The government has decided to initiate a survey of electricity consumers to address issues of power theft, line losses, power companies’ losses and circular debt.

According to sources in the ministry of finance, power distribution companies will conduct the survey, which is part of a broader strategy chalked out by the Asian Development Bank, the World Bank and the Planning Commission to tackle the energy crisis.

A survey for the Islamabad Electric Supply Company (IESCO) has already been finalised as part of a pilot project. Feedback from the project will be funnelled into finalising the survey for power distribution companies.

The survey is expected to discover the amount of electricity consumed by each consumer, the number of commercial, industrial and residential consumers in each distribution company’s vicinity, the amount of electricity consumed by public institutions and the amount of defaulters in each category.

According to the current project, the size of electricity bills will also be reduced. In the IESCO pilot project, bills are expected to be reduced in size by 20 to 25 per cent. The project will also collect data on consumers by partnering with the National Database Registration Authority (Nadra). Proposals to bill consumers through email and text messaging are also under consideration.

From Tribune

The petroleum ministry has held the Oil and Gas Regulatory Authority (Ogra) responsible for the recent fuel crisis in the country.

In a report submitted to the petroleum minister, the office of director-general for oil said that Ogra failed to perform its duty as a regulator as it did not take timely action to head off a crisis. Ogra’s ineffectiveness resulted in black marketing of petrol and diesel in many parts of the country.

Sources in the ministry said Ogra was supposed to take steps to ensure availability of petrol across the country not only by taking measures against hoarders and black marketers but also through timely imports to meet the shortage created by the shutdown of Parco due to floods.

“The Ogra teams did nothing other than to send show-cause notices to oil marketing companies (OMCs) during the crisis and to wait for the replies to such notices,” an official said.

Petroleum Minister Syed Naveed Qamar is expected to forward the report to the Prime Minister’s Secretariat because Ogra falls under the administrative control of cabinet division.

The report added that the petroleum ministry dispatched teams to various places to examine the availability of petrol at the designated retail outlets.

Meanwhile, the recent fuel crisis has served to sharpen the differences between the ministry and the regulator.

A ministry official alleged that senior officials of Ogra drew heavy salaries (up to Rs400,000 per month) but they hardly did anything for the benefit of the industry or the consumer.

“The situation was better when the OCAC was directly monitoring the supply situation in the country,” he claimed.

Officials of Ogra declined to comment over the report or the supply position in the country.

From Dawn News

Pakistan will push hard for quick implementation of a long-delayed trans-regional gas pipeline from Turkmenistan in a bid to ease its mounting energy crisis, Petroleum Minister Naveed Qamar said on Tuesday. Senior officials of Turkmenistan, Afghanistan, Pakistan and India on Monday inked the framework of an agreement to construct the project with an estimated value of $3.3 billion.

The project would pump natural gas to Pakistan and India through the southern Afghan province of Kandahar, the stronghold of the Taliban and its birthplace. More energy security could ease pressure on Pakistan’s government, which faces a range of challenges, from a home-grown Taliban insurgency to what will likely be years of economic pain after summer floods caused billions of dollars in damages.

But analysts said the agreement was still at a preliminary stage and that security challenges in Afghanistan and the tensions between India and Pakistan remained an obstacle. Proposals to build the pipeline have been on the table since the 1990s but war in Afghanistan delayed the project.

“We are following a very, very aggressive timeframe to conclude agreements on this project as early as possible,” Petroleum Minister Naveed Qamar told Reuters by telephone on his way home from Turkmenistan, where the agreement was initialled on Monday. “But it’s too early to say that when these agreements will be completed and when the project will be implemented. Everything is subject to conclusion of agreements.”

The big question is can Afghanistan provide security for the pipeline? A Taliban insurgency is still raging there after nine years of war and more uncertainty is expected after US troops start withdrawing next summer. Any new tensions between arch-enemies Pakistan and India could also complicate efforts to get the project moving. Qamar said a final framework agreement is expected to be signed at a summit of the leaders of the four countries in December.

A pact covering the broad principles of sale and purchase of gas was also signed. Although some Pakistani energy officials hailed the tentative agreement, analysts say it may just be more wishful thinking. “It’s an agreement to reach another agreement without any concrete details and until then it cannot be termed as important,” said Khalid Iqbal Siddiqui, director of Pakistan’s Invest and Finance Securities Ltd. “This is not the first time it has happened.” The planned pipeline would have initial capacity for 33 billion cubic metres a year and would run for nearly 2,000 km (1,250 miles), including 735 km across Afghanistan and another 800 km through Pakistan. Natural gas to fill the pipeline could be drawn from the massive South Iolotan deposit, currently under development, and the existing Dovletabad field.

Pakistan also hopes a major gas pipeline project from Iran will help it tackle its energy problems. In March, the two sides signed a deal to build a much-delayed $7.6 billion pipeline pumping Iranian natural gas to Pakistan. That project may also be fraught with political uncertainties as the United States has been discouraging Pakistan from any deal with Tehran because of its suspected ambitions to build nuclear weapons. Iran denies it has such ambitions.

via Business Recroder

Earlier this week we heard of PSO warning the government of the upcoming power crisis if the case of circular debts is taken up. It is now learned that PSO gets enough founds to keep supplies on to the IPPs. Express Tribune report gives the details.

The finance ministry has released Rs12 billion on an urgent basis to Pakistan State Oil (PSO) in order to help the public-sector oil marketing company avoid default. The release comes a day after the PSO management suspended supplies of furnace oil to independent power providers Hub Power Company (Hubco) and Kot Addu Power Company (Kapco).

“The finance ministry released a payment of Rs12 billion to PSO today (Saturday) and has also given assurances that another Rs24 billion will be paid to the company by Tuesday, September 21,” the PSO spokesperson told The Express Tribune. “In light of the release and commitments, we are resuming supplies to Hubco and Kapco.”

But analysts commented that the latest move by the finance ministry is a stop-gap arrangement at best. “The government will have to come up with a comprehensive solution to inter-corporate debt,” pointed out Khurram Shehzad, Research Head at InvestCap.

The PSO management has also highlighted that the company is facing difficulties in collecting outstanding receivables worth more than Rs149 billion from its customers. “About Rs120 billion of these outstanding dues are owed by the power sector,” said the company’s spokesperson.

PSO’s profitability has suffered because of mounting receivables. In the last fiscal year, the company’s financing cost stood at a towering Rs9 billion.

Petroleum ministry officials claim they are working on a permanent fix for circular debt but sources have informed that hopes for an early solution have been dashed by recent floods in the country as a plan to divert funds from the budget to meet power sector dues has been shelved in favour of flood relief efforts.

Prior to the release of funds by the finance ministry, PSO had also delayed the awarding of import tenders for the months of October and November. The delayed orders would have been for about 650,000 tons of petroleum products and a delay or cancellation in delivery may hold dire consequences for the country’s energy sector. Even after these assurances, the supply of fuel in the country remains choked.

Sources have disclosed that a decision on whether import orders will be scaled down or restored to prior plans will be taken by the senior management on Monday.

Meanwhile, PSO’s managing director, Irfan Qureshi, has asserted that the company has an abundant stock of petrol. While talking to reporters on Saturday, he reiterated that the issue of circular debt must be addressed on a long-term basis.

The LPG Marketing companies, dealer and equipment manufactures/suppliers are striving hard to bring the autogas stations and provide alternative fuel for vehicles in the country. For the same, the LPG Association of Pakistan’s (LPGAP) proposed for allowing installation in resedential areas following the NFPA-58 regulations which the authority Oil and Gas Regulatory Authority (Ogra) has put down. Business Recoder report gives the details.

According to documents available with Business Recorder, the Authority’s rationale is that in a country like Pakistan appropriate locations of LPG dispensing stations is all the more important due to high population densities, poor traffic conditions, dismal public awareness towards safety and weak emergency response at local level. Authority said that National Fire Protection Association (NFPA-58), an International Code and Standards Organisation, provided guidelines on safety at LPG dispensing stations which do not adequately cover the safety requirements for areas around dispensing stations.

The federal government in September 2005 approved the use of LPG in automotives, subject to Ogra preparing a regulatory framework. The Authority accordingly developed regulatory framework in consultation with all the stakeholders and with approval of the federal government incorporated it in LPG Rules which were notified in March 2007.

The clause 2 (b) of the Regulatory Framework (RF) prohibits installation of LPG refuelling/dispensing in congested and residential areas: “The LPG auto refuelling/dispensing station shall not be located in congested or residential areas nor should any of the adjacent buildings be used for accommodation or public gathering of any sort.”

Documents revealed that the LPG Association of Pakistan (LPGAP) has expressed reservations on this clause terming it unnecessary if compliance with the NFPA-58 is ensured. LPGAP has argued that unsafe and unauthorised decanting of LPG, a practice which is rampant, poses a greater threat to public safety; and recommended curtailing and eradicating the decanting of LPG through rapid growth of LPG dispensing stations for which it is imperative to do away with clause 2 (b) of the Regulatory Framework. Spokesman of LPGAP has said that LPG marketing companies have sought licenses to set up LPG Autogas stations under the LPG Autogas Policy, 2005. LPG is used as an automotive fuel throughout the world including in the US, UK, India, and China. Some 10 million cars run on LPG across the globe. LPG Autogas Stations are the only way to completely eradicate the menace of illegal LPG decanting that has claimed several lives.

He said that LPG autogas stations would make product more affordable and introduce a safe and professional environment for the retail of LPG in accordance with international safety standards (NFPA-58) and best practices.

The controversy over appointment of Adnan Khwaja as MD, Oil and Gas Development Company Limited (OGDC), is setteled after appointment of Director General (DG) Petroleum Concession Naeem Malik as new MD of the company. Details via Business Recorder

Naeem is a seasoned official with wide experience of dealing issues relating to oil and gas sectors. He has also worked as DG Gas and DG Oil in Ministry of Petroleum and Natural Resources. During the short span of working as DG PC, he had settled issues of oil and gas exploration and granted record exploration licences to companies in the oil and gas sectors.

After retirement of Mahboob Shah Alam, Naeem was given acting charge of OGDC MD. Adnan Khwaja’s appointment as OGDC MD had sparked controversy. However, he resigned from this post on Thursday. The Supreme Court had also taken suo motu notice of his appointment.

We have heard about the IPI gas pipeline on and off. The agreement between Iran and Pakistan was signed for gas pipeline in march this year. The latest is that German Consultants are set to be appointed for this project. Details from paktribune are as below.

Pakistan is set to appoint ILF Consulting Engineers as the consultant for the Iran gas pipeline within six days, making first step toward the much-delayed project to meet energy shortage, a senior petroleum ministry official said on Wednesday.

“The cost of the consultancy project will be $25 million and they will have to complete the technical feasibility within 12 months,” Secretary Petroleum, Ejaz Chaudhry, told our sources. The Germany-based consultants would be working on the pipeline along with National Engineering Services Pakistan Ltd. (Nespak), he said.

According to the Iran’s state-run television, Tehran has already built most of the 1,000 km pipeline on its territory. However, the work on the remaining 900 kilometres at the Pakistani side has been pending for years.

Chaudhry said that the project was very much in hand and the ministry understood its importance in securing energy supplies for the country. “We have taken every scenario into consideration, including the sanctions against Iran.”

The petroleum ministry official said that despite threats of losing ties with US companies, investors from Dubai, China and Germany had shown interest in financing the deal, Chaudhry said. “We have targeted January 2012 to start construction of the pipeline and trust me, financiers are out there,” he added.

Iran and Pakistan signed the historic pipeline deal in March this year under which 750 million cubic feet of gas will be pumped daily by mid-2015. The 7.5-billion-dollar project, dubbed as “peace pipeline”, will snake out of Iran’s South Fars field into Balochistan and Sindh provinces.

Chaudhry said that there was a proposal to involve state-run companies in arranging funds for the project. “There is EOBI, OGDCL and State Life for making the initial investment.”

Pakistan has been looking at internal sources to fund the gas pipeline as financing from international lenders becomes shaky in the wake of UN sanctions on Iran.

According to the secretary, the Petroleum Ministry had sought legal opinion of international experts to ‘go around’ the sanctions. “We are studying every option,” he added.

Under a force majeure clause of the gas sale purchase agreement, the project can be stopped if sanctions are imposed on Iran. According to a government official, the government would setup a Liquefied Natural Gas (LNG) terminal in Gwadar if the project failed to materialise.

An interesting report from DAWN summaries the Asian Development Bank report which holds the Ministry of Water and Power and NEPRA (National Electric Power Regulatory Authority) responsible for power crises the country faces.

The Asian Development Bank has held two major power sector stakeholders — the Ministry of Water and Power and the National Electric Power Regulatory Authority (Nepra) — responsible for most of the ills Pakistan’s power sector is facing today, including loadshedding, system losses and high tariffs.
This puts a serious question mark on the performance of the two public sector institutions designed and set up to solve electricity problems and remove consumers’ sufferings. They have been blamed for stalling or delaying reforms launched by the government more than two decades ago.

In its “Technical Assistance Completion Report” on creation of Central Power Purchasing Agency (CPPA), the ADB said there had been setbacks to its technical assistance because of lax attitude of Pakistan authorities; it provided another opportunity to the lender to sell another technical assistance for strengthening the regulatory regime.

Because of delays in obtaining internal approval within the government, several milestones, including the establishment of CPPA, could not be achieved. “There were significant delays encountered i.e. converting the market rules guidelines into formal statutes; the incorporation/registration of CPPA and finalisation of its budget; and the nomination of its chief executive officer and senior management. The CEO still remains to be appointed by government after nearly 18 months of its inception,” ADB’s principal energy specialist F.C. Kawawaki said on Monday.

“The weak capacity of Nepra to formulate market rules delayed the implementation process and the ADB was requested to process a follow-up technical assistance to help Nepra in developing market rules,” he added.

Since 1998, the government has been implementing a strategic power sector restructuring and unbundling plan to end the persistent power crisis through increased investments to address longstanding fiscal, technical and fiscal deficits.

The ADB report said that the reforms process had been slow and power supply and infrastructure requirements did not keep pace with the rising demand, thereby constraining growth potential and the country’s competitiveness.

“The current generation shortfall is close to 40 per cent of the installed capacity and coupled with the overstressed power infrastructure results in eight to 10 hours of forced power outages. The inter-circular debt to the tune of Rs250 billion, which is nearly 40 per cent of the sector’s annual revenues, accentuates the situation,” it said.

The CPPA is a key organisation to look after contractual obligation between the government and power producers and between the producers and purchasers.

Although the power sector in Pakistan is mature enough to graduate towards formation of an independent CPPA, “a lack of thrust in political will impeded its implementation in true spirit”. Although consultants have submitted deliverables within agreed timeframes, “the weak capacity of the executing agency and political will of the water and power ministry have stalled the full establishment and operations of the CPPA”.

The ADB said that a lot apparently had been contingent in resolving major structural, technical, fiscal and governance gaps and implementing reform agenda on the part of the government: Nepra’s capacity to initiate the policy reforms that could convert the guidelines on market rules for electricity trading into formal industry regulations and solve circular debt problems had been marginal.

It said the government was also not ready to institutionalise the CPPA model because of exogenous factors like severe power shortages and emergency of ballooning circular debt.

“The creation of an effective CPPA without addressing or restructuring the past financial and fiscal deficits of the sector as well as without providing adequate safety valves to avoid such future recurrences has not been an effective exercise,” the bank said, adding that prior to CPPA creation, the government should have laid emphasis on resolving systemic, structural and fiscal constraints in the sector that had led to circular debt.

On its part, the ADB has learnt the lesson that experiences in one market cannot be directly replicated into another. A thorough plan based on ground realities is critical for success of any new institutional arrangement, particularly of the already challenged power sector.

The report said the ADB should not allow its international consultants to avoid travelling to Pakistan on security excuses.

The Oil and Gas Regulatory Authority (Ogra) has increased the price of Liquefied Petroleum Gas (LPG) by Rs 6 per kg, domestic cylinder by Rs 71 and commercial by Rs 273, Irfan Khokhar, Chairman LPG Distributors Association of Pakistan said in a statement on Wednesday.

He said according to the notification issued by Ogra the new price of gas for domestic users in Karachi would be Rs 85 per kg and in Lahore and Gujranwala Rs 105 per kg. While in Rawalpindi, Islamabad, Bahawalpur, Multan, Rahimyar Khan, Sargodha, Mandi Bahauddin, Sadiqabad, Hyderabad, Jhang, Jhelum, Mianwali the price will be Rs 115 kg and the overall price of a domestic cylinder in these cities will now be Rs 1307. In Azad Kashmir, Swat and Gilgit the new price will be Rs 120 per kg and the domestic cylinder in these areas will now be available at Rs 1366.

via Business Recorder

The case of unsolved circular debts will lead to major oil crises says Parco and PSO. This is a long pending issue and government should now step up to play its role in resolving before it becomes the reason of further loss to the economy. The business recorder news item gives the details.

The country’s oil sector’s largest giants, Pak Arab Refinery Limited (Parco) and Pakistan State Oil (PSO), have warned the government of an imminent massive oil crisis due to the unresolved circular debt problem and have urged it to arrange funds for import of petroleum products, Business Recorder has learnt reliably.

Parco has urged the government to arrange funds via PSO to save it from default on account of Letter of Credits (L/Cs) for the import of crude oil. Parco revealed that its bank borrowing was rising due to non-payment of dues by PSO with Rs 145.4 billion receivables against different clients on Thursday morning.

“We are not in a position to open L/Cs to import crude oil due to non payment of dues by PSO,” Parco management said adding that its revenue has also drastically declined due to refinery’s closure caused by floods. The cash-strapped PSO has also informed the government that the strain on its cash flows for consistently carrying such receivables has limited its ability to guarantee the supply of the products to customers. “We have already defaulted on our obligations to the local refineries which require advance payment for the supply of products which is further aggravating the company’s liquidity crunch,” PSO management says.

“Due to floods in the country, our daily collection of funds has also reduced, worsening our cash flow problems and Pakistan Electric Power Company (Pepco) is not making payments from its own bill collection,” PSO authorities said. Government is doing its best to clear outstanding circular debt, PSO management said, “however, we need immediate help to meet our LC payment commitments for imports and non clearance of dues by power sector and other clients will disrupt the entire supply chain of petroleum products.”

PSO receivables against different clients as follows: WAPDA at Rs 47.3 billion, Hubco at Rs 58.4 billion, Kapco at Rs 27.69 billion, PIA at Rs 515 million, OGDC at Rs 328 million, KESC at Rs 1.55 billion, financial charges from PIA at Rs 960 million, price differential claims (PDC) on High Speed Diesel (HSD) at Rs 1.38 billion and PDC on imported PMG at Rs 3.375 billion.

PSO owes Rs 116.97 billion dues to local as well as international fuel suppliers as follows: Rs 37.108 billion to Parco, Rs 13.723 billion to PRL, Rs 9.36 billion to NRL, Rs 24.525 billion to ARL, Rs 4.69 billion to Bosicor and Rs 26.89 billion on account of L/Cs payments and other international fuel suppliers.