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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Pakistani Energy Sector About to Collapse?

At what point does a nation’s energy infrastructure become unsustainable?

According to Pakistani Intezar Mehdi, corporate lawyer and energy expert, the nation is on the precipice. MEhdi, a corporate lawyer, working with foreign investors in local power sectors, said that the shortsightedness of experts and the government has not only restricted the nation’s power generation sector but that nation’s entire economy is at risk from the consequences of bad energy and petroleum policy, generating “circular debt” that threatens the nation’s entire energy sector in both the short and long term.

Medhi’s grim assessments are echoed by Sir Syed University of Engineering and Technology Chancellor Z.A. Nizami, who noted during a meeting to review the arrangements for the forthcoming 14th IEEE International Multitipic Conference 2011 that the country’s current energy crisis is severely affecting national economic activity including the production sector, where rising power tariffs have negatively impacted manufacturing costs.
 
The problem?

Exploding population growth, which in turn generates ever increasing energy consumption rates, subsequently making available energy resources too expensive for many industries, forcing them to close because of insufficient power supplies.

Simply put, Pakistan’s current electricity demand is about 25,000 megawatts per day while the nation’s current electrical production is less than 20,000 megawatts per day, resulting in a shortfall of 20 percent, or over 5,000 megawatts per day. Even worse, given Pakistan’s ramshackle energy production base, by 2015 demand is projected to rise to 30,000 megawatts per day.

Medhi’s pronouncements are buttressed by the recently released Pakistani State Bank’s annual report on the State of the Economy, which noted that in 2011 the country’s manufacturing sector suffered serious setbacks, with industrial growth being a negative 0.1 percent in FY11, due to flood-driven supply chain interruptions, prolonged power outages and reduction in the nation’s natural gas supplies. Acknowledging the energy sector’s problems, the Report noted that the government’s response to the nation’s chronic energy shortfall was to commission rental power projects, resolve the country’s by injecting $1.3 billion into the country’s energy sector as well as increasing electricity tariffs to pass on the higher cost of production to consumers.

Complicating the picture, responsibility for determining national energy policy and running the country’s power sector is shared out among the nation’s Water and Power Ministry and 19 subordinate agencies, the Ministry of Petroleum and Natural Resources, 16 subsidiary agencies, four other ministries and seven agencies.

It is not as if the government has not attempted to address the country’s chronic energy shortages, as on 22 April 2010 Pakistan’s Prime Minister Yousaf Raza Gillani announced the nation’s national energy policy in response to growing power shortages in the country, which led to widespread rolling blackouts that paralyzed the nation’s industrial concerns and caused protests and rioting. Neon signs were banned and the official weekend was extended from one to two days in an attempt to conserve electricity. Other conservation measures included banning decorative lights, cutting electricity to government offices by 50 percent, along with air conditioners only being allowed to be switched on after 11 am.

Furthermore, street markets were asked to close early and commercial centers except drug stores were ordered to close at 8 pm.

Last but not least, wedding celebrations were to be limited to three hours, while power supplies to Pakistan's commercial capital, "City of Lights" Karachi, were to be decreased by 300 megawatts in order to allow fairer distribution of power to the remaining parts of the country

Possible outside intervention to resolve the crisis? The United States has made improving Pakistan's power infrastructure one of its top priorities and U.S. special envoy Richard Holbrooke, while describing the power situation in Pakistan as "unacceptable," has stated that the U.S. would go to its "absolute limits" to help Pakistan overcome the situation.

So, where does Pakistan go from here? Up to now, the government has been tinkering at the margins of its national energy policy, apparently hoping for some outside intervention in the form of increased international aid.
 
Given that despite ramshackle energy policy, Pakistan is also home to an estimated 70-90 nuclear warheads, according to an analysis published last year by the authoritative Bulletin of the Atomic Scientists, Washington ought to go to its "absolute limits" to help Pakistan keep the lights on.

The sooner the better.

By. John C.K. Daly of Oilprice.com




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