by Mehtab Haider

ISLAMABAD, Jan. 2 (Gwadar Pro) - Pakistan and China on Tuesday discussed cooperation in areas of power, oil and gas sector under the China-Pakistan Economic Corridor (CPEC) framework.

"The advent of New Year will usher in further strengthening of exemplary friendship between Pakistan and China and both sides are keen to work even closer in various fields including energy sector for which new areas are being explored". This was stated by Federal Minister for Power and Petroleum Mr. Omar Ayub Khan in a meeting with Chinese Ambassador to Pakistan HE. Mr. Yao Jing. Secretary Power Division Mr. Irfan Ali was also present during the meeting.

The Federal Minister apprised the Chinese Ambassador that all projects under CPEC are being executed well within their timelines. He said that the cooperation and coordination among the Chinese investors and relevant agencies of the Power Division are exemplary.

Apprising about the oil and gas sector, the Federal Minister said that bidding process for 40 new exploration blocks are soon to be initiated. He said that under a proposed policy, the oil and gas exploration well digging number is to be increased from average 33 to 100 by the Oil and Gas Development Company Limited (OGDCL) which will also increase possibility of new explorations.

During the meeting, progress on various projects under the Energy Sector were also reviewed. It was also agreed that a comprehensive review meeting on all projects will be held sooner at the Power Division.

The Chinese Ambassador while acknowledging the exemplary progress on energy projects under the CPEC said that during the coming year the cooperation is further to be expanded. He said that many Chinese companies are eager to invest in the Power, oil and gas sectors. He informed that since with the New Year under the FTA between Pakistan and China, the exports to China will increase considerably, there will be higher economic activity in Pakistan to meet the demands.

On the occasion of last Joint Cooperation Committee (JCC) meeting held in Islamabad, its minutes stated that since CPEC energy cooperation was initiated five years ago, thanks to the mutual trust of both governments, active participation of businesses and strong support from the Pakistani side, both governments have emphasized the importance of cooperation from project planning to project execution and adhered to the principle of building "a government-led and market-oriented system with businesses as the main player in seek of win-win outcomes".

It stated that guided by an overarching plan at the top level, energy cooperation has maintained steady progress and projects have been advanced with full speed.

As of September 2019, 12 power generation projects have either started construction or been in commercial operation already, with a total installed capacity of 7240 MW and a total investment of about 12.4 billion USD. Among them, there are 9 COD projects (some are constructed by phases), with a total installed capacity of 5320 MW and a total investment of about 8.175 billion USD, and 3 projects, expected to be completed and put into operation between 2020/21 to 2022/23 fiscal year, are under construction (some are constructed by phases), with a total installed capacity of 1920 MW. In addition, 9 projects stand at early stage (some are constructed by phases), with a total installed capacity of 6390 MW.

The CPEC energy cooperation has increased power supply in Pakistan. In the fiscal year of 2018-2019, power generation of CPEC projects reached 17.728 billion kWh, 14.5% of the total output in the NTDC system, which could supply over 33 million people on per capital power use basis.

The CPEC energy cooperation has promoted economic and social development of Pakistan. According to statistics, COD CPEC projects as of the fiscal year of 2018-2019 have paid about 250 million USD in taxes during the construction period and provided over 10,000 jobs. Reliable power supply is a significant facilitator to local economy and social development.

The CPEC energy cooperation has enriched the content of a community of shared future between China and Pakistan. During the construction of projects, the Chinese companies have observed related laws and regulations, respected local rules and customs, and properly addressed issues that may cause local concerns such as the relocation of residents and community development. The Chinese companies are committed to localization of content, including transfer of technology, indigenization, development of local resources and capabilities and have created a significant number of jobs in this process. As they work to ease energy shortage and boost employment, they have also helped enhance infrastructure, improve people's well being, facilitate community development, provide skills training, assist with disaster relief, and participate in cultural exchanges. These efforts have brought real benefits to local communities and facilitated the realization of common prosperity.

Both sides noted that the joint expert panel reached consensus on the Report of Joint Study on Power Market in Pakistan (finalized on November 3, 2019), which indicates that the power supply-demand will be basically balanced in Pakistan from 2019 to 2030.

After 2025, apart from minor surplus in specific years due to concentrated commissioning of power generation projects, Pakistan may enjoy balance generally in all the other years. Both sides agreed in principle that the project list may be reviewed and adjusted based on the Supplementary Protocol to Agreement on the China-Pakistan Economic Corridor Energy Projects Cooperation between the Government of the People’s Republic of China and the Government of the Islamic Republic of Pakistan (signed on February 3, 2016) and the recommendations by expert panels with regard to the project list adjustment in line with Report of Joint Study on Power Market in Pakistan. Then the outcome of adjustment shall be endorsed in the form of the signed agreement between China National Energy Administration and Pakistan Ministry of Energy (Power Division).

The Pakistani provinces proposed the projects, including 135 MW Taunsa HPP by Punjab, 350 MW Toren More Kari HPP and 260 MW Jameshill More Lasht HPP by Khyber Pakhtunkhwa, off-grid solution for Baluchistan and Merged District of Khyber Pakhtunkhwa, and JCC agreed that the project proposals will be evaluated by both experts panels.

The JCC noted the 6th EPEP Meeting regarding Azad Pattan HPP, 2 HPPs in GB and Rahimyar khan imported fuel power Plant.

Chinese and Pakistani leaders have recently reached agreement on advancing CPEC development with high standards and building CPEC projects into model projects of "Belt and Road" high-quality development. In the spirit of their instructions and for a sound, orderly and sustainable CPEC energy cooperation, the joint expert team has drafted the Guiding Principles for CPEC Energy Cooperation Projects. Both sides agreed that the draft and launch of the Guiding Principles at the current stage is an important step taken to ensure long and steady progress of CPEC as well as the construction of high-quality BRI model projects. The two sides also agreed to revise and improve the terms of the Guiding Principles and strive to launch the document within this year.

In addition, both sides agreed on the need to ensure CPEC policy stability for sustainable development of projects. The two sides agreed that all CPEC projects had been strictly reviewed and granted approvals by the Pakistani side on a case-by-case basis. These projects are consistent with and fall within the policy and regulatory framework of Pakistan. The current CPEC policies and agreements shall be jointly executed by both the Chinese and the Pakistani side. The Chinese side proposes that the Pakistani side maintains stability in its taxes and power tariffs while establishing a better regulated and more efficient power market. The two sides shall enhance communication and coordination, analyze the impact of changing policies on CPEC projects, and be aware of potential risks so as to ensure sustainable development of CPEC energy projects.

The Chinese side pays attention to the coordinated development between power generation and power evacuation arrangements and appreciates the efforts made by the Pakistani side on the construction of power transmission system supporting CPEC projects.

As to tariff payment, currency depreciation and other affairs, the Pakistani side stated that the delay of tariff payment is being improved. The Chinese side also noticed that the Pakistani side was taking various measures to balance and coordinate various factors and appreciated efforts. It is hoped that the Pakistani side could continue its high attention to related issues, ensure successful project execution and proceed to resolve issues brought by delay of tariff payment and currency depreciation.

The Pakistani side proposed inclusion of this project into CPEC framework on a priority basis by both sides. The Chinese side acknowledged Pakistan’s inspiration to develop AMI system and supports Chinese companies to offer capacity building and technical apparatus based on commercial principles.

Both sides appreciated the work of the Joint Experts Panels of Oil & Gas Sub working group attached to the CPEC energy sector and towards completion of the “Pakistan Oil and Gas Industry Development Plan Report” which will provide effective guidance for the development of the Oil and Gas Industry in Pakistan with emphasis on petrochemical industry refinery, oil and gas exploration including conducting seismic survey and Pipe line projects. Given the proposed projects to be helpful in development of oil and gas industry, both sides agreed that these projects will be included in the “Development Plan for Pakistan Oil and Gas Industry”. Both sides agreed to make the Development Plan more actionable for quality development of CPEC with ready projects.

Among several projects that were discussed at the experts' level, following were recommended to be considered, in the first instance, for early implementation under CPEC:

i) Finalization of feasibility study on South North Gas Pipeline Project by Power China International Group of Companies;

ii) Upgradation of Pakistan Refinery Ltd Karachi;

iii) Coal to Liquid Engineering Plant based on Thar Coal at Thar Sindh

IV) Both sides appreciated the concept to include Thar Block-VI for Coal gasification to Fertiliser projects under CPEC and desired to undertake a feasibility study for further evaluation.

Interested parties will conduct feasibilities and place before the next Energy Planning Expert Panel for review.

Both sides agreed that other projects discussed in the Experts Panel and Joint Energy Working Group meetings require further study and feasibility work before they can be formally included in the process.