Thar Coal A Game Changer for Pakistan Energy

Thar Coal- A Game Changer for Pakistan Energy Conference, 11 th April 2011, Islamabad By Ajaz Ali Khan Secretary C&EDD / Managing Director Thar Coal & Energy Board secy@sindhcoal. gos. pk www. sindhcoal. gos. pk

Coal’s Significance in Global Energy Scenario q Global energy consumption will rise by 50% by 2030. In non -OECD region, it will rise by 85% (International Energy Outlook Report 2008) q Coal use is likely to grow from 40% to 44%, as a source for power generation, by 2030* due to energy security and price volatility. q Besides use in power generation, various countries have initiated projects to produce Coal-to-Liquids, that entail producing diesel and other liquid products and Coal gasification projects in China, US, India and South Africa. q World Proven Coal Reserves – Over 860 billion tons. * Source IEA Report 2009 2 www. sindhcoal. gos. pk

World Coal Resources billion tonnes World Coal reserves – Bituminous & anthracite – Sub Bituminous – Lignite %age 860 405 260 195 47 30 23 According to Survey of Energy Resources 2010 by World Energy Council –The use of coal to rise by 60% by 2030 –Coal’s Share in Power generation is set to increase from 41% to 44% by 2030* www. sindhcoal. gos. pk * ( Source- 2010 survey of energy Resources- world energy council) 3

Coal Used in Electricity Generation & Lignite Reserves % age of Electricity Generated from Coal Lignite Reserves Billion tonnes South Africa 94 30. 15* Poland 93 1. 37 China 81 18. 6 Australia 76 37. 2 Israel 71 - Kazakhstan 70 12. 1 India 68 4. 5 Czech Republic 62 0. 98 Morocco 57 - Greece 55 3. 02 USA 49 30. 16 Germany 49 40. 6 World Average 41 195. 38 Pakistan 0. 1 186. 2** ( Source, 2008, IEA) * Sub bituminous & Anthracite reserves only www. sindhcoal. gos. pk 4 ** Thar Coal Resources are 175 billion tonnes Proven Reserve in 9 explored Blocks alone is 20 billion tonnes

A Comparison of Power Generation fuel Mix World Power Generation fuel Mix 2008 -09 Pakistan Nuclear, Pakistan Power Generation Fuel Mix 2008 -09 1. 8% Others 2% Hydel; 30, 3% Gas; 32, 4% Coal 41% Hydro 16% Coal; 0, 1% Gas 20% Oil; 35, 4% Oil 6% www. sindhcoal. gos. pk 5

Demand & Supply Gap Projection for Pakistan Current Installed Capacity (MW) 19, 566 Project Demand Gap (MW) Year MW 2010 24, 474 6, 577 2015 36, 217 18, 320 54, 359 36, 462 80, 566 62, 669 113, 695 95, 798 2020 2025 2030 Source: Pakistan Electric Power Company (PEPCO) Future Energy Demand Supply Gap is Alarming! 3 www. sindhcoal. gos. pk 6

Pakistan’s Coal Reserves Sindh 186. 560 billion tonnes Thar 175 billion tonnes Punjab 235 million tonnes Balochistan 217 million tonnes KP 90 million tonnes Azad Kashmir 9 million tonnes Thar www. sindhcoal. gos. pk 7

Uses of Lignite Coal Combustion (Steam) Gasification Electricity (Steam Turbines) CH 4 CO CO 2 H 2 Ash Tar Naphta Phenol Catechols Carbon Dioxide Dephenolized Cresylic Acid H 2 S NH 3 Coal to Liquid Fisher Tropsch Synthesis Crude Oil Refinery Ethanol Jet Fuel Diesel Petrol Paraffin Chemicals (Ethylene Polymers Ammonia Fertilizer Explosives Source: Syngas and Coal Technology, R & D, SASOL – Mr Johannes Van Heerdeen 8 www. sindhcoal. gos. pk

Uses of Lignite From 1 ton of Lignite in Germany they produce – 1100 Kwh of electricity – 400 Kg of Briquettes – 360 Kg of Pulverized Lignite – 380 Kg of fluidized bed Lignite – 250 Kg of Coke – 190 Cu Mtr of Substitute Natural gas – 160 Ltrs of Diesel – 50 cu Mtrs of Synthetic gas www. sindhcoal. gos. pk 9

Social Benefits from Thar Development § Thar area development will transform rural economy (primarily based on subsistence farming) to a urban economy § Increased economic activity will create number of opportunities for locals residents § CSR expenditure of Sindh Thar Coal Mining Company (2% of Earnings Before Tax) will be spent on community and social development programs improving socio-economic indicators of the area and reducing burden on PSDP § Extensive skill development will have a positive spillover effect on productivity due to knowledge transfer and human capital development § Improvement in infrastructure and ancillary facilities will improve local residents access to hospitals, schools etc.

Benefit to Economy – Reduction in Power Generation Cost • NPV of savings from Block II alone is over Rs. 3. 2 Trillion Year Price of Oil (USD/bbl) * RFO Tariff (Usc/k. Wh) Coal Tariff (Usc/k. Wh) Annual Savings (Rs B) Cumulative Savings (Rs B) • • • 2016 81 14 10 14 14 2025 95 16 11 177 1, 026 2035 115 16 9 420 4, 055 2045 138 19 11 856 10, 403 Savings discounted at the rate of inflation (local inflation: 8%) Source: CERA (Cambridge Energy Research Associates) ; RFO and Coal Prices calculated from crude oil prices through historical regression analysis 2055 165 23 12 1, 746 23, 341 2065 198 28 14 3, 562 49, 732 2071 221 31 16 5, 466 77, 372

Annual Savings in Foreign Exchange from Thar Block II • Cumulative savings of over USD 87 Billion from Block II alone • Net Present Value of USD 31 B discounted at the rate of inflation (US CPI: 3%)

Vision for Thar Coal “To develop Thar Coal as a major source of power generation for Energy & Economic Security of the country and as a Hub of Petro Chemical Industry” Goal To generate at least 10, 000 MW by 2020 www. sindhcoal. gos. pk 13

Status of Blocks Thar Coal Block-II Sindh Engro Coal Mining Company (JV: 40% Sindh Government; 60% Engro) 2 X 600 Power Plant planned Open Pit Mining @ 6. 5 Mtpa Block III-A Cougar Energy (UK) 400 MW Planned Under Ground Coal Gasification Project Ergo Exergy Technology planned Status Bankable Feasibility completed Project financing activity continued. 31 st August 2010 Pilot Burn planned in 36 Months Desktop studies under process. Block-V UCG Project Under Ground Coal Gasification Project 2 X 50 MW IGCC Power Plant Planned Unit gasifier design prepared, Technical team mobilized and desktop studies under process. Drilling in Process by GSP Test Burn Planned April 2011 Block-VI Oracle Coalfields, PLC (UK) Strip mining; Mo. U signed with KESC for 300 MW Geotechnical drilling in process through DRD BFS completion June 2011 ESIA completed 14 www. sindhcoal. gos. pk

Incentives for Thar Coal Development Special Economic Zone • Thar Coalfield is declared as Special Economic Zone, and the projects of development of Thar (also including coal mining and power generation) declared as ‘Projects of National Security’ Rate of Return • 20% ($ Based) IRR to firms which achieve Financial Close before 31 st December 2015 for Mine & Power Plants based on indigenous coal and additional half a percentage IRR i. e. 20. 5% IRR for firms which Financial Close by or before 31 st December 2014. www. sindhcoal. gos. pk 15

Incentives for Thar Coal Development • Zero percent customs duties on import of coal mining equipment and machinery including vehicles for site use. • Exemption on withholding tax to shareholders on dividend for initial 30 years. • Exemption on withholding tax on procurement of goods and services during project construction and operations. • Exemption for 30 years on other levies including special excise duty, federal excise duty, WPPF and WWF. www. sindhcoal. gos. pk 16

INFRASTRUCTURE AVAILABLE AT THAR ROAD NETWORK 70 tonnes load carrying capacity metalled road is available up to Coal field area. ELECTRICITY 11 KV feeder emanating from Islamkot to Thar Coal Project areas with 200 watts transformer is available. COMMUNICATION Telephone & Internet communication through Optic fiber cable is available up to Thar Coalfield area. DRINKING WATER 29 Reverse Osmosis Plants in Thar are available for provision of portable water to residents as well as project staff free of cost. RESCUE STATION Rescue Station in coal mining area at Thar coalfield covering an area of 8, 200 sq. ft. is completed LIBRARY A Coal library is situated at office of Sindh Coal Authority, Karachi. www. sindhcoal. gos. pk 17

INFRASTRUCTURE PLANNED AT THAR TRANSMISSION LINE NTDC is conducting feasibility study for lying of Transmission Line for evacuation of 10, 000 MW from Thar. In the first Phase they are planning to evacuate 1200 MW. AIRPORT The Go. S has approved a scheme at the cost of Rs. 972. 070 million for the construction of Airport at Thar for Coal Fields of Sindh by the Civil Aviation Authority. PROVISION OF HEAVY DUTY ROAD The W&S Deptt. is upgrading the road from Karachi to Islamkot through Hyderabad- Mirpurkhas- Naukot for facilitating transportation of heavy machinery by Dec. 2012. RAILWAY LINK PRACS has been engaged by Go. S to prepare feasibility for broad gauge rail link from Port Qasim to Islamkot. LODGE AT THAR Lodge at Thar with 20 -bedded accommodation to facilitate foreign and local investors is being constructed at Islamkot. PROVISION OF CANAL WATER: The Go. S has planned to construct a water carrier to provide 300 Cusecs water to Thar. 18

BUSINESS FACILITATION Strategic alliance between Coal & Power sector ► High powered Thar Coal Energy Board (TCEB) established as one stop org. with Federal and Provincial agencies to facilitate investors. ► TCEB is a decision making body on Thar Coal Mining and Power Generation Projects. ► TCEB facilitates and coordinates with all the projects related to Thar Coal. ► Causing concerned agencies to improve infrastructure ► To act as coal Pricing agency 19 www. sindhcoal. gos. pk

Thar Coal & Energy Board Composition of the Board is: i. iii. iv. v. viii. ix. x. xiii. Chief Minister Sindh Federal Minister for Water & Power Federal Minister for Finance Federal Minister for Law and Justice Deputy Chairman, Planning Commission Provincial Minister (Irrigation & Power) Provincial Minister (Revenue & Relief) Female MNA from Thar Region Federal Secretary, Ministry of Water and Power Chief Secretary, Govt. of Sindh Secretary, Coal & Energy Development Dept. One eminent Person Managing Director, TCEB www. sindhcoal. gos. pk Chairman Vice-Chairman Member Member Member/Secretary 20

Update on International Competitive Bidding • REOI for Coal Mining, Power Generation & other uses was published in daily Financial Times, worldwide on 21 st Dec. 2010. • Blocks I, III-B, IV & VII of Thar Coalfields were offered through this ICB. • In all six proposals were received and these are being examined as per rules/ evaluation criteria by following Evaluation Committee: i. iii. iv. v. Advisor to CM for Investment Advisor to CM for P&D Secretary, M/o W&P, Go. P (or Rep) Secretary, Coal & Energy Dev. Deptt: , Go. S Director Projects, PPIB, Go. P www. sindhcoal. gos. pk - Convener Member 21

Investment Options 1. Coal Mining Investors interested only in mining may apply for a mine lease for mining the coal. 2. Integrated Coal & Power Generation Project Investors may also opt for investing an integrated coal mining and power generation projects. 3. Mine Mouth Power Project Thar coalfields present best opportunity for mine mouth power projects in view of the great demand for energy in the country. www. sindhcoal. gos. pk 22

Investment Options 4. Coal Gasification Investors may propose to convert coal into gas and market the syngas and bye products in open market, or may develop a forward integrated project on any one or more bye products from gasification project 5. Coal to Liquid Projects Investors may propose to convert coal into Liquid and market the byproducts in open market, or may develop a forward integrated project on any one or more bye products from CTL project www. sindhcoal. gos. pk 23

Open Cast Mines Based on Lignite www. sindhcoal. gos. pk 24

Opencast Mine at Hambach, Germany Producing 40 mtpa Rheinbraun's lignite mines provide fuel for five power stations operated by RWE Energie AG, with a combined capacity of 10, 289 MW. www. sindhcoal. gos. pk 25

Neyveli Lignite Corp Mine in Bikaner India It produces 2. 1 mtpa lignite at Barsingsar village, Bikaner district. This would feed 250 -mw power plant in its initial phase. This Mine is 150 km from Thar Block I. www. sindhcoal. gos. pk 26

Neyveli Power Plant www. sindhcoal. gos. pk 27

RECOMMENDATIONS • Creation of Gov-Ind Energy Council welcome • Should act proactively to create the enabling environment for dev local coal for long term energy solution • Gov to initiate public sector projects to produce atleast 5000 mw from local coal • International financing thru Govtal effort for Thar coal based projects • Provide essential infrastructure to promote large scale investment in local coal to provide baseload at affordable rates • Indigenous resources can only provide Energy Security for the country www. sindhcoal. gos. pk 28

Thar today www. sindhcoal. gos. pk 29

Thar Tomorrow Thank You www. sindhcoal. gos. pk 30