potential%20in%20Pakistan.pdf

4. https://en.wikipedia.org/wiki/Pakistan_Coal_Mines_and_Resources

5.

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