Letter of Authorization

December 26, 2009

Dear Students,

My name is Saqib M. Hasan lecturer of business communication at Bahria University,

authorize you to prepare a report on the Energy Crisis in Pakistan. You are being asked
to perform a detailed analysis on energy crisis with a specific focus on energy crisis and
their solutions. The due date to submit the report is December 29, 2009.

The purpose of this assignment is to integrate the material and to create an opportunity
for students to utilize their professional written business communication skills. Your
analysis report must be submitted in printed form and report should include the reasons of
energy crisis, recommendations and conclusion.

The information should represent reality and based on real facts and figures. You are free
to gather information from any resource. You will therefore want to present a carefully
researched, thoughtfully written, and comprehensive formal report.

Use a formal report structure for the report. Be creative and complete in your analysis and
presentation. You should gather and include any analysis necessary to appropriately
convey an understanding of the new protocol and its impact on energy.

I wish you all the best for the completion of this report.

Sincerely,

Saqib M. Hasan
Lecturer of Business Communication
BIMCS.

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 Letter of Transmittal

December 26, 2009

Saqib M Hassan
Lecturer of Business communication.
Bahria University:
Karachi Campus.

Respected Sir,

Our group has completed the report and presentation which you had authorized us and we
are pleased to present our final report, "Energy crisis in Pakistan” This report examines
energy crisis in Pakistan.

The purpose of the report is to highlight energy crisis, alternatives and it also contains the
findings and recommendations of energy crisis in Pakistan.

We hope that our recommendations will be helpful and will play a key role in this case.
Energy Alternatives in Pakistan is part of our report and this is more interesting because
we have prepared this portion according to our country and based on real data. We have
collected information from different sources and we look forward to discuss this report
with you.

In the end we are thankful to Allah Almighty for giving us the ability to make this report
and we are also thankful to our teacher for giving us the opportunity to work on this
issue.

Sincerely,

Muhammad Zahid Iqbal

Syed Muhammad Bilal
MBA-1A Evening
Bahria University

Acknowledgement

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We are heartily thankful to our Lecturer, Mr. Saqib Mehmood, whose encouragement,
guidance and support from the initial to the final level enabled us to develop an
understanding of the subject. We want to thank our classmates for their help, support,
interest and valuable hints.

Lastly, we offer our regards and blessings to all of those who supported us in any respect
during the completion of the report.

Muhammad Zahid Iqbal,

Syed Muhammad Bilal.

Introduction
Energy Crisis and Pakistan

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An energy crisis is any great shortfall (or price rise) in the supply of energy resources to
an economy. It usually refers to the shortage of oil and additionally to electricity or other
natural resources.

The crisis often has effects on the rest of the economy, with many recessions being
caused by an energy crisis in some form. In particular, the production costs of electricity
rise, which raises manufacturing costs.
For the consumer, the price of gasoline (petrol) and diesel for cars and other vehicles
rises, leading to reduced consumer confidence and spending, higher transportation costs
and general price rising.

Background

Energy Crisis In Pakistan

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Energy resources have depleted! Whatever resources are available are simply too
expensive to buy or already acquired by countries which had planned and acted long time
ago. Delayed efforts in the exploration sector have not been able to find sufficient
amounts of energy resources. Nations of the world which have their own reserves are not
supplying energy resources anymore; only the old contracts made decades ago are active.
Airplanes, trains, cars, motorbikes, buses and trucks, all modes of transportation are
coming to a stand still. Many industries have closed due to insufficient power supply.
Price of oil has gone above the ceiling. At domestic level, alternate methods like solar,
biogas and other methods are being tried for mere survival.

The above is a likely scenario of Pakistan and around the globe after 25 years. A
pessimistic view, but realistic enough to think about and plan for the future. But are we
doing anything about it? Lets have a look at the current energy situation of Pakistan and
the world (Humayun p14).

Pakistan’s economy is performing at a very high note with GDP growing at an

exceptional rate, touching 8.35% in 2004-05.In its history of 58 years, there has been
only a few golden years where the economy grew above 7%. For the coming years, the
government is targeting GDP growth rate above 6%. With economy growing at such a
pace, the energy requirements are likely to increase with a similar rate. For 2004-05,
Pakistan’s energy consumption touched 55.5 MTOE (Million Tons of Oil Equivalent).
The energy consumption is expected to grow at double digit if the overall economy
sustains the targeted GDP growth rate of 6% by the government. Pakistan’s energy
requirements are expected to double in the next few years, and our energy requirements
by 2015 is likely to cross 120MTOE. By 2030, the nation’s requirement will be 7 times
the current requirement reaching 361MTOE. Pakistan’s energy requirements are fulfilled
with more than 80% of energy resources through imports (Humanyun p14).

On the other hand, international oil prices have not only broken all records but are
touching new highs, with every news directly or indirectly affecting the black gold
industry. Moreover, speculators all around the world expect oil prices to touch $100 per
barrel in the coming years. With concerns over Iran’s nuclear program, terrorist issues in
Nigeria and high economic growth in China & India and their ever rising energy
requirements, oil prices don’t see any another way but to shoot upwards (Humanyun
p14).

What is the government doing to ensure a sustainable supply of energy resources for
economic growth? What strategic steps are being taken to acquire energy resources in
future? Is private sector willing to invest in Pakistan’s oil industry? What are the
incentives being offered to the foreign players to continue working in the exploration
sector? What hurdles are stopping other big players around the world to enter Pakistan?
What is the role of gas distribution companies so far? Are the citizens of Pakistan being
robbed by energy giants with ever rising utility bills? What should be the real price of
petroleum, kerosene and other oil products in Pakistan? When will the nation have “load
shedding free” electric supply? Have we been able to make long term contracts with the

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countries to provide uninterrupted supply of energy resources? Will the government be
able to provide enough sources to the citizens for a sustainable economic growth? Have
we lost the race for acquiring maximum energy resources for future survival?

Current Energy Crisis in Pakistan

As per Pakistan Economic Survey 2003-04, electricity consumption has increased by 8.6
per cent during first three-quarter of last fiscal year. However, a top level WAPDA

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official maintained that electricity demand surged up to 13 per cent during last quarter
(Energy Bulletin p14).

The survey said household sector has been the largest consumer of electricity accounting
for 44.2 per cent of total electricity consumption followed by industries 31.1 per cent,
agriculture 14.3 per cent, other government sector 7.4 per cent, commercial 5.5 per cent
and street light 0.7 per cent (Energy Bulletin p14).

Keeping in view the past trend and the future development, WAPDA has also revised its
load forecast to eight per cent per annum as against previous estimates of five per cent on
average. Even the revised load forecast has also failed all assessments due to which
Authority has left no other option but to start load management,
therefore scheduled loadshedding have started and will remain for the coming years
(Energy Bulletin p14).

The country needs a quantum jump in electricity generation in medium-term scenario to

revert the possibilities of loadshedding in future due to shrinking gap between demand
and supply of electricity at peak hours.

According to an official report, the gap between firm supply and peak hours demand was
to shrunk to three digit (440 MW) during 2005-6 and then slip into negative columns in
2006-7 (-441 MW) and further intensify to (-1,457 MW) during the financial year 2008-
09 (Energy Bulletin p14).

The report maintained that the difference between firm supply and peak demand is
estimated at 5,529 MW by the year 2009-10 when firm electricity supply will stand at
15,055 MW against peak demand of 20,584 MW(Energy Bulletin p14).

Chairman WAPDA Tariq Hamid at a Press conference early this year warned about the
possible energy crisis and stressed the need for ‘quantum jump’ in power generation. The
experts say it could only be possible through a mega project of hydropower generation,
otherwise the gap between firm supply and peak demand will remain on the rise (Energy
Bulletin p14).

They said the power generation projects, which are due to commission in coming years
are of low capacity and will not be able to exceed the surging demand of the electricity.

They say no power generation project will commission during this fiscal year and the
total installed capacity of electricity generation will remain 19,478 MW to meet 15,082
MW firm supply and 14,642 MW peak demand (Energy Bulletin p14).

Giving details of projects, the sources said Malakand-lll (81MW), Pehur (18MW) and
combined cycle power plant at Faisalabad (450MW) were commissioned during the year
2007. Mangla Dam raising project have also added 150 MW capacity to the national grid
since June 2007. Besides this, Khan Khwar (72MW), Allai Khwar (121MW), Duber
Khwar (130MW) and Kayal Khwar (130MW) are expected to be completed in 2009

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along with Golan Gol (106MW) and Jinnah (96MW). Moreover, Matiltan (84MW), New
Bong Escape (79MW) and Rajdhani (132MW) are expected by 2009-10 while Taunsa
(120MW) is likely to be completed by 2010 (Energy Bulletin p).
Sources say WAPDA has also planned to install a high efficiency combined cycle power
plant at Baloki (450MW), which is expected to be completed by 2010. In addition of
these, power plant 1 & 2 of 300 MW each at Thar Coal with the assistance of China are
also planned for commissioning in 2009-10, sources said. Moreover, efforts are also
under way with China National Nuclear Corporation for the construction of a third
nuclear power plant with a gross capacity of 325 MW at Chashma, they added (Energy
Bulletin p14).

When contacted, a WAPDA official admitted that the shortage started to occur in the year
2007 and onward and said the Authority will utilise all options including running of IPPs
plant at full capacity to avert any possible crisis (Energy Bulletin p14).

About the system augmentation to bring down line losses, the official said the Authority
would spend Rs 3.5 billion on augmentation of distribution lines this fiscal while another
Rs 5 billion will be consumed on transmission lines. “We have been negotiating Rs 9
billion loan with a consortium of local banks to upgrade and augment the power
transmission system,” he disclosed (Energy Bulletin p14).

Energy Alternatives in Pakistan

Water and Power are no more synonymous. However, Wapda makes us believe that
water and power are inseparable and that the present energy crisis in the country is
because we have failed to build large dams. Wapda and the proponents of big dams use
this argument in favour of building Kalabagh and other large dams (Humanyun p14).

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We need to look at the larger picture and think out of the box. Pakistan produces about
19,500 MW of electric power; Wapda provides about 11,363 MW, or 58 per cent of this.
The remaining power is supplied by the KESC, nuclear and IPPs. There is currently
loadshedding of up to 700 MW a day because of shortage and poor transmission
capabilities. Electricity demand is expected to grow by eight per cent a year during the
period 2005 — 2015, requiring an annual installation capacity of about 2000 MW for the
next 10 years (Humanyun p14).

The worldwide electricity production, as per the World Bank, is as follows: coal: 40 per
cent; gas 19 per cent; nuclear 16 per cent; hydro 16 per cent; oil seven per cent.
Pakistan’s power production is gas 48 per cent; hydro 33 per cent; oil 16 per cent; nuclear
two per cent, and coal 0.2 per cent (Humanyun p14).

There has been a global trend to shift away from oil because of its rising price expected
to reach $100 a barrel by the end of this year depending on the international geopolitical
situation. Despite the lowest cost of hydroelectric power, there have been environmental,
ecological and geopolitical concerns over the building of large dams (Humanyun p14).

The supply of natural gas in Pakistan has been depleting over the years, and the country
is now looking at the option of importing gas from Qatar, Iran and Central Asia. This
leaves the possibility of exploring nuclear, coal and other alternative energy sources
(Humanyun p14).

Nuclear energy and coal form the lowest source of power production in Pakistan. On the
other hand, the world average for nuclear energy is 16 per cent and for coal 40 per cent
(Humanyun p14).

Let us first consider these two potential sources of electric power production for Pakistan.
The US obtains 20 per cent of its electric power from nuclear energy with 104 reactors;
France 78 per cent with 59 reactors, Japan 24 per cent with 54 reactors, the UK 23 per
cent with 31 reactors, and so on. India’s civilian nuclear cooperation agreement with the
United States results in the development of its nuclear capability for power generation
and economic development. It has currently six reactors in operation with a capacity of
3,750 MW, and another six with a capacity of 3,340 MW are under construction and
should be completed in the coming years (Humanyun p14).

The new agreement will further boost the nuclear power generating capacity of India.
Today, nuclear power plants have average capacities of 600 — 1,000 MW (Humanyun
p14).

Pakistan only produces two per cent of its power through two reactors (Karachi and
Chashma at 137 MW and 300 MW respectively). Pakistan is a nuclear technologically
advanced country with capabilities to produce fuel, yet falls behind most other countries,
including India, in terms of nuclear power production (Humanyun p14).

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Regarding coal power generation, the US produces 51 per cent of its power using coal,
Poland 96 per cent, South Africa 94 per cent, India 68 per cent, Australia 77 per cent,
China 79 per cent, Israel 77 per cent, UK 35 per cent, Japan 28 per cent, while Pakistan
produces only 0.2 per cent of its power through coal (Humanyun p14).

Pakistan has the world’s seventh largest reserves of coal, after the recent discoveries in
Thar. The total coal reserve in Pakistan is about 175 billion tons (Humanyun p14).

The current coal production is only 3.5 million tons per year, which is mostly used for the
brick and cement industry. Coal has typical problems, such as a high sulphur content (it
produces sulphur dioxide, the source of acid rain), mineral matter content (leading to ash
and pollution problems), carbon dioxide emission (contributing to global warming) and
high moisture content (Humanyun p14).

However, technologies are available to minimise all of these. Conversion technologies

are currently under development to convert coal into environmentally-friendly methanol
and hydrogen gas to be used as clean fuel. The US is working on a major initiative called
future gen to produce “zero emission” power plants of the future (Humanyun p14).

There is large-scale application of coal for power generation around the world. The
largest coal-fired plant in the world today is at Nanticoke, Canada, with a capacity of
3900 MW. In the US, which is the largest consumer of coal-generated power the power
plant at Coal Creek has a capacity of 1,100 MW. Coal-fired power plants of 500 MW are
the norm today and many are currently under construction around the world. In Pakistan,
there are plans to build only two 300 MW coal-fired plants at Thar (Humanyun p14).

In addition to the option of using nuclear plants and coal for power production,
alternative energy sources are also available, including wind and solar. Wind energy is
the fastest growing energy source in the world. It grew at an astonishing 43 per cent in
the last one year alone. Total installed capacity worldwide is 60,000 MW. Technologies
have greatly improved in the last two decades, making wind energy very feasible as
compared to other sources of power. In the 1980s, the cost of wind energy production
was 40 c/kwh; today it is only four c/kwh (Rs 2.40 per unit as compared to Rs. 4.00 for
fossil fuel) and therefore it is growing very rapidly. Ecological issues continue to be
addressed for large wind farms (Humanyun p14).

The world’s two largest growing economies — China and India — are capitalising on
wind capability. By 2010, China will set up plants of over 5,000 MW of wind power.
India last year alone set up 1,430 MW of wind power plants and is expected to add
another 5,000 MW by 2012. The world’s largest producers of wind energy today are
Germany at 18,440 MW (equal to Pakistan’s total power output), Spain 10,000 MW, the
US 9,150 MW and India 4,430 MW (at number four). The Indian government is
envisaging a capacity addition of 5,000 MW of wind power by 2012 by extending major
financial incentives to the wind energy sector (Humanyun p14).

Denmark is obtaining 15 per cent of its electric power needs from windmills and it is

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expected to grow to 50 per cent by 2012; Britain, France, Ireland and Canada are
countries which are rapidly expanding their wind energy potential. Large-scale wind
farms today include a 300 MW plant in Oregon-Washington, while an under-construction
520 MW capacity in Ireland will be the world’s largest. China has announced that it plans
to build a 1000 MW wind farm in Hebi by 2012 (Humanyun p14).

Smaller windmills are also very feasible for remote villages, and in desert, mountainous
and coastal regions, cutting down on the cost of power transmission and distribution
networks. In remote farmlands, they have been successfully used for decades in the
United States and Europe.

In Pakistan, smaller windmills are now visible, such as the ones at Gharo, where
SZABIST set up an experimental research station many years ago. The Sindh
government has recently announced plans to build a 50 MW wind farm in the vicinity in
the coastal region at Gharo (Humanyun p14).

Solar power (photovoltaic or thermal) is another alternative energy source option that is
generally considered feasible for tropical and equatorial countries. Even though the
accepted standard is 1,000 W/m2 of peak power at sea level, an average solar panel (or
photovoltaic — PV — panel), delivers an average of only 19-56W/m2. Solar plants are
generally used in cases where smaller amounts of power are required at remote locations.
PV is also the most expensive of all options making it less attractive (Humanyun p14).

However, costs have halved in the last five years because of better production technology
and growing demand. A typical solar power plant today will pay for itself in five to 10
years.

Japan is the leader in solar PV power plants with over 1,200 MW of installed capacity,
followed by Germany (794 MW), the US (365 MW) and India (86 MW). Typical solar
(PV) power generating stations are in the 300 — 600 KW capacity. The world’s largest
PV solar power plants are in Germany and Portugal with a capacity of 10 MW and spread
over 62 acres. In 2005, Israel announced the building of a 100 MW solar power plant
(Humanyun p14).

Thermal-based solar power plants using reflectors are also in use today, the largest of
these in California with a capacity of 350 MW. These are, however, not very popular,
like other types of solar power options.

It is, therefore, very clear from the above that Pakistan needs to aggressively pursue ways
to increase its power-generating capacity to reduce its energy crisis. The best options
available today are nuclear and coal, followed by wind and solar. Hydroelectricity can
only be pursued after all environmental, ecological and geopolitical issues are settled
with a consensus among all four provinces.

Pakistan needs to set up at least a dozen nuclear power plants, large coal fired plants,
wind farms and solar plants in the next 10 years to generate about 20,000 MW of

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electricity. We need to invest at least a billion dollars a year in developing the
infrastructure and establishing power plants using nuclear, coal, wind and solar
technology. We need to cut back on non-development expenditures by at least one billion
dollars a year to invest in energy needs (Humanyun p14).

Industrialisation around the world has taken place because of the abundance of reliable
and cheap electrical power (infrastructure, human resource and government incentives
follow). Reliable and cheap availability of electric power in Pakistan will lead to large-
scale investment in industry, creation of jobs, elimination of unemployment and poverty,
greater manufacturing and exports, trade surplus and the reduction of deficits. It will lead
to a prosperous Pakistan.

Conclusion

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Energy crisis is now a world problem and every country is facing it, but Pakistan is the
country which is heavily affected by it.

There is constant increase in the fuel prices in Pakistan and with the shortage of Power
and continuous loadshedding, still the prices of power is increasing. Recently it was
announced that there is going to be an increase of more than twelve percent in electricity
bills from January 2010 and this increase of rates will continue to another 6months.

This increase in energy prices result in the increase transportation prices and other
general prices. Therefore Pakistan’s government need to take some steps, it should build
more dams by taking all the provinces in confidence and Pakistan should also try to use
its other resources like coal and nuclear energy to decrease this gap between the
production and consumption of energy and minimizes its energy crisis.

References

Humanyun. “Energy Crisis in Pakistan.” 23 January 2009.

<http://ammar360.com/2009/01/23/energy-crisis-and-pakistan/>

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www.enerybulletin.net. “Energy Crisis Feared.” 2 July 2004.

<http://www.energybulletin.net/node/883>

Humanyun. “Future and alternative sources of energy.” 23 January 2009.

<http://ammar360.com/2009/01/23/energy-crisis-and-pakistan/>

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