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Pakistan Turns to China in Energy Binge

SAEED SHAH, WSJ

December 19th, 2016

 

 

KARACHI, Pakistan—When Prime Minister Nawaz Sharif came to office in 2013, rolling power outages across the country were plunging homes and businesses into darkness for up to 12 hours a day.

Now the Pakistani leader is betting on a $21 billion Chinese-backed splurge on energy projects to boost the economy—and his re-election bid.

More than 10,000 Chinese workers are now building at least 10 partly Beijing-financed energy projects across Pakistan that are set to grow the country’s energy output by 60% within two years in the first major boost to supply in two decades.Mr. Sharif’s government plans to inaugurate a nuclear plant this month and a pipeline network in January that will carry large-scale gas imports upcountry.

“Never in the history of Pakistan has there been such a big package of electricity plants in the pipeline,” said Syed Akhtar Ali, in charge of energy at the Planning Commission, the ministry tasked with long-term development.

Mr. Sharif’s promise to solve the electricity crisis propelled him to office at a time when the energy deficit was knocking some 2 percentage points off growth, economists say, stifling industry and leaving school children to study by candlelight.

Pakistan’s economic growth has risen to almost 5% annually under Mr. Sharif’ and his government set a 7% target for the years ahead. That, his government hopes, will boost the moribund private sector, reduce unemployment and provide youth with more alternatives to extremism.

The energy plan is a centerpiece of that economic aspiration. Mr. Sharif is racing to fulfill his pledge and become the first incumbent to be re-elected in a country whose voters—or the interventionist military—have long ousted its leaders for their poor performance. Mr. Sharif, who led Pakistan twice before in the 1990s, hasn’t previously even completed a term in office.

“Electric power is going to be the swing factor in the election,” said Shahid Khaqan Abbasi, the minister for petroleum. “If we don’t deliver on power, we won’t be seen as having delivered.”

Mr. Sharif’s plan depends heavily on ​China, which​ is translating its long-term strategic ties with Pakistan into an economic partnership, part of a broader infrastructure push across Eurasia. China is financing many plants as commercial investments. But to expedite projects, the Pakistani government is funding ​some​ power stations in the run up to the election, including three gas-fired plants in Mr. Sharif’s home province of Punjab. The eventual aim is to more than double Pakistan’s current output of around 16,000 megawatts.

By comparison, Washington’s multibillion-dollar civilian aid program for Pakistan has been far less ambitious, adding 1,000 megawatts to the country’s power generation in recent years by enhancing existing power stations.

The plan is to add 10,000 megawatts of the new China-backed infrastructure, a mixture of coal, gas and hydro electricity, by early 2018, months before elections, at a cost of $21 billion. The schedule is tight. The massive amounts of natural gas and coal needed for the plants require an extensive delivery system of ports, pipelines and railways. The country also needs to upgrade its power distribution network to be able to carry the extra electricity.

“My concern is that gaps in longer term planning, including much needed structural, regulatory and market reforms, will once again fall by the wayside in the euphoria of having achieved a temporary electricity supply surplus,” said Jamil Masud, a partner at Hagler Bailly Pakistan, an energy consultancy,

The projects could become a political issue. The Chinese-financed plants enjoy a generous return guaranteed by Islamabad. Less highly populated provinces complain that Mr. Sharif’s Punjab has scooped an unfair share of the projects. Beyond the election, billions of dollars of more Chinese power projects are also planned.

At Karachi’s Port Qasim, a $2 billion coal-fired plant is taking shape. After only 1.5 years under construction, one 400-foot high cooling tower is up and the second is almost complete. The hulking metal frames for the boilers are in place and a jetty for imported coal is taking shape. Around 4,000 people work on the site, 24 hours a day—half of them Chinese workers who aren’t allowed to step outside its boundary.

On the other side of the port, a massive tanker ship serves as a terminal for liquefied natural gas imports, which are piped across Pakistan. Three more terminals are planned by the government.

The Chinese hope that, over time, greater economic success for its Pakistani ally will act as a source of stability and help to de-radicalize society, said Andrew Small, author of The China-Pakistan Axis.


“If you have a more normalized Pakistani economy and closer economic linkages within the region, this will at least mitigate some of the long standing conflictual tendencies that exist there,” he said.

 

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