In letter to Hammad Azhar, SAPM Tabish Gauhar calls for ‘structural reforms’ in energy sector

Special Assistant to the Prime Minister on Energy and Petroleum Tabish Gauhar, in a letter addressed to Energy Minister Hammad Azhar, has urged that strategies be chalked out and “holistic and structural reforms” made to address energy sector challenges.

The four-page letter titled “Beyond The Fire Fighting – Proposed Strategic Workstreams In The Energy Sector”, a copy of which is available with and dated July 23, 2021, was also sent to Prime Minister Imran Khan, Finance Minister Shaukat Tarin, Planning, Development and Special Initiatives Minister Asad Umar — who is also the chairperson of the Cabinet Committee on Energy (CCoE) — and petroleum and power secretaries, in deviation from the usual practice as such letters are only sent to the relevant minister or secretary.

In the letter, Gauhar underscored the need for making substantive headway on the 1,100 kilometre-long gas pipeline running from Port Qasim in Karachi to Lahore and working in this regard with the relevant Russian consortium in the next couple of months. The prime minister’s aide termed the measure “of critical importance to Pakistan’s energy security”.

“In my humble opinion, this gas pipeline project should be financed by the Rs 321 billion Gas Infrastructure Development Cess funds already raised from the public for this very purpose and not from third party debt and equity that will add on to the gas consumer bill,” he suggested.

He added that the “people of Pakistan shouldn’t be paying twice for the same asset.

Furthermore, Gauhar warned that “by giving veto right to the Russians on [the] design and construction [of the pipeline], it is almost inevitable that they (Russians) would opt for the larger diameter (56-inch) pipe that our Sui companies have no track record of — whilst according to our local analysis, we can meet the projected gas demand for the next 10-15 years with a relatively smaller (42-inch) diameter pipeline at a potentially lower upfront project cost (savings of up to $500 million) and quicker timeline (2023 versus 2024 completion).”

Improving demand-supply management
On the subject of electricity load shedding, he highlighted that the recent supply-side challenges again exposed the “fragility” of the energy ecosystem during peak times, notwithstanding the “excess capacity” syndrome.

In this regard, he suggested that Pakistan paces up the privatisation of public-sector power plants.

He further pointed out that there is a long-standing demand for a centralised power-cum-petroleum “Planning Cell” for more accurate demand-supply forecasts based on a data-driven or econometric modeling exercise.

Moreover, the prime minister’s aide urged the energy minister to “commission an independent audit of those thermal IPPs (independent power plants) that were not available when we needed them the most and yet charge take-or-pay capacity payments throughout the year”.

Petroleum sector
With regards to the petroleum sector, Gauhar highlighted that “there is a serious human resource and governance issue in the Petroleum Division.”

He said in the letter that while the issue might not be apparent, it was having a “direct adverse impact on its (Petroleum Division’s) policymaking and oversight functions across the upstream, midstream and downstream segment”.

Moreover, he also called for some key structural changes, including the transfer of various regulatory functions from the Petroleum Division to the Oil and Gas Regulatory Authority and the upcoming exploration and production regulatory authority.

The prime minister’s aide also wrote about the liquified petroleum gas, power sector’s circular debt and other key issues in the letter.

According to sources in Cabinet Division, a meeting chaired by Asad Umar was also held on Monday to look into Gauhar’s recommendations.

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