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Coal gasification and fertilizer sector

Published on 3rd Feb, Edition 5, 2014

 

Prime Minister Nawaz Sharif and former President Asif Ali Zardari finally inaugurated the work on the Sindh Engro Coal Mining (SECMC) project, a joint venture between government of Sindh and Engro Corporation. This marks the beginning of not only clean coal extraction from Thar Coal Block II, however, inauguration also reflects the complete political consensus on Thar Coal, as a sustainable indigenous solution for Pakistan’s energy security. The initial mine production will cater to around 600-1200MW of electricity generation, which will be gradually scaled up to eventually yield power generation of 5,000MW for 50 years. Part of coal production will also be supplied to other coal fired plants being planned.

One can hope that Thar Coal has the potential to change the energy landscape of Pakistan, as for consumer relief the cost of power generated from Thar Coal is estimated at under USD 9/kwh, which is almost 50% of cost from furnace oil-based electricity generation. Consequently, the development of this project not only tackle the monster of circular debt but also bodes well the international donor agencies concern regarding clean environment. The coal can also be used for gasification of fertilizer and petrochemicals industry opening up new avenues of progress and development in Pakistan.

As fertilizer sector is a major consumer of natural gas and now a days become a part of the larger problem of gas crisis. Local production and self-sufficiency of fertilizer was largely premised on the availability of cheap gas locally. It takes, 0.75 kg of gas to produce one kg of urea and gas costs internationally are 90% of the cash production costs. Due to gas crisis, the fertilizer usage in the country, which touched 6.5 million tonnes mark in 2009 has phenomenally decreased to 5.3 million tonnes in 2012-13 depicting lower consumption/demand due to unavailability and higher urea prices owing to imposition of GST, GIDC and unprecedented gas curtailment from SNGPL.

Gas curtailment to fertilizer industry in the past three years has resulted in imports of three million tonnes with foreign exchange spending of US$1.5 billion and subsidy of Rs85 billion. Total per acre fertilizer cost in 2008-09 was Rs4,450 which increased by 83 percent in 2012-13 to Rs8,125 per acre for the average farmer hence Pakistani farmers are paying heavily besides increase in prices of all important input items including diesels, water fertilizer, seeds and pesticides.

Buying cheap gas and selling expensive fertilizers no doubt creating a rift between farmers and fertilizers sector. Even it has not only harmed the farmer’s interest but also created problems for power sector. As the gas supplied to fertilizer sector takes gas away from the power sector and industry increasing the oil import bill and cost production of electricity, along this consumer faced in domestic level of gas loadsheding, closure of CNG pumps for 2 or 3 days per week throughout the year.

In all these circumstances, government and fertilizer sector come into the main stream as if government plan to stop gas supply than Pakistan would have to spend approximately Rs452 billion annually on account of urea import if government decides to close down fertilizer industry by permanently disconnecting gas to fertilizer plants with annual production capacity of 6.9 million tonnes, than loss the high amount of revenue generated by this sector. It is estimated that fertilizer sector has paid over Rs140 billion taxes in last five years.

According to fertilizer sector it is a misconception that gas allocation for fertilizer sector is only for the fertilizer plants, however, it is for the agriculture sector of the country that represented 21.4 percent in the GDP and also ensured food security. As fertilizer is one of the key inputs used in agricultural production. The fertilizers contain all or any of the basic nutrients for agriculture: nitrogen (N), phosphorus (P) and potassium (K). Among them the nitrogen is most essential nutrient for plant growth.

 

Urea application on soil contributes to around 25 percent in crop yield and unavailability of urea for Pakistani farmers can result in at least 40 kg less wheat production per acre costing the country Rs24 billion a year and would also increase the price of flour substantially, or increasing food insecurity of 180 million population.

In this scenario it is becoming critical for government to take measures, and explore more source of energy or gas. Burdens comes to the Pakistan’s two natural gas companies, Sui Northern Gas Pipelines Ltd and Sui Southern Gas Company to produce an additional 300-400 million cubic feet of gas. Then it will provide enough gas to fuel an additional 2,000 MW of electricity. Nearly 70 of the installed capacity of the public sector thermal generation companies is now over 15 years old, which is a major reason for the drop in power generation efficiency.

Investment in gas exploration and extraction is seriously lagging behind demand trends. As a result, government continues rely heavily on fuel oil. However, a joint venture between government of Sindh and Engro Corporation opens a new door for prosperity not only for fertilizer sector but for overall hauling of Pakistan economy.

China is the largest producer of fertilizers both Urea and Ammonia, with an output of 50 MTPA, which is almost one-third of the global capacity. Three-fourth of China’s urea production is on coal. Chinese plants, however, are based on the up ground gasification of Anthracite Coal. Gasification of Brown coal has been done successfully HZ2 in North Dakota, in the wake of oil crisis of 1973. There are projects in Australia and New Zealand considering Brown coal gasification.

With the exploration of Thar coal field, extraction and power generation are possible through coal gasification and use of supercritical technology abiding by international environmental and social safeguard standard.

In coal gasification, coal is oxidized to produce a mixture of hydrogen and carbon monoxide, called syngas. The syngas is then used to heal the boilers to produce steam that runs the turbines to produce electricity with carbon dioxide reduced to about 30 to 40 percent. In supercritical power plant technology uses less coal to produce more electricity. It’s affordable and economical and more importantly meets World Bank emission guidelines. As in supercritical power plants operate at a much higher temperature and boiler pressures and burn coal more efficiently. Every kilograms of coal provides about 20 percent more electricity and in the process produces 40 percent less carbon dioxide.

No doubt, with the joint venture of public and private sector the gas reserves at Kunar Peshaki near Hyderabad and Kohlu explore. As, Kunar Peshaki could potentially produce 280mcf of gas per day and gas reserves at Kohlu exploration block, spread over an area of 2500 sq. km. These are projected to be about 22 trillion cubic feet (TCF), vis-a-vis Pakistan’s total current proven gas reserves of about 29 TCF. Out of 22 TCF, 15.4 TCF is recoverable, and their monetary value comes to US$80 billion. At the same time, the government also encourage Independent Power Producers to switch from gas to coal as their main fuel.

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