Presentation By Munawar Baseer Ahmed

SUI SOUTHERN GAS COMPANY LIMITED Karachi, 15 June 2007 PAKISTAN'S POWER CRISIS MUNAWAR BASEER AHMAD P.E. MANAGING DIRECTOR by

PAKISTAN POWER SECTOR PRESENTATION SEQUENCE LOOMING POWER CRISIS OR CRISIS OF POWER (PLANNING) HISTORICAL BACKGROUND OF POOR PLANNING IN POWER SECTOR TEN YEARS GROWTH / ADDITION IN POWER GENERATION INEFFECTIVE REGULATORY FRAME WORK AND ENFORCEMENT CASE STUDY OF EFFECTIVE PLANNING AND IMPLEMENTATION NATIONAL ENERGY PLAN 2005 – A SOLUTION? PROPOSED POWER GENERATION PROJECTS; IMPLEMENTATION? THE WAY FORWARD TO ENSURE……………… ENERGY SECURITY SOVEREIGNTY SUSTAINABILITY

1. Inadequate Energy demand forecasts 2. No integrated Energy or Power Planning 3. Lack of effective implementation modalities, and project development 4. Lack of Financing Plan, Structure or Vehicle 5. Lack of coordination between sectoral entities i.e. Hydel, Electric, Oil/Gas 6. Primary Energy supply chain development, enhancement and security issues not addressed 7. Regulatory framework out of focus with ground realities and supply constraints CRISIS OF POWER SEVEN CRUCIAL ASPECTS

INDIA AFGHANISTAN IRAN CHINA ARABIAN SEA Sindh Balochistan Punjab Islamabad NWFP JAMMU & KASHMIR (DISPUTED TERRITORY) (MW) PAKISTAN POWER SECTOR – INSTALLED CAPACITY Source: Power System Statistic, Feb 2007 by NTDC 220 Total 200 Hydel 20 Thermal 1947-1960 2,808 Total 1,450 Hydel 1,358 Thermal 1961-1980 325 Nuclear 10,652 Total 4,813 Hydel 5,514 Thermal 1981-2006 2,068.5 Total 420 Retired 1,648.5 Privatized Retired / Privatized 5,783 Total 30 Hydel 5,753 Thermal IPP’s upto June 06 19,549.5 Grand Total 2,108 3,064 7,426.5 3,766 1,030 KESC 2,155 137 NUCLEAR 2,155 Total 1,756 KESC 262 IPP KARACHI

PAKISTAN POWER SECTOR – GROWTH AT A GLANCE ACGR: 8.8% (MW) Source: 1. Power System Statistic, Feb 2007 by NTDC 2. Pakistan energy Year Book 2006 1,582.41 384.97 % INCREASE 1951 4,879 163.63 2006 ACGR % GDP (RS BILLION) POPULATION (Million) 8.8 TOTAL 325 3.5 NUCLEAR (1972-2006) 7.5 THERMAL (1960-2006) 33.74 8.5 HYDRO (1925-2006)

Source: BP Statistical Review of World Energy June 2006, ENERGY CONSUMPTION PER CAPITA, 2005-06

PAKISTAN POWER SECTOR – INSTALLED CAPACITY (MW) Source: Power System Statistic, Feb 2007 by NTDC 33.8 % increase

PAKISTAN POWER SECTOR ADDITIONAL GENERATION (MW) (Ghazi Brotha Shahddra Thermal NOTE: 1. GBHP FULL UTILIZATION IN 2004 2. ESSENTIALLY NO NEW POWER GENERATION ADDITION AFTER 2001 Source: Power System Statistic, Feb 2007 by NTDC HUBCO Kot Addu Uch Japan Fauji Chashma Liberty AES Habibullah

PAKISTAN POWER SECTOR KESC – ADDITIONAL GENERATION (MW) NOTE: NO NEW ADDITION FOR 9 YEARS Source: Power System Statistic, Feb 2007 by NTDC IPPs : 262 MW Thermal KESC: 231 MW Nuclear

PAKISTAN POWER SECTOR ENERGY GENERATION BY FUEL TYPE - FY 2006 (WAPDA) (KESC) Source: 1. BP Statistical Review of World Energy June 2006, 2. Power System Statistic, Feb 2007 by NTDC 24.38% USA 56.16% India 70.17% China Indigenous Coal

FUEL COST AND AVERAGE SALE PRICE (Rs /kWh) ACGR: 5.6% ACGR: 6.2% ACGR%: GAS: 8.6 FURNACE OIL: 14.8 AVERAGE FUEL PRICE INCREASED: 11.70% CGAR Source: 1. Power System Statistic, Feb 2007 by NTDC 2. Pakistan energy Year Book 2006

PAKISTAN POWER SECTOR - SYSTEM LOSSES (%) Source: Power System Statistic, Feb 2007 by NTDC NOTE: * ASSUMING A MINIMUM OF 6% TECHNICAL LOSSES, ADDITIONAL THEFT/LEAKAGE FOR KESC AMOUNT TO RS. 11,120 MILLION ** ASSUMING A MINIMUM OF 10% TECHNICAL LOSSES, ADDITIONAL THEFT/LEAKAGE FOR WAPDA AMOUNT TO RS. 50 BILLION * **

ROLE OF NEPRA ?? Seven Points to ponder: 1. Proper Power Sector structure and operations framework not done 2. Failure to undertake Tariff rationalization necessary to support existing and induct new generation 3. Power sector development, and growth neither forecasted nor planned 4. Utility system operations service levels neither checked nor enforced Network System Augmentation, growth, and improvement not mandated 6. Unwarranted system losses and theft not curtailed through forceful intervention 7. Interest of primary stakeholders – public, compromised through closed door approach

CASE STUDY OF EFFECTIVE PLANNING AND IMPLEMENTATION SUI SOUTHERN GAS COMPANY LIMITED

MERGER OF 3 COMPANIES IN 1989 KARACHI GAS COMPANY – PRIVATE SECTOR INDUS GAS COMPANY – PUBLIC SECTOR (PIDC) SUI GAS TRANSMISSION COMPANY – MULTINATIONAL RESULTING IN 3 UNIQUELY DISTINCT CULTURES AND CONTINUOUS DISTORTION OF WORK PRACTICES LACK OF COORDINATION, INTEGRATED PLANNING AND SETTING OF OBJECTIVES EMPLOYEES AND MANAGEMENT MOSTLY MIRED IN STATUS QUO. OUR ISSUES

NO PLAN FOR GROWTH NO CLEAR OBJECTIVES NO EFFECTIVE BUSINESS SYSTEMS LACK OF BEST BUSINESS PRACTICES INEFFICIENT WORK PRACTICES & PROCEDURES MIXED CONCEPT OF CUSTOMER SERVICES MANAGEMENT AND EMPLOYEES INVOLVED IN ROUTINE WORK LOW CAPEX RESULTING IN LOW RETURN ON FIXED ASSETS NO PLAN FOR MEETING EMERGING CUSTOMER DEMANDS NO PLAN TO AUGMENT OUTDATED EQUIPMENTS AND INFRASTRUCTURE NO INNOVATION OR NEW TECHNOLOGY INDUCTION CONSEQUENCES

STRATEGIC MANAGEMENT OBJECTIVES; TO MAKE SSGC THE BEST PUBLIC SECTOR COMPANY IN PAKISTAN (SET AS PART OF 5 YEARS PLAN FOR 2003-2008) EXPANSION OF DISTRIBUTION AND TRANSMISSION NETWORK; FOR ENHANCEMENT OF GAS SUPPLY TO POWER PLANTS, INDUSTRIES AND COMMERCIAL SECTOR INCLUDING SUPPLY OF GAS TO PREVIOUSLY DEPRIVED AREAS IN THE DOMESTIC SECTOR “ SERVICE WITH A SMILE ” CULTURE FOR CUSTOMER SATISFACTION THRU INNOVATION & QUALITY SERVICES CONSISTENT APPRECIATION IN SHAREHOLDER’S VALUE; BY INCREASING THE COMPANY’S ASSET BASE AND SIGNIFICANT IMPROVEMENT IN PRODUCTIVITY AND EFFICIENCY BUSINESS PROCESS RE-ENGINEERING (BPR); RE-STRUCTURING OF SELECT DEPARTMENTS AND IMPLEMENTATION OF ERP TO PROVIDE EFFECTIVE M.I.S. FOR BUSINESS OPERATIONS AND CONTROL

STRATEGIC MANAGEMENT OBJECTIVES; TO MAKE SSGC THE BEST PUBLIC SECTOR COMPANY IN PAKISTAN MAKE SSGC THE “MOST IT ENABLED COMPANY” THRU ENTERPRISE INFORMATION SYSTEM (EIS) AND TECHNOLOGY IMPLEMENTATION IN ALL AREAS OF BUSINESS EMPOWERMENT OF EMPLOYEES THRU CAREER PLANNING, HRD AND EXTENSIVE TRAINING AND SKILL DEVELOPMENT BE A GOOD CORPORATE CITIZEN THRU COMMUNITY SUPPORT SERVICES AND ENVIRONMENTAL PROTECTION INITIATIVES TO MEET THE NATIONAL AND SOCIAL RESPONSIBILITIES

SSGC CORE INVESTMENT PROGRAMME RUPEES MILLION 368.8 501.1 640.1 800.3 271.2 25.6 296.4 OTHERS 6,488.5 1,897.4 2,046.8 592.7 235.6 1218.5 - 2,544.3 256.6 - 208.8 1,782.5 2004-05 359.2 348.1 375.6 279.3 331.4 121.0 REHABILITATION 1,536.0 1,577.2 1,768.4 1,945.6 - 509.8 UNDER PLANNING/ APPROVAL 1,904.8 2,560.9 3,913.7 4,329.0 3,382.0 1,978.2 SUB TOTAL (A) - - - 240.8 173.8 25.6 LEFTOVER PROJECTS - 482.6 1,505.2 1,001.1 648.1 338.7 ONGOING OTHER PROJECTS - - - 341.2 2,288.9 1,078.5 ONGOING- GIREP II A) TRANSMISSION PROJECTS: 885.5 853.3 823.3 1,725.1 864.7 497.1 C) OTHER CAPITAL EXPENDITURE 5,398.9 2,608.6 460.2 2,233.0 - 2010-11 6,414.9 3,000.7 670.1 1,971.4 - 2009-10 TOTAL (A+B+C) SUB TOTAL (B) NEW TOWNS NORMAL EXPANSION DISTRIBUTION PROJECTS B) DISTRIBUTION SYSTEM: PROJECT DESCRIPTION - 816.5 238.2 648.3 1,729.7 2,468.1 1,770.2 1761.1 1,040.2 1,618.1 1,258.1 533.3 3,118.0 5,182.0 3,597.9 3,063.7 7,855.0 11,236.1 7,844.7 5,539.0 2008-09 2007-08 2006-07 2005-06

GAS INFRASTRUCTURE REHABILITATION AND EXPANSION PROJECTS Quetta Sibi Pirkoh Loti Dera Bugti Sui Jacobabad Shikarpur Larkana Dadu Zamzama Sari Hyderabad Nawabshah Sawan Kadanwari Miano Badin Karachi Bhit Hasan Sukkur FJFC Pesh Bogi GAS INFRASTRUCTURE REHABILITATION AND EXPANSION PROJECTS 2006-08 Mazarani Zarghun SNGPL transmission line Naimat Basal 42” Ø 13 Km Bin Qasim Distribution Pipeline Rs.807 million 18” Ø 15 Km Mach – Kolpur And 31 Km Dingra – Sibi Loop line + Sibi Compressor Rs. 1,138 Million 18” Ø 15 Km Re – routing in Dingra Nala Rs. 272 Million 18” Ø 18 Km Abegum – Mach Loopline Rs. 306 Million 24” Ø 66 Km Bajara to Karchat 134 Km Karchat to Karachi Rs. 2795 million 30” Ø 9 Km By-pass HQ3 to SMS Sindh University Rs. 364 Million 24” Ø 116 km Snaghar – Nawabshah – Karachi Pipelinepahse -1 Rs. 2,262 million 24” Ø 14 Km loop Line Pahse-2 HQ3-Masu Rs. 323 Million 48 Km Shahdadpur to Masu 24” Ø 140 Km Sanghar – Nawabshah – Hyderabad Karachi loopline 50 Km Shahadpur – MVA Karam Jamali 12” ø 64 Km Zarghun Pipeline Rs. 900 million Compressor Bin Qasim Masu MVA Karam Jamali Shahdadpur Bajara Karchat HQ2

Proposed LNG setup KARACHI GAS DEVELOPMENT MASTER PLAN 92 MMCFD SMS KT 242 MMCFD SMS MALIR 95 MMCFD SMS STEEL 36 MMCFD 250 MMCFD KTPS BQPS Proposed 36”x30Km (140 mmcfd) Distribution main * LNG not included * * TOTAL : 1,200 ADDL 2010 : 410 EXISTING : 750-790 LOAD MMCFD

SIX YEARS PERFORMANCE HIGHLIGHTS Estimated

KEY PERFORMANCE INDICATORS Estimated

KEY PERFORMANCE INDICATORS Design capacity is 275,000 Capacity increase through BPR and improved work flow management Estimated

IMPERATIVES OF SUSTAINABLE ENERGY SUPPLY 1. ENERGY IS PRIMARY VEHICLE FOR ECONOMIC GROWTH AND SOCIAL DEVELOPMENT AND MUST BE MADE AVAILABLE FOR MANAGED GROWTH 2. DEVELOPING SOCIETIES REQUIRE MORE ENERGY TO MAKE THE TRANSITION OUT OF LOW INCOME ECONOMIES (AND POVERTY) 3. INDIGENOUS SOURCES MUST BE MAXIMIZED WITH MORE HYDEL CONTENT 4. LONG TERM ENERGY SUPPLIES MUST BE SECURED (OIL, GAS, COAL) FROM MULTIPLE SOURCES (BOTH INDIGENOUS AND OVERSEAS) 5. ENERGY MIX TO HAVE INCREASING SHARE OF RENEWABLE (WIND, SOLAR) WITH UP TO 10% OVER THE NEXT 20 YEARS 6. ENERGY CONSERVATION EFFICIENCY IMPROVEMENT AND LOSS REDUCTION MUST BE ENFORCED 7. UTILITIES MUST UNDERTAKE EFFECTIVE LOAD CYCLE MANAGEMENT FOR MAXIMUM CAPACITY UTILIZATION

ENERGY MIX PLAN BASED ON PIP/OCAC STUDY OF GOP MODERATE GROWTH RATE OF 6.5% Source: Pakistan Energy Plan 2005-2030 by P.C., Islamabad 2.9 6.3 2.6 4.5 2.7 3.6 2.6 2.5 0.6 0.4 1.0 0.6 NUCLEAR 1.1 2.4 1.1 1.8 0.9 1.2 0.6 0.6 0.4 0.3 - - RENEWABLE 13.8 30.0 13.2 22.4 13.7 17.9 13.9 13.6 12.9 9.3 12.7 7.4 HYDEL 15.0 32.7 13.0 22.1 11.5 15.1 10.0 9.8 8.1 5.8 7.0 4.0 COAL 48.6 106.0 49.9 84.8 47.7 62.5 48.3 47.3 49.4 35.6 50.4 29.2 NATURAL GAS 18.6 40.6 20.2 34.4 23.4 30.7 24.7 24.2 28.6 20.6 28.4 16.4 OIL % 218 * % 170 % 131 % 98 % 72 % 57.7 TOTAL ENERGY 2030 2025 2020 2015 2010 2005-06 LONG TERM MEDIUM TERM SHORT TERM CURRENT % MTOE

PROJECTED HYDEL POWER PROJECTS Source: Pakistan Energy Plan 2005-2030 by P.C., Islamabad MW 19,200 5,000 “ UPTO 2030 14,200 6,800 “ UPTO 2020 7,400 1,200 ADDITION UPTO 2010 6,200 6,200 EXISTING INCLUDING GHAZI BAROTHA (FULL) CUMULATIVE CAPACITY 5,000 6,877 1,206 3,000 3,877 2,000 3,000 600 120 740 655 649 240 133 740 19 121 130 72 81 96 130 106 79 132 84 97 60 Small projects Large Project TOTAL UPTO 2030 NEW POWER PROJECTS (CAPACITY IN MW) Neelam Jhelum Taunsa Munda Suki Kinari Swat Cascade Karot Partind Kohala TOTAL Large Project TOTAL Pehur Allai Khwar Duber Khwar Khan Khwar Malakand-III Jinnah Barrage Keyal Khwar Golen Gol New Bong Hydro power Rajdhani Power Project Matiltan Distt Swat Kotli Hydro Power Project Gulpur Hydro Project TOTAL UPTO 2020 UPTO 2010

PROJECTED NUCLEAR POWER PROJECTS Source: Pakistan Energy Plan 2005-2030 by P.C., Islamabad MW 8,000 1,000 x 5 “ UPTO 2030 3,000 600 x 4 “ UPTO 2020 600 300 ADDITION UPTO 2010 360 360 EXISTING CUMULATIVE CAPACITY 7,400 600 360 * TO BE RETIRED BY 2010 1200 1200 2000 2000 1000 300 300 60 300 NPP-4 NPP-5 NPP-6 NPP-7 NPP-8 NPP-9 UPTO 2030 NEW POWER PROJECTS (CAPACITY IN MW) CHASNUPP-2 NPP-3 KANUPP-1* CHASNUPP-1 UPTO 2020 UPTO 2010

GENERATION EXPANSION PLAN ( WAPDA SYSTEM) 1 Rental :150 MW 1 Renta : 136 MW 1 Hydel : 81 MW 3 Hydel : 323 MW 14 Thermal : 2927 MW 1 Alt. Energy: 100 MW 1 Hydel : 96 MW 8 Thermal : 1209 MW 2 Hydel : 184 MW 1 Thermal : 150 MW 1 Nuclear : 325 MW

PROJECTED COAL POWER PROJECTS Source: Pakistan Energy Plan 2005-2030 by P.C., Islamabad 26 (58) 11 (24.9) 2.1 (4.7) 0.09 (0.2) 36 (80) 17 (38) 6.1 (13.6) 2.69 (6) TOTAL MTOE (MT) MTOE (MT) MW 8.0 (18.0) 2.0 (4.5) 14,500 “ 2030 4.0 (9.0) 2.0 (4.5) 5,800 “ 2020 2.0 (4.5) 2.0 (4.5) 1,050 UPTO 2010 1.6 (3.6) 1.0 (2.2) 150 EXISTING CEMENT / BRICKS STEEL POWER 20 15 10 6 % IN ENERGY MIX 150 150 Existing 1,050 900 TOTAL 300 450 150 Dadabhoy Energy Lakhra coal Habibullah Energy ADDITION UPTO 2010 MW 14,500 8,700 “ UPTO 2030 5,800 4,750 “ UPTO 2020 CUMULATIVE CAPACITY

THE WAY FORWARD 1. GOP TO SET-UP NATIONAL ENERGY COMMISSION OR NATIONAL ENERGY PLAN AUTHORITY TO ACT AS CENTRAL STATUTORY BODY FOR ENERGY PLANNING AND PROJECT MANAGEMENT. 2. GOP TO SET-UP COAL POWER DEVELOPMENT AUTHORITY WITH MANDATE AND FUNDS TO SET-UP COAL POWER PROJECTS BASED ON LOCAL COAL. 3. TRANSITION OF OIL, GAS AND POWER COMPANIES TO FULLY EMPOWERED CORPORATE STRUCTURE WITH PROFESSIONAL MANAGEMENT . 4. ARRANGE FOR GOP FUNDING, DONOR SUPPORT ETC FOR MEGA PROJECTS IN HYDEL, COAL AND NUCLEAR SECTORS. 5. SECURE LONG TERM SUPPLIES OF OIL & GAS FROM MID EAST AND CAS THROUGH UPSTREAM INVOLVEMENT AND GOVERNMENT TO GOVERNMENT LEVEL COOPERATION. 6. FAST TRACK AGREEMENTS AND IMPLEMENTATION OF TRANS NATIONAL OIL AND GAS PIPELINES . 7. DEVELOP PRESIDENT’S VISION OF PAKISTAN AS “ASIAN ENERGY CORRIDOR”, THUS SECURING PAKISTAN’S STRATEGIC ROLE IN REGION AND ENSURING SUSTAINABLE ENERGY SUPPLIES FOR THE FUTURE. For Pakistan’s Energy – Security, Sustainability Sovereignty

MOVING AHEAD ….. TOGETHER FOR PAKISTAN’S POWER SECURITY, SOVEREIGNTY, SUSTAINABILITY. THANK YOU

FUEL MIX IN ENERGY GENERATION (GENCOs) 1.33 0.88 0.77 0.66 0.63 0.61 0.59 0.67 0.94 0.81 Cost/kWh (Rs) 12.68 11.03 9.91 11.28 9.49 9.51 3.56 3.40 2.27 3.15 Cost/kWh (Rs) 5.04 3.27 2.71 2.89 2.49 2.62 1.74 1.40 1.61 1.46 Cost/kWh (Rs) 2.35 1.97 1.82 1.75 1.74 1.64 1.27 1.24 1.16 1.12 Cost/kWh (Rs) Generation (GWh) Generation (GWh) Generation (GWh) Generation (GWh) 129 2 4976 17402 2006 175 198 231 284 240 410 501 406 375 Coal 5 26 76 64 65 43 79 84 139 H.S.D. 3213 2734 6619 6631 4824 5274 4191 4966 6276 Furnace Oil 1879 18053 12648 11680 11711 13417 11121 12003 12303 GAS 2005 2004 2003 2002 2001 2000 1999 1998 1997 FUEL

AVERAGE FUEL COST AND SALE PRICE KESC ( Paisa) / kWh)

AVERAGE FUEL COST AND SALE PRICE WAPDA (GENCOs) ( Paisa) / kWh)

Presentation By Munawar Baseer Ahmed

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