Thursday, 26 February 2015

Pakistan: Performance of Power Sector

Pakistan’s National Electric Power Regulatory Authority (NEPRA) has released its annual State of the Industry Report 2014 covering a detailed review of major segments of the power chain. Highlighting pertinent issues in generation, transmission and distribution and developments over the period, the report also prescribes possible solutions to relieve ailing players of the sector.

Key recommendations in the report include the diversion of gas to power generation, LNG price and tariff to be set after analyzing all alternatives, technical studies to assess the impact of new renewable energy plants on the national grid, timely completion of coal based generation projects and decentralizing the role of PEPCO and ministries. In addition, recent developments in the media regarding the planned release of the 2015 Power Policy have renewed impetus for promoting investment in the sector in the long run.

During the period under review 105,733GwH of electricity were produced, registering an increase of 6.7%YoY. Analysis reveals that diverting 150mmcfd to the four IPPs currently operating on gas would allow them to operate on gas throughout the year instead of HSD during the winter months. Gas supply deficit leaves the room for RLNG fired power plants, NEPRA has advised for a thorough analysis of alternatives before RLNG based power plants are setup. 

Deterioration in the efficiencies and generation levels of GENCO's (installed capacity of 4,829MW) is also a point of concern while GoP's initiatives to setup large coal fired plants and invest in GENCO’s repairs and extensions are beneficial. However the privatization process for these GENCO’s is already underway casting doubts on the timing of these moves. IPP's have added 7% generation to the grid over the year, with a capacity utilization averaging 77%.

Lack of proper management aside, NEPRA has highlighted the need for T&D losses to be curtailed by DISCOs, where they continued to disappoint as T&D losses still hover slightly below 19%, while recoveries remained around 89% for FY14. Moreover, NTDC has been criticized for not upgrading its systems to allow for accommodating newly initiated power projects including planned hydro projects in Dasu, Diamer Basha, and imported coal projects on coastal locations with approximate costs of US$9 billion.

Projections for future capacity additions to the grid and increase in demand show an increase in the shortfall reaching 4,920MW by FY16, with a reduction in the shortfall every year thereafter, leading to a surplus by FY20. In order to tackle the situation, major recommendation in the report include 1) diversion of gas to power generation, 2) LNG price and tariff to be set after analyzing all alternatives, 3) technical studies to assess the impact of new renewable energy plants on the national grid, 4) timely completion of coal based generation projects and 5) decentralizing the role of PEPCO and ministries.


Monday, 9 February 2015

US drilling rig count witnessing sharp decline

The war between United States and OPEC (led by Saudi Arabia) regarding who enjoys the power to determine crude oil price seems to be getting bitter.  Initially it appeared that neither of the groups would voluntarily cut down production but now it appears both are cutting production but at a different pace.

As the price declined by almost 50% it started pinching all but shale producers felt the real brunt. According to one of Bloomberg reports drillers have reduced the number of rigs in service by 83 to 1,140, the lowest number since December 2011.

“We’re seeing signs that the market is beginning to give greater weight in its pricing to the likelihood that shale oil production in the U.S. will be cut over coming months,” Ric Spooner, Chief Strategist at CMC Markets in Sydney, told newswire service.

According to Baker Hughes total U.S. rig count has declined by a record 435 in nine weeks. The drop of 37 at the Permian Basin, the largest oil field of the US has been the steepest since the services company began reporting basin-by-basin counts in February 2011.

OPEC alone can’t maintain “reasonable prices” and cooperation with producers outside of the group is necessary, Venezuela’s Chavez said. A news indicates that Chevron has cut output from Saudi-Kuwaiti oil fields.

According to some scanty details crude production dropped by 20 percent since October at a venture that Chevron Corp operates in the Wafra field, which Kuwait is developing in collaboration with Saudi Arabia.

The Wafra project, in which Chevron had planned to invest as much as US$40 billion, is one of the world’s largest attempts to free heavy oil by injecting steam underground.

All eyes are set at the next meeting of OPEC when Saudi Arabia, the largest producer and Kuwait, the group’s third-biggest member will join other OPEC states to assess market conditions and set production levels scheduled on June 5 in Vienna.

Reportedly, Kuwait has stopped issuing work permits for Saudi Chevron employees at Wafra oil fields, located in a shared neutral zone along Saudi Arabia because country’s ministry of labor and social affairs halted services to the company.



Sunday, 8 February 2015

Indian hegemony in South Asia

The importance of Pak China cooperation in infrastructure development can be best understood if one goes through the Indian opposition of Chinese support for Gwadar port. India itself is helping Iran in the construction of Chabahar port, located at a distance of around 70 kilometers from Gwadar. It seems that India is fully aware of the fact that Pakistan offers the shortest and the most cost effective route to Central Asia via Afghanistan.
India is constructing Chabahar not only to undermine Pakistan’s importance but also for establishing its hegemony in the Indian Ocean. In this endeavor India is fully supported by the United States, as no action has been taken against India for violating economic sanctions imposed on Iran.
India terms Gawadr a threat for its existence and its maritime trade. It goes to the extent of term Gwadar a potential Chinese naval port. If India is constructing Chabahar to protect its economic interest, China is also doing the same by managing Gwadar to protect its commercial interest, especially oil being bought from Iran.
One of the points is that India had been overreacting about the Chinese assistance extended in the construction of the Gwadar port in the Baluchistan province of Pakistan. India has been creating the hype that the Chinese presence in Gwadar is not only a serious threat for India, but it would also give China extra leverage in the region.
India alleges that China has acquired management control of Gwadar to use it as its naval base. This mantra is aimed at seeking support of United States and Russia, who consider China a major power in the region.
Indian propaganda has also been aimed at creating an impression that Afghanistan was highly unhappy because it wanted to join hands with India to move its shipments through Chabahar port. India also tried to pass on the message to Central Asian countries that Chabahar located in warm waters and the road and rail network being constructed would make it the gateway for them to the rest of world. Additionally, there has also been regular propaganda about Iranian, Afghani and Indian cooperation. However, one of the news sources quoting Iranian authorities opened the Pandora’s Box and unleashed the disinformation being spread by India. In a meeting, Hassan Nourian, Iranian Consul General in India exposed the extent of cooperation being extended by India.
Being a seasoned diplomat, Nourian expressed hope that India would act fast on the Chabahar port, which it had promised to build as far back as 2003. The message in between the lines was loud and clear — that Iranians were upset with Indian attitude.
India’s exasperatingly slow progress in building the port — 11 years so far and work has not even begun — has been a major source of irritation for the Iranians. After all, they gave the project to India rejecting a Chinese offer.
A s against this, the Chinese have finished building the Gwadar port in Pakistan that is located 70 kilometers east of Chabahar. It seems that the Iranians have realized, though very late, the reason why India wanted the project — to thwart the Chinese. It has also become evident why the India is dragging its feet — for fear of annoying the US. For Iran, the Chabahar port is of great economic importance and its great economic and strategic significance is also known to India. The port has the potential to open a route that leads to Afghanistan, a lucrative market today, and beyond, to the mineral-rich countries such as Kazakhstan and Turkmenistan. As Iran is annoyed there emerges an opportunity for China, which is one of the biggest buyers of Iranian oil, seeking a port outside Strait of Hormaz. India has also realized that the game is slipping out of its hands. If India loses Chabahar to the Chinese, it would greatly undermine much talked about Indian supremacy in the Indian Ocean. Sri Lanka offered the Humbantota port development project to India, twice. The tsunami-ravaged port was in President Rajapaksa’s constituency and he was keen on re-building it. While India dithered, China jumped in.
Humbantota has developed into a fine port. India ceded a key strategic space in its own backyard to China. No one could be blamed except India, because UPA partner DMK didn’t let India do any development work in Sri Lanka. Now, Chabahar is going the Humbantota way. While India drags its feet in Myanmar, China is moving in fast. While India dumped the two hydro-electric projects terming those “too expensive”, China is going ahead with as many as 33 projects. The port of Sittwe is critically important for India, for it would open up the North East. India did secure the project — it was given to the Essar Group. There have been delays, but the work has begun. However, the project is only a part of what India had committed to doing, which was to build the entire multi-modal transport corridor — the Kaladan project. For parts of the project other than the port, even the tenders have not been floated.
At this stage, place after place in India’s neighborhood, including Afghanistan, are likely to slip out of its dominance and going under China’s influence. This is happening only because of the dichotomy of Indian policies.
India on one hand tries to extract all the possible benefits by making false promises and on the other hand desert those projects once the United States and Russia increase aid and assistance that helps in achieving the status of regional super power and creating its hegemony in South Asia.