ENERGY
The least expensive of oil fuels, naphtha is also used the world-over for power generation, either as primary or alternate fuel to natural gas. Leading world manufacturers of gas turbines and diesel/gas engines, including General Electric (GE) and Alstom, have installed, in recent years, a number of simple-cycle and combined-cycle units using naphtha as fuel for power generation in many countries, including China, India, and Indonesia. Relatively, India has rich experience in using naphtha on gas turbines. Currently, there are 28 naphtha-fired and dual-fuel-fired (gas and naphtha) power plants with total installed capacity of more than 11,300MW in operation, which constitute about ten percent of the total power generation. Many Indian power plants operating on liquefied natural gas (LNG) have recently switched to naphtha.
Of late, naphtha, which is the unprocessed component in the production of petrol/motor gasoline, and an intermediate distillate between the lighter gasoline and heavier benzene, is being put into better utilisation in many countries. Besides setting up hydro-cracker plants, naphtha production is converted into high-octane gasoline in many countries. Also, naphtha is used in various value-added products such as PVC, plastic, ethylene, etc, and as feedstock for producing various chemicals. Naphtha production in Pakistan, as a by-product from petroleum refineries, is around two million tons annually, and most of it is surplus. Currently, the naphtha production is converted into high-octane gasoline only at two refineries.
At present, naphtha is exported as a low-valued commodity. Its price in Asia in particular has been fluctuating and since there is no price mechanism for it in Pakistan, international markets dictate its price. Naphtha, also known as Petroleum Naphtha, is one of the three main items of export of petroleum group exports, after crude oil and lube base oil. Pakistan exported 854,653 tons of naphtha during 2012-13. However, like any other item, export of naphtha has been declining in recent years, registering 251,059 tons in 2014-15, and now having reached the lowest ebb. It was reported last year that the UAE, a key importer of naphtha from Pakistan, had stopped buying it after concluding a deal with India.
This is therefore the most opportune time for the industry to consider using huge surplus volume of naphtha for power generation. The government needs to take initiative against the backdrop of shortages of natural gas, high cost of imported LNG, and escalating operational costs of diesel-and furnace oil-run plants. In view of Pakistan’s persistent high import bill of oil, it is advisable to adopt economical options. The gas-based power plants use alternate or back-up fuel for the period when natural gas is not available, depending on the technology applied for power generation. Generally, these are distillate (light) fuel oils, such as high-speed diesel (HSD), and residual (heavy) fuel oils, including low sulphur furnace oil (LSFO) and high sulphur furnace oil (HSFO).
On the other hand, the Independent Power Producers (IPPs) should be asked to explore the possibility of using naphtha as an alternate/back-up oil fuel for their existing power plants. The current production of naphtha in Pakistan is enough to run at least six combined-cycle power plants of 200MW capacity each, roughly, for a period of two months when supply of natural gas would not be ensured. Interestingly, India has generated more power in its gas-based power plants by increasing the use of naphtha, and has also enhanced the efficiency of power plants in the range of 46 percent to 73 percent.
It is a matter of record that the World Bank had recommended in 2010 the use of naphtha as a fuel for IPPs in Pakistan. In response, the Ministry of Water and Power supported imposition of ban on export of naphtha, urging oil refineries to allocate their entire surplus naphtha production to power generation plants. The proposal however met strong opposition by the vested interests, and could not be translated into reality. It is estimated that use of surplus naphtha will reduce import of furnace oil fuel used in power plants by 25 percent.
Naphtha requires special safety considerations for use in gas turbines and diesel/gas engines. Its high volatility can cause fire explosions, as in case of other liquid fuels. The related technology however has recently improved, and more effective protection systems and safety management regulations are in place. Nonetheless, sustained use of naphtha as fuel in power plant would result in high maintenance costs. Still, there are obvious advantages of naphtha-based power generation, naphtha being indigenous and of lower price compared to other oil fuels. Also, there is no increase in capital cost of power generation machinery as it is the same as applicable to using other oil fuels.
Thus, using naphtha would significantly reduce power generation costs and electricity tariffs too. As regards environmental concerns, nitrogen oxide emissions burning naphtha are almost of the same levels as that for combustion of other heavy fuel oils, and the impact is effectively mitigated, by installing separators, bringing the same to acceptable and regulatory levels. In fact, centrifugal liquid fuel treatment systems are installed, which significantly improves the quality of fuel before it enters gas turbine or diesel/gas engine, as the case may be.
In 2010, the Asian Energy Ventures Pakistan (Private) Ltd, Karachi, had plans to establish a pioneering naphtha-based IPP on build, own and operate (BOO) basis. For the purpose, the company had requested the government to allocate 325,000 tons of naphtha on an annual basis for use as a primary fuel. The project was conceived as a combined cycle power plant installing two units of gas turbines along with two heat recovery steam generators and one steam turbine, with cumulative capacity of 240MW of electricity. The company had no track record in power sector, but claimed that the project was being implemented on fast-track and the US Export-Import Bank had provided letter of intent to finance the procurement of gas turbines.
As per project schedule, financial close for the project was within six months, whereas commercial operations were to commence within another two years. Nonetheless, there was no progress on the project and sponsors failed to obtain requisite letter of intent (LOI) from the Private Power and Infrastructure Board (PPIB), and could not initiate preparation of the project feasibility study. The company was incorporated on January 23, 2009, registered at number 0068562 with the Securities and Exchange Commission of Pakistan (SECP), but has been defunct since long.
The writer is ex-chairman of the State Engineering Corporation
