Pakistan: Is LNG the right solution?

The PML-N government is very actively perusing LNG import and also terming it the right solution to overcome Pakistan’s looming energy crisis. However, some of the quarters attribute this to be nothing more than ‘rental power scam’. They insist that it is ‘selecting a lesser evil’ and question the prudence of policy planners. They even go to the extent of saying that the power energy policies of ruling junta have always been dictated by those having vested interest. If rental power scam was a display of PPP’s corruption the same may be said about distribution of half a trillion rupees among the favorite IPPs by PML-N soon coming into power.

On the request of the Ministry of Petroleum and Natural Resources, the Economic Coordination Committee (ECC) has exempted the import of LNG from Gas Infrastructure Development Cess (GIDC). The decision looks like a joke because the purpose behind imposition of GIDC was to mobilize funds for the construction of Iran-Pakistan gas pipeline and LNG terminal. Therefore, collection of GIDC in imported LNG was irrational and to be blunt unconstitutional. Ideally, imposition of GIDC is unconstitutional because it is the sole responsibility of the government to mobilize funds for infrastructure development fund and it should refrain from penalizing the customers. The ECC, however, decided to levy five per cent GST on LNG import in any case, instead of prevailing general sales tax rate of 16 per cent.

Over the years experts have been saying that Pakistan’ energy crisis can be overcome by following a prioritized agenda that should include immediate actions like; 1) curbing theft of electricity and gas and 2) improving recovery of electricity and gas distribution companies. Let this point be kept in mind that the PML-N distributed half a trillion rupees to overcome circular debt issue. However, the government completely failed in taking the above stated two steps. The result is that the size of circular has bulged to around the same quantum in slightly more than one year.

The recommended medium term measure is changing the energy mix by minimizing dependence on imported fossil oil by switching over thermal power plants to coal, initially to imported one and then to indigenous. They also suggest construction of smaller ‘run of the river’ type hydel power plants, close to the places of power consumption

They also demand granting status of IPPs to sugar mills, which are capable of supplying 3000MW to the national grid to begin with and the output can be doubled by operating sugar mills at 100% capacity utilization. At present the mills are produced around 5 million tons sugar against an installed capacity of 9 million tons.

The added advantage will be double the production of molasses that is the basic raw material for the production of ethanol, being used to produce bio-fuel E-10 (motor gasoline containing 10% ethanol). This percentage can be enhanced to 35% by taking advantage of Brazilian experience. The move will: 1) improve capacity utilization of sugar mills and help in producing exportable sugar, 2) enhance production of molasses and ethanol, 3) contain motor gasoline import and above all save natural gas (CNG) currently being used in vehicles.

In the medium term work on coal fired and nuclear power plants should be completed on war footings but the core objective should remain increasing hydel power generation. The country is capable of producing 40,000MW hydel power and the added advantage of construction of mega dams are 1) generation of electricity around Rs2.50 per unit as against cost of Rs15 per unit produces at furnace oil based thermal power plants. The exact cost can be determined by examining cost of generation of HUBCO and KAPCO, Pakistan two largest IPPs.

While the fate of first LNG project is in doldrums the GoP has taken decision to construct another LNG terminal at Gwadar. Early October the ECC approved ‘fast track’ construction of 710km Gwadar to Nawabshah gas pipeline and LNG terminal at Gwadar port as an alternate plan to facilitate Iran-Pakistan pipeline and transport liquefied natural gas (LNG). The Gwadar to Nawabshah pipeline, with 42-inch diameter shall be laid along with two compressor stations. The terminal will have the capacity to handle up to 500 mmcfd of gas. Interstate Gas Systems (Pvt) Limited (ISGS) will be authorized to execute the implementation of the project. The committee also directed the Ministry of Petroleum and Natural Resources to finalize the funding plan preferably on government-to-government basis or build, operate and transfer or build, own, operate basis.

It is an incorrect perception that the country suffers from shortage of gas. To be precise if use of gas in power generation is stopped, thefts are contained the shortfall can be reduced substantially. If cement plants can switch over to burning coal why power plants can’t be run on coal? One has the reasons to suspect that ‘oil lobby’ is deadly against promoting use of coal in power generation. This point gets credence if one looks at the failure of the GoP to exploit Thar coal potential.

The time has come to put the things in right perspective and take the right steps to overcome the energy crisis. Keeping in view the high cost of LNG using it as a prime source of energy is highly imprudent. At the best it could be used as a make shift arrangement during winter and during the days supply from gas fields remain suspected due to annual turnaround. This consumers should not be forced to pay for high cost imported case as the country has ample supply if use prudently. Containing the leakages and theft of Sui twins would can add nearly 1,000 mmbtu or more than what the GoP intends to import as LNG.

Is ISIS making inroads in Pakistan?

On Sunday Dawn Pakistan’s leading English newspaper published from Karachi ran a story on signs of emergence of ISIS in the country.  According to details ISIS is attracting the attention of radicals in Pakistan and Afghanistan, unnerving authorities who fear a potential violent contagion. The successes of ISIS play a very dangerous, inspirational role in Pakistan, where more than 200 organizations are operational. A banned outfit the TTP says it broadly support both ISIS militants and Al-Qaeda.

The report also quoted US officials saying the group is generating tens of millions of dollars a month from black market oil sales, ransoms and extortion. This financial heft is proving a big draw — including for the five Pakistani Taliban commanders who announced their support for the ISIS. The splinter groups are facing financial crisis, so they are contacting Daesh, another name for IS. They also say they have sent 1,000 fighters in recent years to help the militant struggle in Syria and plan to send 700 more.

By late evening there was a horrendous blast in which more than 60 people died and over 100 critically injured near Wagah border, the responsibility of which was claimed separately two outfits Jundullah and TTP affiliated Jamaat-ul-Ahrar. Jundullah and TTP are among loosely aligned militant groups that frequently share personnel, tactics and agendas but claims for specific incidents are often hard to verify.

One is completely taken aback by the statement of Rehman Malik, Interior Minister of previous PPP government. He has urged the government to immediately convene a joint session of parliament and share information about Jundullah with the lawmakers. If a person like Malik is not aware of the details, what else can one expect from PML-N government, which is often alleged for having contacts with extremists groups operating in Pakistan? This statement is based on the fact that PPP and ANP came under severe attack but PML-N didn’t during the election campaign.

As Dawn has rightly alarmed ISIS could be serious threat for Pakistan. Although ISIS is a product of the Western super powers, it also draws support from many Muslim countries. It could not have emerged without support from western powers and their regional allies. These facilitated the travel of jihadis from 80 countries into Syria, funded them, and then trained and armed them.

Terrorism is a product of relations of domination. As long as such relations are not addressed, we can see no end to it. ISIS is not an internal phenomenon of Syria and Iraq but an international one. The US, Europe, Turkey, Saudi Arabia, Qatar and other Persian Gulf Arab regimes are often alleged for creating a monster that is now threatening their interests. All the countries involved in the disaster in Syria through which ISIS has emerged and who are responsible for the present catastrophe need to get together and agree to stop funding and arming the parties involved.

Shiites and Sunnis must know that any action or remark, including insulting one another, leads to increased sensitivities and ignite flames. This will certainly benefit the common enemy of all Muslims. The supposed grand plan hits two birds with one stone: to pit Arab against Arab until they are too weak to face Israel, and to gather the Sunnis against Shiite Iran, foment a sectarian cross-border conflict and encircle Iran.

Can Saudi Arabia survive the US oil assault?

Many had wondered why Saudi Arabia was supporting United States in keeping oil prices high. Now it has become evident that the US wanted to keep crude oil prices high as it was working on shale oil extraction. In this exercise first Iraq was encouraged to attack on Iran and war continued for almost a decade. Then sanctions were imposed on Iran to curb its oil export.

Turmoil was created in Iraq in the name of regime change to disrupt its oil export. Libya was also a victim of oil vultures. And the latest drama is being staged with the connivance of ISIS. Many of the countries are facing US bombardment in the name of demolishing ISIS hideouts. Have the Muslims ever bothered to find out the rise of ISIS, its funding and colossal military might. The reply is simple ISIS has not emerged overnight but part of the Zionist agenda to destroy Muslim countries, particularly those producing oil and Saudi Arabia is the prime target

Ironically Saudi Arabia still suffers from a dilemma that United States is its best friend. Saudis have been completely brain washed as they say ‘Iran is a bigger enemy as compared to Israel’.  This perception has also enabled the US to sell billions of dollars arms to Saudi Arabia. Oil prices were kept high to facilitate Saudi Arabia to earn more of petrodollars that were taken back as price of arms. Saudis were annoyed when the US refused to attack Syria, mainly due to the opposition of Russia. The breach between Saudi Arabia and the US further widened after the super powers arrived at an agreement to ease sanctions on Iran.

While Arabs remained engrossed in their petty matters, the work on shale oil continued at full swing and the result is that today United States has emerged as world’s largest oil producers. This means that not only the biggest oil market will be lost but United States will also emerge as the biggest competitor of Saudi Arabia in the global oil market. The signs of oil glut have already started appearing,  oil prices have plunged substantially and the fall is likely to continue because the US does not seem in a mood to curtail shale oil production.

The US cronies have already started putting pressure on OPEC to curtail production to resist further fall in oil prices. As opposed to this Saudi Arabia, the biggest oil supplier among OPEC members seems adamant to retain its share in the global market by selling oil to Asian buyers at a discount. This is killing two birds with one stone, retain its petro dollar income and snatch share of Iranian market, Iran supplies oil to Asian buyers that include China, India, Korea and Japan.

In the prevailing scenario it seems that Saudi Arabia has no solution, except drift with the tide. If it considers that it has got the muscles and can also afford to flow against the tides, it has to let oil prices slip to a level where production of shale oil becomes uneconomical.

It is true that in the short-term Saudi Arabia may emerge as the biggest looser and other OPEC members may not subscribe to the strategy. However, it is the question of collective survival of OPEC members who control 40 percent of global oil production.

Muslim countries, particularly Arab monarchs have to come out of ‘Iran phobia’ and identity their real enemies. They have wasted trillions of dollars in fighting US proxy war and the time has come to protect the interest of Muslim collectively irrespective of which language they speak or sect they belong to. The enemies have prevailed over by deepening the sectarian divide and spreading animosity in the name of Islam. The enemies are trying to portray killing as prime mission of Islam, which is totally incorrect. Islam is religion of love and peace for all irrespective of faith, cast and creed.  

PSO the biggest beneficiary of margin hike

The Government of Pakistan has increased margins of oil marketing companies for motor gasoline and high speed diesel. Pakistan State Oil Company (PSO) is expected to be the prime beneficiary considering its market leader position both in motor gasoline (27% share) and high speed diesel (53% share) of the segments. PSO earnings will be bolstered by Rs6.18/share on an annualized basis. In the near term, This will help the Company in diluting the negativity on account of inventory losses expected to be brought on by declining domestic petroleum product prices. For details visit shkazmipk.com