Structural reforms in the power sector are long overdue

• Govt must focus on exploiting indigenous energy resources

Interview with Mr. Kalim A. Siddiqui — former Managing Director, Pakistan State Oil

PAGE: Tell me something about yourself, please:

Kalim A. Siddiqui: I am a former Managing Director of Pakistan State Oil and former President of Byco Petroleum.

I am holding a Bachelor’s in Chemical Engineering from the University of Bradford in England (UK) and a Master’s in Chemistry from Karachi University, has broad-based, global experience working in the USA, UK, Australia, Vietnam and Pakistan for over 36 years.

I am an enthusiastic and highly accomplished executive with 36 years of extensive fuels/lubricants business expertise in marketing, sales, operations management and system re-engineering in the oil industry by running supply chains, streamlining processes, hunting for new business and growing top producing accounts; I have experience of developed and emerging markets/cultures. I am a collaborative leader with the aptitude to achieve change, excite the organization, infuse new ideas and deliver dramatic, bottom-line outcomes; recognize to accomplish multiple customer-specific priorities with competence, exemplary follow-up and interpersonal abilities; I am highly expert in high-level market segments, top-down selling and vertical market mastery.

I have served as Chairman Oil Companies Advisory Committee (OCAC) and have held directorships in various reputable companies, & professional and educational institutes including Pakistan Refinery Limited, Pak-Arab Pipeline Company, Asia Petroleum Limited, Pak-Grease Manufacturing Company Limited, Petroleum Institute of Pakistan, Pakistan Advertisers Society and Lahore University of Management Sciences.

Before joining PSO in 2001, I served in Caltex (now Chevron) for over 20 years locally as well as internationally. International assignments were located in the USA, Australia and Vietnam. In a longer spell of over 20 years in Caltex, I have dealt with fuels, lubes and LPG in all aspects like product development, product engineering, supply chain, operations, production/manufacturing and sales/marketing.

My three years of work in the UK were with Howden Engineering Company, Burmah-Castrol refinery, North West Water Authority and A.P.V Company before coming back to Pakistan in 1980.

PAGE: How was 2022 in terms of price and availability of energy in the entire world?

Kalim A. Siddiqui: The world is in the midst of its first global energy crisis – a shock of unprecedented breadth and complexity. Pressures in markets predated Russia’s invasion of Ukraine, but Russia’s actions have turned a rapid economic recovery from the pandemic – which strained all manner of global supply chains, including energy – into full-blown energy turmoil. Russia has been by far the world’s largest exporter of fossil fuels, but its curtailments of natural gas supply to Europe and European sanctions on imports of oil and coal from Russia are severing one of the main arteries of global energy trade. All fuels are affected, but gas markets are the epicenter as Russia seeks leverage by exposing consumers to higher energy bills and supply shortages.

Prices for spot purchases of natural gas have reached levels never seen before, regularly exceeding the equivalent of USD 250 for a barrel of oil. Coal prices have also hit record levels, while oil rose well above USD 100 per barrel in mid-2022 before falling back. High gas and coal prices account for 90% of the upward pressure on electricity costs around the world. To offset shortfalls in Russian gas supply, Europe is set to import an extra 50 billion cubic meters (bcm) of liquefied natural gas (LNG) in 2022 compared with the previous year. This has been eased by lower demand from China, where gas use was held back by lockdowns and subdued economic growth, but higher European LNG demand has diverted gas away from other importers in Asia.

The crisis has stoked inflationary pressures and created a looming risk of recession, as well as a huge USD 2 trillion windfall for fossil fuel producers above their 2021 net income. Higher energy prices are also increasing food insecurity in many developing economies, with the heaviest burden falling on poorer households where a larger share of income is spent on energy and food. Some 75 million people who recently gained access to electricity are likely to lose the ability to pay for it, meaning that for the first time, since we started tracking it, the total number of people worldwide without electricity access has started to rise. And almost 100 million people may be pushed back into reliance on firewood for cooking instead of cleaner, healthier solutions.

Faced with energy shortfalls and high prices, governments have so far committed well over USD 500 billion, mainly in advanced economies, to shield consumers from the immediate impacts. They have rushed to try and secure alternative fuel supplies and ensure adequate gas storage. Other short-term actions have included increasing oil- and coal-fired electricity generation, extending the lifetimes of some nuclear power plants, and accelerating the flow of new renewables projects. Demand-side measures have generally received less attention, but greater efficiency is an essential part of the short- and longer-term response. 

PAGE: What is your standpoint on the energy sector of Pakistan?

Kalim A. Siddiqui: Pakistan is energy deficient country because of its inadequate energy power supply mix, the rising energy gap between supply & demand, lack of energy legislation and its implementation. 

 Conventional ways of generating electrical energy through non-renewable resources is a lengthy process and this process usually takes five to ten years if sincere efforts go into it without politics. In parallel to this, we should adopt all alternate ways to save and generate electricity through renewable resources to overcome the energy crisis in Pakistan. Some alternate ways to save and generate energy are:

1. Energy conservation and Energy Efficiency Improvements such as replacing conventional lighting with LED and solar lighting, using highly efficient motors, pumps and controllers, use of energy-efficient equipment (refrigerators, fans, air conditioners, stoves), using energy-efficient materials in buildings, replacement of conventional heating & cooling by solar water heating & cooling, etc.
2. Alternate and renewable energy applications like Solar Thermal, Solar Photovoltaics (PV) commonly called Solar Panels, Solar & LED Lighting and Wind Power, etc.

Develop and utilize all the available indigenous sources to make Pakistan self-sufficient in a cost-effective manner.

Either the Energy Ministry or evolve the “Energy Administration Authority” for regulation of the energy sector and to streamline decision-making. Energy efficiency improvement and the use of alternate and renewable energy applications can bring the country out of energy crises and it will help in the reduction of GHS emissions enhancing the energy security of the country.

Government should provide facilitation through legislation, the private sector should follow the policies and laws and all Chambers of Commerce and Industries should bridge this gap by providing a platform where the private and government sector should work as a team for the growth of alternate and renewable energy sectors in Pakistan.

PAGE: How would you comment on the taxation on the energy sector of Pakistan?

Kalim A. Siddiqui: Energy is the lifeline of an economy and is a vital input to sustain industrial, commercial and domestic activities. Energy disruptions and energy shortages not only result in loss of economic growth and employment but adversely affect social cohesion in society. 

Pakistan’s tax collection from the energy sector comprises Income Tax, Sales Tax and Federal Excise Duty and is the single biggest source of the government’s revenue generation. Like other countries, this sector is heavily taxed in Pakistan.

As for affordability, the extent to which the energy prices feed through to household and other energy bills is determined by the policy and market design, as well as by whatever taxes, subsidies, capital costs and environmental surcharges are reflected in the final bill. In an ideal world, energy bills will be based on cost-effective energy prices and would encourage efficient and sustainable choices, but without harming low-income households or choking off economic activity.

PAGE: Are the current policies favorable for the energy sector?

Kalim A. Siddiqui: Despite claims of our successive governments that their energy policies are prudent but in reality, they have not been able to introduce any overdue structural reforms in the energy sector to encourage local & foreign investments to take the country towards self-sufficiency. Successive governments have displayed poor governance and incompetence that resulted in fuel & gas shortages and exorbitant hikes in electricity pricing. Power outages will not go completely until and unless the power distribution network is expanded/upgraded and we focus on exploiting indigenous energy resources.