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Promises and rhetoric not to solve Pakistan’s energy problems: report

* By 2030, Pakistan’s energy demand will be almost 64 percent greater than projected supply

By Khalid Hasan

WASHINGTON: Solemn promises and soaring rhetoric will not resolve Pakistan’s energy problems, as only long-term vision, a national commitment widely shared among the its political and business leaders, continuity of sound policies and, most of all, political will deliver the desired results, writes Robert M. Hathaway in an introduction to a major report on the energy scene in Pakistan.

The report being released by the Woodrow Wilson International Centre for Scholars is made up of 12 analytical essays by experts on different aspects of Pakistan’s energy needs, the focus being on the future and what steps Pakistan needs to take to meet the challenges that lie ahead. Those who have contributed to the study, sponsored by the Woodrow Wilson Centre, include Shahid Javed Burki, Mukhtar Ahmed, Saleem H. Ali, Asad Umer and Sabira Qureshi.

Some of the essays were presented at a conference on the subject the Centre held in June last year; others were commissioned later.

In his introduction to the volume, Hathaway, Asia programme director of the Woodrow Wilson Centre, points out that Pakistan’s economy is growing, and with this growth comes higher energy consumption and greater pressure on the country’s energy resources. At present, demand for energy exceeds supply, and power outages and planned power cuts are common. In addition to the economic costs, energy shortages can foster political instability, he cautions. Barring drastic action, Pakistan’s energy situation is expected to get worse in the years ahead, he predicts

As much as 79 percent of the country’s energy needs are met by oil and natural gas, in vast excess of local supplies. Pakistan imports nearly 20 percent of its oil requirements and its projected natural gas needs will double by 2010. Other sources are underutilized, a situation that must be reversed. Nuclear power accounts for just 1 percent of energy consumption.

In his analysis, Shahid Javed Burki points out that for nearly six decades, no Pakistani government made a serious effort to prepare for the country’s energy requirements. As a consequence, Pakistan has been saddled with “weak institutions, inappropriate pricing policies and insufficient public sector investment.” The net result is that by 2030, energy demand in Pakistan will be almost 64 percent greater than projected supply. Unless Pakistan moves to address this shortfall, he warns, the country will inevitably pay a large cost not only in an economic sense, but also in terms of a rise in Islamic extremism and slower progress toward political democracy. Burki criticises the government for resorting to ad hoc measures to deal with energy needs and for failing to address deep-rooted structural problems.

Pakistan energy adviser Mukhtar Ahmed explores the challenges facing Pakistan, and observes that 40 percent of the households are not even connected to the electrical grid. Over the next 20 years, overall demand will increase by 350 percent. During this period, the percentage of Pakistan ’s total energy needs met from domestic sources will fall from 72 to 38 percent. Ahmed writes of the need to develop an integrated energy development plan combining energy imports, the development of indigenous energy resources, a more diversified energy mix, and programmes emphasising greater energy efficiency and better management. The “cornerstone” of long-range policy, Ahmed states, involves a shift from a predominantly state-controlled industry to an arrangement where the private sector plays a leading role in energy development and management.

Sabira Qureshi looks at the links between energy policy and poverty reduction efforts, pointing out that study after study has demonstrated that a lack of access to modern energy supplies inhibits the ability of the poor, particularly the rural poor, to escape from poverty. Yet in Pakistan, energy policy is “disproportionately oriented towards the elite rather than the poor.” Those responsible for formulating policy “continue to concentrate on meeting the country’s rapidly growing energy needs in the formal sector, while failing to respond to poverty reduction needs, particularly as they relate to rural household consumption.” And because the majority of Pakistan ’s poor are female, government energy policies must explicitly recognise the need “to mainstream gender” in all energy initiatives. Contributor Dorothy Lele insists that social and human development should be the ultimate objective of Pakistan’s energy policies, not just a fortunate by-product. The poor, she writes, usually pay a higher percentage of their income on energy, and much more per unit of “useful energy service” than the rich.

Economist Robert Looney sets out seven “energy futures” - alternative scenarios of growth and energy needs, based on a macro-energy forecasting model that simulates different patterns and rates of investment and energy availabilities between now and 2035. He suggests that an economic environment characterised by high rates of sustained investment and a major expansion of Pakistan’s hydroelectric generation capacity is most likely to produce sustained economic growth, especially if supported by substantial loans from international agencies. The essay by Vladislav Vucetic and Achilles G. Adamantiades, both of the World Bank, focuses on Pakistan’s power sector, noting that because of a lack of managerial and financial autonomy, the power sector continues to function largely as a centrally controlled, vertically integrated monopoly. The authors provide a troubling assessment of the state of Pakistan’s electricity sector - demand approaching maximum production capacity, while institutional capacity for policy development and implementation remaining low. Sanjeev Minocha of the International Finance Corporation describes the benefits of private sector involvement in oil and gas. From the perspective of the state, he notes, enlisting the private sector to assume much of the risk associated with oil and gas exploration and development can generate immense revenues with little or no provision of government capital.

Pakistani businessman Asad Umar notes that until the early 1990s, the private sector’s participation in the energy sector was limited largely to exploration and production, but privatisation of formerly public sector entities has dramatically changed the energy landscape in recent years. He identifies four roadblocks keeping private enterprise from playing an even larger role in the energy sector: the unstable political situation and attendant law and order problems in Baluchistan; delay in the privatisation of public sector energy companies; the political controversy and provincial disagreements associated with storage-based hydroelectric power generation projects; and overlapping responsibilities of the Private Power and Infrastructure Board and the National Electric Power Regulatory Authority. John R. Hammond of the US Energy Association writes that unless foreign investors feel safe in Pakistan, they are unlikely to be enthusiastic about doing business there. The US Chamber of Commerce’s Aram Zamgochian gives the Pakistan government credit for opening its energy and power sectors, and instituting many of the policies necessary to attract foreign investors. Privatisation and deregulation in the oil sector are progressing steadily, he asserts. Efforts in building a strong infrastructure, on the other hand, have been lacking, and Pakistan’s poor infrastructure results in an estimated 30 percent loss in transmission. Power theft also remains a major problem, he reports. Saleem H. Ali highlights some of the ways in which Pakistani decision makers formulating energy policy should incorporate ecological planning criteria. Large hydroelectric projects, he cautions, should be viewed only as a last resort after low-cost conservation measures have been fully utilised. The government’s current “supply-side approach” to energy has stifled environmental consciousness and efforts toward energy conservation while leading to massive investments in energy generation at the expense of ecological considerations.

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