Gaining energy independence lies at the root of contemporary national energy policies across the globe.
Though
the projects under CPEC are addressing serious bottlenecks in Pakistan’s energy sector, yet the share of
indigenous sources is insignificant in post CPEC prospective energy mix. Import dependence for power
generation will thus remain. A proper framework for development and exploitation of indigenous resources is the
need of hour.
I. INTRODUCTION
The concept of energy independence has been rising
both in scope as well as significance across the globe.
Energy independence aims at reducing reliance on
imported fuels by means of meeting energy needs
through domestic and indigenous sources. In the post
1973 oil crisis, it became the key foundation block of
international energy frameworks. Since then, many
countries across the world made realistic endeavours
for revising their respective energy policies and
achieving varying numbers of energy independence.
Over-reliance on imported fuels for fulfilling
domestic energy needs undermines energy as well as
national security. The higher the energy import
dependency, the more vulnerable a country becomes
to supply disruptions, price hikes, trade imbalances
and foreign influence. Vulnerability to these shocks in
turn can translate into huge competitiveness loss in
terms of GDP. Whereas, displacement of imported
fuels through indigenous sources paves way for the
much-needed energy independence and improved
trade balance.
Pakistan is an energy dependent country with limited
indigenous gas and oil reserves. 64% of the existing
1
Pakistan Economic Survey 2017-18
2
Petroleum Industry Report 2016-17
3
Pakistan Economic Survey 2017-18
[1]
power mix in the country comes from thermal fuels
which are largely imported. Approximately 85% of
Pakistan’s oil requirements, 1 35% of Natural Gas
requirements and 42% of LPG requirements comes
from imported fuels.2 The petroleum import bills are a
major drain on the country’s foreign exchange
reserves. Petroleum group imports reached US$ 5.6
billion, registering a growth of 29%, during the first
half of FY 2017-18.3
With the rising population and rapid industrialization,
Pakistan’s energy demand has increased rapidly
during recent years. In the wake of the increasing
energy demand, the government has made efforts to
expand the energy base. In this regard, the power
projects under CPEC are expected to significantly
change composition of Pakistan’s energy mix. CPEC
will contribute at least in two counts, when seen in
national perspective: regional connectivity and energy
shortfall. With 33 billion dollar investment, Chinese
energy projects will make 56% of the total CPEC
portfolio. Other than CPEC, the power generation
projects will add up 3633.5 MW to the national grid.
This brief aims at analysing the energy import
dependence in the context of CPEC energy projects on
Pakistan’s power sector portfolio.
PAKISTAN’S ENERGY OUTLOOK Fig.2 Growth of Power Sector

Power sector of Pakistan predominately relies on 20000

Hydro Thermal Nuclear
thermal sources, which are largely imported. Fig.1
shows the share of different sources in the current 15000
power generation mix of the country. Share of thermal
10000
sources in the energy mix stands at 64%, making it the
largest of electricity generation. Share of hydro power 5000
has declined to 27% of the energy mix, compared to
31% in FY 13-14, owing to reduced availability of 0
water. Whereas share of Nuclear stands at 7% in the

29,573
1,234 MW

1,925 MW

2,635 MW

5,949 MW
119 MW

366 MW

599 MW

MW
current mix. Renewable energy, which had almost no
share in FY 13-14 is now contributing 2% to the
national energy mix.4 This share is expected to further
increase in the upcoming years. 1947 1957 1967 1977 1987 1997 2007 2017
Source: NTDC Report.
Fig.1 Percentage Share of Different Sources in
Electricity Generation (July-Feb FY 2017-18). Given the huge reliance on thermal sources, the
indigenous sources of these fuels are but limited.
Natural gas deposits, whose share in country’s
primary energy supply mix stands at 47%, are rapidly
7% 2% depleting. Demand of natural gas in the country has
Thermal soared up to 6 billion cubic feet per day (bcfd) against
production of 4 bcfd. As per the forecasts, this gap will
Hydro
27% keep on widening and the country will face an
Nuclear estimated shortfall of 3,399 million cubic feet per day
64% Renewable by 2019-20.5

Fig. 3 Demand-Supply Gap of Natural Gas

(MMCFD)

Source: Ministry of Energy (Power Division). 9000

8000
7000
Traditionally, Pakistan has largely relied on hydro
6000
power for meeting the national energy needs. 5000
However, thermal power plants which were initially 4000
built as a backup for mitigating the seasonal 3000
fluctuations of hydropower generation capacity, grew 2000
at a striking speed, outpacing hydro power generation 1000
in post 1990 era. Fig.2 shows the trend in growth of 0
FY-16
FY-17
FY-18
FY-19
FY-20
FY-21
FY-22
FY-23
FY-24
FY-25
FY-26
FY-27
FY-28
FY-29
FY-30

different sources of power generation since 1947.

Demand of Natural Gas Supply of Natural Gas

Source: Petroleum Industry Report 2016-17

Fig.3 would suggest that the recent shift toward

imported LNG for mitigating natural gas shortfall is
thus not without justifications.

4
Ministry of Energy (Power Division). 2017-18
5
ibid

[2]
Power sector consumed highest volume of the natural
gas in FY 2016-17. Its share stood at 1,180 million
cubic feet per day (MMCFD) compared to overall
consumption of 4,131 MMCFD. 6 Fig.4 shows the
percentage share of country’s sectoral Natural Gas
consumption.
Coming to Petroleum products, its consumption
registered growth of 9.7%, increasing to 26.0 million
tons in the year 2016-17 compared to 23.7 million tons
in the preceding year. Transport and power sector
were the main drivers of this increased consumption,
registering growth of 12% and 10% respectively.7

Fig.4. Sectoral Consumption of Natural Gas FY Only 15% of the country’s crude oil requirements are
2016-17 met through indigenous sources, whereas 85% of the
requirements are met through imports. 8 Fig.6 shows
the sectoral share of POL products in the energy sector.
35%
30% Fig.6 Sectoral share in POL consumption of energy
25% products
20%
15%
10%
5%
0%

Source: Petroleum Industry Report 2016-17

Power sector’s share in Natural Gas consumption has

also been growing with the passage of time. Its
consumption peaked in 2005, declining gradually in
the subsequent years. Nevertheless, since 2013, its
consumption in power sector registered continual
growth. Fig.5 shows the overall consumption of
Natural Gas in Power Sector from FY 1996 to FY
2017. Source: Petroleum Industry Report 2016-17

Fig.5 Natural Gas Consumption in Power Sector Power sector is the largest consumer of fuel Oil too,
(MMCFD). with its share standing at 8.2 million tons. Whereas in
FY 2017, the overall share of power sector in
Petroleum consumption stood at 8.5 trillion tons
1600
against the total consumption of 26 million tons. Fig.7
1400
shows the indigenous and imported share of Fuel Oil
1200
(FO), Motor Spirit (MS) and High-Speed Diesel (HSD)
1000 via its total consumption in FY 16 and 17.
800
600
400
200
0
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17

Source: Petroleum Industry Report 2016-17

6
Petroleum Industry Report 2016-17
7
ibid
8
Pakistan Economic Survey 2017-18

[3]
Fig.7 Domestic Production and Imports of 3. Muzaffargarh Power 1320 Punjab
Project
Petroleum Products
4. Port Qasim Electric 1320 Sindh
Company coal fired
2*660

5. Gwadar Coal/LNG/Oil 300 Baluchistan

Power Project

6. Hubco Coal Power 660 Baluchistan

Project

7. Gaddani Power Project 1320 Baluchistan

B. Coal Local
Project Name MW Province
1. Engro Thar Coal Fired 1320 Sindh
4*330
2. SSRL Mine Mouth 1320 Sindh
Power Project

C. Hydel
Project Name MW Province
1. Karot Hydro Power 720 Punjab
Station
Source: Petroleum Industry Report 2016
2. Suki Kinari Hydro 870 KPK
Power
In the given scenario of limited indigenous thermal
3. Kohala Hydel Project 1100 AJK
sources in the country, heavy reliance on it for power
generation is but unsustainable. Pakistan is currently D. Solar
in transition mode, where for plugging the increasing Project Name MW Province
energy needs of the country, huge investments are 1. Quaid-e-Azam Solar 1000 Punjab
Park
underway. In this regard, CPEC is one of the biggest
such project which will significantly change the power E. Wind
mix in the upcoming years. The aim, of the next Project Name MW Province
section is to analyse these changes in terms of energy 1. Dawd Wind Farm 50 Sindh
dependence. 2. UEP Wind Farm 100 Sindh

II. POST-CPEC ENERGY MIX 3. Sachal Wind Farm 50 Sindh

4. Pakistan Wind Farms II 100 Sindh

China Pakistan Economic Corridor, a part of the “One
Belt - One Road,” vision, proved a huge opportunity
for Pakistan’s energy sector at a time when it faced New projects of around 10,000 MW would be further
chronic power shortages. With 33 billion $ allocated added to the system over the next couple of years,
to the energy sector, the project is expected to along with more than 1000 MW through mostly
contribute 14,200 MW to the power sector. renewable energy-based projects around 16,000 MW
is expected to be available by December 2020.
The composition of Pakistan’s energy mix will
undergo significant changes once the power plants As shown in the Table. 1 above, the power projects
under CPEC become operational. Table 1. shows under CPEC comes from diverse sources including
CPEC energy projects. coal, hydro, solar and wind energy. In addition to these
projects, two transmission lines namely “Matiari to
Table.1. Power Projects Under CPEC Lahore Transmission” and “Matiari to Faisalabad
Transmission” are also part of the project.
A. Coal Imported Nevertheless, a strong tilt toward imported Coal-fired
Project Name MW Province power plants exist in its overall mix as only 35% of
1. Sahiwal Coal-Fired 1320 Punjab
Power Plant 2*660 the coal fired power plants are dependent on local coal.

2. Rahim Yar Khan Coal 1320 Punjab

Power Plant

[4]
Fig.9. CPEC Energy Mix
Solar
Wind
6%
1%
Hydro
Coal
17%
Hydro
Coal
Wind
76%
Solar
Source: Centre for Excellence CPEC
Till lately, coal had almost negligible share in
Pakistan’s energy mix. As of 2014, the total share of
coal in energy mix was 0.07%, high-speed diesel had
a share of 2.79%, furnace oil 36.58%, indigenous
natural gas 22.45%, nuclear 1.78% and wind 0.37%.
Almost four years later in March 2018, the share of
coal had gone up to 14.46%, high-speed diesel had no
share, furnace oil’s contribution had come down to
16.14%, domestically produced natural gas 21.28%,
LNG 24.32%, nuclear 8.99%, power import from Iran
0.48%, wind 1.71%, baggase 1.04% and solar 0.81%
in total energy mix.9
According to NEPRA Conference report of February
2018, when overall power production is expected to
go up to 33,124 megawatts, the share of hydroelectric
power will be 30%, furnace oil 18%, LNG 16%, local
natural gas 12%, imported coal 10%, solar 2%,wind
3%, nuclear power 4% and local coal 2%.10 However
once all projects under CPEC are completed,
hydroelectric power will likely have a share of 26%,
followed by imported coal at 20%, Furnance Oil, 14%,
LNG 13%, Local coal 4%, Wind 4% and Solar 2%.
Fig.10 shows the prospective energy mix of Pakistan,
once CPEC projects are duly completed by 2020.
9
Arrfat, Y. (2017). Challenges and Solutions in Building CPEC: A Flagship of BRI (Working paper No. 017/2017).
Islamabad, Pakistan: Centre for Excellence China Pakistan Economic Corridor and Ministry of Planning Development.
10
Ibid
11
Amin, S. (2018). Energy Projects under the Cpec Regulatory Aspects. In Icap Conference Cpec-Myths & Realities.
Islamabad, Pakistan: NEPRA. doi:https://www.icap.org.pk/cpecconference/pdf/SalmanAminCPECNEPRA.pdf.
12
Pakistan, Qatar sign $16 billion LNG deal. (2016, February 11). The Express Tribune. Retrieved June 6, 2018, from
https://tribune.com.pk/story/1044645/game-changer-pakistan-qatar-sign-16-billion-lng-deal/
[5]
Fig.10. Post-CPEC Energy Mix
Gas Solar Wind Nuclear
Imported
Local
11% 2% 3% 3% 2% Coal
4%
Oil
13%
Hydel
24%
LNG
12%
Imported
Coal
26%
Source: Centre for Excellence CPEC 11
Analysing above energy mix we can see that
Renewable Energy, which till lately had negligible
share in the power mix is making slow progress. The
6% share of solar and wind energy is a big step
forward. Again, the reduced reliance on furnace oil
will be another major accomplishment. Furnace oil
imports are already on decline and will relieve much
burden from foreign exchange reserves in
forthcoming years. Whereas, Pakistan is also shifting
towards LNG (Liquefied Natural Gas) for which an
agreement has been signed with Qatar, for a period
of15 years. Under the terms of agreement, Qatar gas,
will supply 1.3 million tons per year of LNG to
Pakistan for 20 years, with provisions allowing the
volume to increase to 2.3 million tons per year. 12
Nuclear Energy will have minor share as only 3% of
whole energy mix will be generated with it.
However, contrary to the wide misconception of
utilizing indigenous coal reserves for power
generation, Pakistan is rather heading toward
imported coal. Local coal will only contribute to 4%
of the energy mix. Import of coal in the country has
substantially increased in FY 17. In first half of FY 18
alone, coal imports doubled reaching 500.4 million
$ compared to the 255.2 million $ in the same period
of FY 2017. This increase has been primarily driven
by the operation of Sahiwal power plant, duly
completed under CPEC. Once the remaining seven
plants (currently under construction) become
operational, coal imports will further surge. Fig.8
shows the imported vs domestic share of Coal
consumption in FY 17.
Fig. 8. Domestic Vs Imported Consumption of Coal
(Metric Tons).
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0 exploitation of indigenous oil and gas resources is the
2016-17
Domestic Coal Production Imported Coal
Source: Pakistan Economic Survey 2017-18
Though the projects under CPEC are rightly
addressing the serious bottlenecks in Pakistan’s
economy and energy sector, yet the country will still
be relying on imported fuels. Significant changes have
only been made in the choice for these fuels where a
clear shift toward LNG and coal could be witnessed.
III. LOOKING AHEAD
Gaining energy independence lies at the roots of
contemporary national energy policies across the
globe. Becoming less reliant on imported energy and
setting a realistic pathway toward energy
independence has thus become imperative.
Dependence on imported fuels in Pakistan became
significantly higher after 1990s when growth in
thermal energy outpaced hydro power. The shift
toward oil and natural gas did not only increase import
dependence of energy sources at an alarming pace but
also its generation cost. However, in the wake of
CPEC projects, the country is steering away from high
cost fuels to relatively low-cost fuels. Once the power
plants under CPEC become operational, composition
13
The State of Pakistan’s Economy, State Bank Quarterly Report, 2017-18.
[6]
of Pakistan’s energy imports will significantly change.
The share of power in oil consumption has already
declined from 43% in 2014 to 33% in 2017.13 The shift
toward low cost fuels will also reduce per unit cost of
electricity. Nevertheless, Pakistan’s energy equations,
its sustainability and independence are not rightly
addressed as CPEC energy mix is dominated with
imported coal. The post CPEC prospective energy mix
of Pakistan still heavily relies on imported fuels as the
share of indigenous sources is insignificant. Import
dependence for power generation will thus remain.
The absence of sustainable energy sources can hamper
economic development. Any prospective additional
energy dependency on imported fuels can further
worsen the trade imbalances. In the wake of
unpredictable variations in global prices of fossil fuels,
over-reliance on imported fuels has become a risky
venture. The more indigenous the energy sources of a
country, the less vulnerable it becomes to international
energy price shocks or any unforeseen supply
disruptions A proper framework for development and
need of hour.
Expanding Renewable base stands out as the most
important pillar for reducing foreign exchange
dependency. Access to clean energy sources can mark
the much needed balance between energy self-
sufficiency and clean environment. The global and
regional trends had shown a major uptake in various
forms of renewable energy as a commercial
alternative to fossil-fuel based energy generation. The
rationale for setting a vibrant policy drive unto
renewables become more evident in the given scenario.
The additional benefits of reduction in carbon
intensity will help in the much-needed climate change
mitigation in the country. Though switching to
alternative clean indigenous resources will be a slow
process and will take a long time in making the
country’s sector independent, however it will at least
put the country on the path to energy security and
independence.
In Pakistan, growth in this sector has been halted
owing to tariff related issues, cumbersome procedures
for project approvals and lack of infrastructural
development in grid connectivity.
Nuclear fuel is another promising and cost-effective
alternative. It can become a long-term component of
the county’s energy portfolio with the support of
proper plan on safe methods of nuclear fuel waste
disposal.
Furthermore, efficient consumption of energy sources
can help in minimizing the energy needs and
consequently improve the energy dependence
situation. In this regard, supporting policies aimed at
encouraging energy efficiency in all sectors will make
a significant impact.
Stable energy policies necessitate provision of
adequate, reliable and secure energy supplies at
affordable cost. With the growing demand for energy
in the country, the projects under CPEC are rightly
addressing the serious bottlenecks in Pakistan’s
economy and energy sector. Diversification of energy
resources as per domestic sources for improving
energy independence and energy security has become
inevitable. A consistent and coherent vision
supporting the drive toward energy independence has
to be devised and pursued.
Focused initiatives for accomplishing the dual goal of
energy independence and security should not be
delayed anymore. A thoughtfully considered and
prudent framework for accomplishing well-balanced
energy mix is the way forward.

Prepared by Maryam Khan and Naila Saleh, Edited by Syed Nadeem Farhat
| For queries: Syed Nadeem Farhat, Senior Research Coordinator, nadeem@ips.net.pk |
www.ips.org.pk

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