Resetting our energy chessboard

The writer designed the Board of

Investment and the First Women’s Bank.

Bereft of synergy with indigenous sources, our energy chessboard has been carrying a heavy baggage of ad-hoc and imported fixes which have trapped our people into an unaffordable energy paradigm. The gap between their per capita income and the per unit cost of energy they consume is among the highest in the world. And there is no way out of this quagmire unless we create synergies with our indigenous resources.

Simply put, the cheapest sources of energy supply for Pakistan are its indigenous sources of hydro and coal-based power generation. Natural gas has more valuable uses, and on-going research would make solar and wind power competitive in 10 years. And regional synergy with piped supply from our energy rich neighbours would provide long-term security at reasonable prices.

Poor policy decisions made hydro-power controversial and put away even non-controversial projects. But it contributes 30 percent to our power generation. Coal-based power and Thar coal reserves of 185 billion tons have been talked about for decades. But while coal contributes between 40-70 percent in power generation of countries like the UK, US, Australia, India and China, it has received no policy support to make even one percent contribution to our power generation.

Pakistan’s total power generation from all sources – oil, gas, hydel, nuclear, renewable – is less than 20,000 MWs. How much power can Thar coal reserves provide to Pakistan? Here is the magnitude.

If Pakistan produces 100,000 MWs of power (five times its current production) from Thar coal reserves and keeps producing the same one lakh MWs for the next one hundred years, it will have consumed only one-fourth of these reserves.

Also, as coal-based power is labour intensive, this means hundreds of thousands of job opportunities would keep opening up for people as the country keeps producing coal-based power. At an average of five members to a family, this would translate into lifting millions of people out of poverty within 10 years.

Even with falling oil prices, Pakistan’s import of petroleum products costs over 12 billion dollars; that is well over 50 percent of country’s meagre and declining exports of $22 billion.

So why has our horse-and buggy system of governance, which sits upon one of the largest coal reserves in the world, been creating unemployment in the country by transferring people’s jobs and country’s meagre foreign exchange earnings abroad, instead of using its cheap, abundant and labour intensive coal reserves to provide at least 50 percent of national power? And now, to add insult to injury, it has even started coal imports for power generation.

In May 1989, the then prime minister Benazir Bhutto paid an official visit to Iran. During the official talks (attended by this writer) between the prime minister of Pakistan and president Ali Akbar Hashemi Rafsanjani of Iran, the Iranian president repeated his country’s proposal made in the early 1980s for an oil pipeline between the two countries. A long-term agreement for piped energy supply – even as shipments of energy supplies from friendly sources continue – would enhance energy security for Pakistan at reasonable costs. Subsequently, the Iran-Pakistan gas pipeline has also been talked about, but neither has materialised.

Twenty years back, the Tapi (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline was proposed – more as a political than an investment project. Nothing has happened since. Nothing is likely to materialise in the near future. Trans-Afghanistan infrastructure projects like a gas pipeline, an oil pipeline, and a railway-line between Central Asia and Pakistan via Afghanistan were marketed by this writer, as head of the Board of Investment, to investors in Europe, US and Asia. No serious investor was willing to risk investment in a long gestations infrastructure project becoming hostage to the war-lords of Afghanistan.

But that did not mean Pakistan should not have explored alternate avenues for accessing energy resources of Central Asia for itself and for global markets which would have enhanced its profile as ‘regional energy hub’. For several reasons, many big energy players – government as well as corporate – supported Pakistan to take on such a role and were willing to assist this country, if only our laidback system could show the vision and energy to seize the opportunities and make it happen.

Development in the 21st century is a competitive game among nations, each one trying to seize opportunities and do better than the others. And it is measured not in simple abstract terms but in relation to the pace of development of other nations.

Some sort of development has always been taking place – even in the horse-and-buggy era of Middle Ages, when it took the world 1000 years to double its GDP prior to arrival of the Industrial Revolution. But we live in the 21st century when the world GDP is estimated to multiply between 6 and 8 times in this century. However, our system of governance is still anchored in the horse-and-buggy period and does not recognise the value of timely decision-making opportunities, which are then captured by other competitive forces. Thus Pakistan keeps missing its take-off and, as Lee Kwan Yew said, “not realising its potential”.

If we still think that, given time, the horse-and-buggy system would somehow turn itself into an efficient, fast-paced automobile on which Pakistan could ride into the 21st century, here is a sobering thought. Haiti has been a sovereign independent country for over 200 years, well before Argentina, Brazil or Mexico gained independence. But its leaders have been running a vicious cycle which keeps repeating corrupt, incompetent and dysfunctional governance among themselves. It has kept its people at the bottom of every index of human development even after 200 years, while its ‘leaders’ have set up safe havens in Europe with people’s stolen wealth.

In these uncertain times, every country is zealously working towards long-term energy security. Behind the cataclysmic events in the Middle East – from the Bush administration’s 2003 intervention in Iraq to the systematic destruction of Syria – are the moves by major players to set the energy chessboard of the region to their own liking.

For Pakistan, resetting its energy chessboard with indigenous and regional synergies would liberate its people from an unaffordable paradigm they have been trapped into. But in a real world of conflicting interests, good things do not just happen without conscious and continuous efforts to orient and empower the system of governance towards its real objectives. Otherwise, waiting in the wings is a parallel, informal system of vested interests, ready and willing to undermine it.

And it is this undermined system which has let people down and not delivered to them cheap and abundant power long ago. Pakistan does not figure among the pollutants of the world. The income level of its people calls for affordable energy as the foremost priority. And clean coal technology is available.

Our national interest demands that the laidback system of governance should not transfer our jobs and foreign exchange abroad. We need to synergise vast indigenous coal reserves into contributing 50 percent of national power and save citizens from the stranglehold of dependency and insecurity.

Email: smshah@alum.mit.edu