Thar Coal Utilization

1. Primary Supply for Coal

Pakistan has abundant coal resources, found in all provinces, that are still untapped and
underutilized. The largest reserves are in the Thar Desert of Sindh, which has 7,025 million tonnes of
measured reserves. Coal is the cheapest source of energy that can be used as fuel for power
generation and industrial use, such as the brick-kiln and cement industry. A country with a plentiful
reserve can provide a hedge against international fuel price volatility. With the advancement of the
Thar coal project, domestic coal is contributing a considerable share to the country’s current energy
mix relative to past practices (see Table 1).
Table 1. Primary Energy Supply for Coal (Tonnes)

Supply 2006 2010 2015 2020 2022

Thar Coal - - - 3,669,968 3,517,511
Non-Thar Coal 4,871,159 3,480,674 3,711,561 5,065,122 6,077,357
Local coal 4,871,159 3,480,674 3,711,561 8,735,090 9,594,868
Import 2,842,829 4,657,829 5,003,806 16,421,787 18,102,600
Primary supply 7,713,988 8,138,503 8,715,367 25,156,877 27,697,468
(Source: EYB [2006–2020])
2. Imported Coal
Pakistan has abundant resources of coal that are still untapped and underutilized. Currently, total
imported coal consumption is 19.49 million tons per annum (mtpa) and the import bill is about $
3,703 million.
Table 2. Imported Coal Consumption

Particulars

Imported Coal Consumption for Power (million tons/annum) 11.09

Imported Coal Consumption for Industrial Sector (million tons/annum) 8.4

Total Imported Coal Consumption (million tons/annum) 19.49

Imported Coal Price ($/ton) 190

Cost of Coal ($ million) 3,703

Source: Pakistan Energy Outlook Report-2022, IEP

Imported coal-based power plants with a total capacity of 3,960 MW consume 11.09 mtpa
whereas 8.4 mtpa of coal is consumed by non-power sectors. Import coal prices remained within the
range of 69.6 ($/ton) to 190 ($/ton) from 2015 to 2022.

Energy Planning and Resource Centre, Integrated Energy Planning for Sustainable Development,
Ministry of Planning, Development & Special Initiatives, Planning Commission
Government of Pakistan

1
 200.0 190.0
180.0
160.0
140.0
USD/tonne

120.0 107.0
99.1 86.8
100.0 100.6
100.2
80.0
89.2
60.0 69.6

40.0
20.0
0.0
2015 2016 2017 2018 2019 2020 2021 2022
Figure 1. Imported Coal Price (Source: NEPRA, Economic Survey of Pakistan (2020-21) & Energy Year Book)

3. Price Analysis

Imported coal prices are currently constantly increasing in the international market, therefore,
price analysis scenarios are assumed to analyze the cost of imported coal. Considering imported coal
price 324 ($/ton) based on June, 2022, we assumed two scenarios i.e. 350 ($/ton) and 400 ($/ton) for
cost of imported coal (see Figure 2 & 3).
450.0
400.0
400.0 350.0
350.0
USD/tonne

300.0 324.0
250.0
200.0
190.0
150.0
100.0
50.0
0.0
2022 2022 (June) Scenario-1 Scenario-2
Figure 2. Price Scenarios (Source: NEPRA, Richard Bay Coal Prices, and author’s scenarios)

9,000
8,000 7,796

7,000 6,822
6,315
USD million

6,000
5,000
4,000 3,703

3,000
2,000
1,000
0
2022 2022 (June) Scenario-1 Scenario-2
Figure 3. Cost of Imported Coal (Source: Author’s calculation)

Energy Planning and Resource Centre, Integrated Energy Planning for Sustainable Development,
Ministry of Planning, Development & Special Initiatives, Planning Commission
Government of Pakistan

2
4. Coal Substitution
The GoP has intended to harness the untapped potential of local coal to increase its share in the
primary energy mix. Efforts can be made to substitute the use of imported coal with Thar coal in the
country. By 2030, the imported coal requirement is expected to be 20.8 million tonnes, including 7.6
mtpa for power and 13.28 mtpa for the industrial sector. The GoP may substitute 20 percent imported
coal for power generation and 30 percent imported coal for the industrial sector (see Table 3).
Table 3. Imported Coal Substitution with Local Coal by 2030 (Tonnes)
Coal Demand Imported Coal Thar Coal Non-Thar
Demand for coal (2030) 20,885,967 20,245,766 8,811,995
Industrial (30 % substitution) -3,984,213 7,848,902
Power (20 % substitution) -1,521,051 2,996,471
Demand after substitution 15,380,703 23,242,238 16,660,897
(Source: Pakistan Energy Outlook Report 2022, IEP)

 Impact on Coal Tariff. Local coal has a low heating value (2,800 kcal/kg) and high moisture
and ash contents compared to imported coal which has a calorific value of 5,505 kcal/kg. The
local coal requirement in terms of quantity of supply will be two times higher than imported coal.
With the planned coal mine expansion, the coal price will come down for power plants to around
$30/tonnes by 2022 or 2023. Additional demand for coal substitution for power generation can
further decrease the price by around $4/tonnes down to the floor price of $26/tonners (see Figure
4).

140.0 128.55
120.0
USD/tonne

100.0 89.17

80.0 57.97 56.0025

65.42 51.09 51.09
60.0
45.38
40.0 29.50 28.50 26
20.0 26
0.0
2021 2022 2023 2024 2025 2030

Local Coal Equivalent Price for Imported Coal Quality

Local Coal Price (USD/ton)
Figure 4. Local Coal Price (Source: NEPRA, NTDC, Sindh Sino & SECMC)

 Impact on Tariff: Considering the imported coal price $190.16/ton and with planned mining
expansion, coal price would be reduced to $26 by 2026. Plant-wise fuel cost (Rs/KWh) shows in
the graph. Reduced Fuel Cost calculated using Fuel Charges (Rs/KWh) for the month of April
2022 and various Thar Coal Prices with 100% substitution for imported coal with local coal.

Energy Planning and Resource Centre, Integrated Energy Planning for Sustainable Development,
Ministry of Planning, Development & Special Initiatives, Planning Commission
Government of Pakistan

3
 12.0
10.17
10.0

8.0 7.40
6.44
Rs/KWh

6.0
4.48 4.21 4.48 4.21 4.33 4.07 3.95 3.71
4.0 3.01 3.01 2.90 2.65
2.0

0.0
190.00 45.38 29.50 28.50 26.00
Coal Price at mine mouth (USD/ton)
China Power (Hub) Port Qasim Sahiwal
Figure 5. Plant-wise Fuel Cost Component (Source: Source: Calculations based on NEPRA, NTDC, Sindh Sino &
SECMC Presentations)

 Foreign Exchange Savings. Considering various substitution scenarios i.e., 20%, 50%, and
100% by 2030, the cost of imported and thar coal along with FX savings area analyzed. As a
result, approximately USD 405 million per annum could be deliberate for FX savings 100%
substitution scenario (see Figure 6).
900
USD million per annum

794
800
700
600
500
397 390 405
400
300
195 202
200 159
100 78 81

0
20% Substitution 50% Substitution 100% Substitution

Improted Coal Cost Thar Coal Cost FX Savings

Figure 6. Foreign Exchange Savings (Source: Richard Bay Imported Coal Prices and the author’s calculation)

5. Recommendations
 Mining expansion. With the planned mining expansion, the price of coal is expected to come
down for power generation by 2030. Therefore, additional demand for coal and the substitution
with imported coal can further decrease the prices of local coal. Considering the production of 30
mtpa of coal from Thar, no expansion in the mining blocks is required.
 Develop a new rail link. A rail link of 105 kilometers to connect Thar mines with the new Chorr
station on the Hyderabad-Mirpurkhas should be developed so that rail can be adopted as a
primary mode of transportation.

Energy Planning and Resource Centre, Integrated Energy Planning for Sustainable Development,
Ministry of Planning, Development & Special Initiatives, Planning Commission
Government of Pakistan