Coal called hedge against global fuel price volatility – Journal
KARACHI: Coal is disappearing globally as the impact of climate change becomes more evident by the day.
But energy companies involved in mining and coal-based power generation in Pakistan are increasing their generation capacities to ensure “reliable and affordable” electricity in the future.
“Coal offers us protection against the volatility of international fuel prices. It is indigenous and its price is not indexed in the international market, ”said Ahsan Zafar Syed, CEO of Engro Energy Ltd, in a recent interview with Dawn.
His company owns an 11.9% stake in Sindh Engro Coal Mining Company Ltd (SECMC), which has mined 3.8 million tonnes of coal annually since 2019. It sells all of its production to Engro Powergen Thar Ltd ( EPTL), the only coal in the country. – a 660 megawatt power station that burns indigenous fuel. Engro Energy Ltd holds 50.1% of the shares of EPTL.
“Covid-19 showed us how an event could affect international fuel supply chains. Economic progress requires indigenous fuel sources to ensure energy security and protection against supply chain disruptions, ”he said.
Engro Energy CEO Says Covid Has Showed How Event Can Disrupt International Supply Chains
The contribution of coal to the energy mix has increased in recent years as an increasing number of power plants fueled by both imported and local coal have been integrated into the national grid. Its share in total electricity production in the first 10 months of 2021 was 20 pc.
Despite a global movement against the use of coal, Mr Syed said SECMC is set to double production to 7.6 million tonnes per year by June 2022. The mine expansion under of the current second phase will coincide with the commissioning of a 330 MW power plant by Thar Energy Ltd, whose majority stake is held by The Hub Power Company (Hubco).
Another 330 MW power plant sponsored by Hubco, ThalNova Power Thar Ltd, is expected to come on stream in September-October next year. Its commissioning will ensure consumption of 100% of the reinforced production of the Thar coal mine.
The third phase of the mine’s expansion will then bring production to 12.2 million tonnes of coal per year by June 2023, Syed said. The increased production will supply fuel to the 660 MW power plant that the Lucky Group is building in Port Qasim.
“You can’t even think of giving up this [mining] project. We have to get it to a point where it achieves economic viability. Only then can you take a break and think about other options, ”said Mr. Syed.
Based on the pricing structure in place for Thar coal, SECMC obtains an internal rate of return or IRR of 20% above the cost of the project. The price of domestic coal is currently $ 61 per tonne, about half the rate in the international market.
The price of coal from Thar will drop to $ 42 per ton after the ongoing second phase, he said. Thanks to the economies of scale, it will drop to $ 27 a tonne again when the third phase is completed.
“International commodity prices will only return to normal levels until at least mid-2022. But even after their normalization, our post-expansion coal will still be the cheapest source of energy at $ 27 per tonne, ”Mr. Syed said, noting that the mine’s output is to be increased to $ 12.2 million. tonnes per year for it to fully achieve financial and sustainability.
Focus on renewable energies
Mr Syed went to great lengths to state that he and his company strongly believe in climate change and view coal as a dirty fuel source. But burning coal is inevitable to meet the basic energy needs of the developing economy, he insisted.
However, renewable energy sources should be promoted simultaneously, he said, noting that his company is now focusing more on wind and solar projects.
Engro Energy to establish a 400 MW wind and solar power project in Jhimpir to sell 20% cheaper electricity to bulk consumers based in Port Qasim and Dhabeji under a business-to-business (B2B) model of by 2024.
In addition, the company has signed 17 letters of intent with the government of Balochistan for the establishment of 10 wind power plants and seven solar power plants with a maximum capacity of 1,700 MW in Chagai district.
“We have installed wind masts. they collected [meteorological] data for two years now, ”he said.
Posted in Dawn, le 5 December 2021