Aurora Magazine

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Pakistan's game changer

Published in Nov-Dec 2016
Interview with Shamsuddin Ahmed Shaikh, CEO, Sindh Engro Coal Mining Company.

AURORA: Could we start with a brief overview of SECMC’s mandate in Thar?
SHAMSUDDIN AHMED SHAIKH: SECMC has been involved in Thar for the last eight years. For background, coal was discovered in Thar in the 1990s. At that time, the exploitation of Thar coal came under the Federal Government. Two attempts were made to invest and mine in Thar, but due to various reasons they came to nothing. Then in 2008, the responsibility for Mines and Minerals was devolved to the Sindh Government, which took the wise decision that since they could not handle Thar coal on their own, private sector partners should be involved. As a result, an international competitive bid was held and in 2009 Engro became a part of the Sindh Government’s joint venture and this led to the formation of SECMC. Engro and the Sindh Government pooled resources together – on a 60% Engro and 40% Sindh Government ratio – to undertake the feasibility.

When this was completed in 2012, it was decided to set up a 1,200 megawatt project with 6.5 million tons per annum (MTPA) mining at a cost of three billion dollars. Then a number of factors intervened. Firstly, due to the economic situation, it was almost impossible to raise three billion dollars in Pakistan at that time. Secondly, the international commodity market went down the drain and with it the price of coal, and it was no longer economically viable to mine Pakistani coal. So the project went on the backburner. At that time Engro asked me to look at what could be done with the project. I had always been keen to work in Thar, not so much because of the coal, but because I come from Hyderabad and I wanted to do something there. After I looked at the project, we decided to redefine the project from a 1,200 megawatt (MW) one to a 660 MW one in order to make it financially feasible and to approach other companies to see whether they would partner with us in this venture. We managed to convince eight companies to join us; six were Pakistani and two were Chinese.

A: Which are those companies?
SAS: The Pakistani companies are the Government of Sindh, Liberty Power Company, Engro Corporation, Habib Bank Limited (HBL), House of Habib (Thal) and Hub Power Company. The two companies from China are China State Power and China Machinery Engineering Cooperation (CMEC). Another positive was that the Government of Pakistan gave us a sovereign guarantee on our loan, with the Sindh Government as the primary obligator. In fact, the Sindh Government has been the backbone of this project; they have done everything possible for this company. They invested $110 as equity and spent almost $700 million providing the infrastructure, while Engro brought in the best expertise to make the project happen. The Government of Sindh-Engro collaboration has been a dream team for the development of coal fields in Thar.

A: Is SECMC the lead partner in this venture?
SAS: We formed two companies; SECMC (the mining company) and Engro Powergen Thar Limited (the power company). SECMC has seven shareholders; the Sindh Government with a 51% stake, followed by Engro Powergen, the House of Habib, Hub Power Company, HBL, CMEC and State Power International Mendong (SPIM) and the China State Power. Engro Powergen has four stakeholders; Engro with a 51% stake followed by CMEC with 35%, HBL with 10% and Liberty Power with five percent. The mining project at $845 million is one of the biggest mining projects ever undertaken and the power project is worth $1.1 billion. Today Engro is managing both projects, and this shows the confidence exhibited by all the stakeholders in Engro’s abilities and depth. The present government made us part of the China Pakistan Economic Corridor (CPEC), which was a great help and made the financing possible.

A: Why was this of help?
SAS: We became a priority project under CPEC. Within the CPEC, there are a number of projects and ours is the third and fourth one. The first is the Port Qasim Power Plant, the second is the Sahiwal Power Plant, the third is our mining project, and the fourth is our power project. The Federal Government also put up a transmission line from Thar to Matiari. In Pakistan it is almost impossible to work on a power or a mining project unless both the Federal and the Provincial Governments are completely aligned. We achieved financial closure on April 4, 2016 and we are seven months into the project. Our COD (Commercial Operation Date) is set for June 3, 2019, which is when we have to start generating power.

A: What is the full capacity of Thar?
SAS: Thar has reserves worth 175 billion tons and is the seventh largest coal reserve in the world. The Government divided these 175 billion tons into 13 different investment blocks and SECMC was given Block 2, which has two billion tons of coal, of which we will be able to exploit 1.5 billion economically and produce 5,000 MW energy for 50 years. Block 2 represents only one percent of the coal in Thar.

“Of the 1,200 Tharis working for us, 300 are now working on skilled jobs and the plan is to keep training. We have also hired a few Thari engineers and technicians but their percentage is lower than what we desire. Companies such as AmanTech, Hunar Foundation and Descon are providing training on site and we plan to hire a lot more Thari engineers under our training programme."

A: How far have you progressed with the project?
SAS: The coal is located at a depth of 135 metres, so we first have to remove the overburden. We have reached 33 metres and will reach 135 metres in the fourth quarter of 2018, which is when we can start taking the coal out. The good thing about mining is that as you keep on expanding the mine, the cost goes down, which means that the price of coal and power also goes down. In a few years, when we reach 4,000 MW, power prices will be the lowest in terms of any other source of power produced in Pakistan.

A: Where does the expertise come from?
SAS: Thar coal is lignite in type. Apart from the UK, all the coal used in Europe is lignite. We went to Germany to find the best possible company in the business and Rhenish-Westphalian Power Plant (RWE) are our main consultants or owner engineers as they are called. We have asked GE to design our boilers as we want them to be environmentally friendly. In fact Alstom, which is a European company but owned by GE, are designing the boiler. The turbines and the equipment are coming from China and a lot of mining machinery from Japan.

A: Are people from these companies working on the site?
SAS: Approximately 2,300 people are working on the site. Of these, about 750 are Chinese, although there are people from Germany and Japan as well. In addition 1,200 Tharis work there. We decided that 50% of the people we hired would be from Thar; as of now, there are 300 Pakistanis other than 1,200 Tharis and 750 Chinese working there.

A: What jobs do the Tharis do?
SAS: Unfortunately education levels in Thar are very low; people are mostly unskilled (apart from driving and cooking) and until we came in there were no jobs. We are now training them. Two hundred and fifty men between the ages 18 to 23 have been trained by the NLC driving institute to drive heavy duty trucks. Others are being trained in masonry, plumbing, electricals and scaffolding. Of the 1,200 Tharis working for us, 300 are now working on skilled jobs and the plan is to keep training. We have also hired a few Thari engineers and technicians but their percentage is lower than what we desire. Companies such as AmanTech, Hunar Foundation and Descon are providing training on site and we plan to hire a lot more Thari engineers under our training programme. We will also be relocating two villages; Sehnri Das and Thariyo Halepoto.

A: Will there be more relocations as you expand?
SAS: Not for the next eight to 10 years. Sehnri Das, which consists of 171 houses, will be relocated before 2018. We selected the site and 98% of the people approved and signed off on the new location. After that we showed them the layout and they signed off on this as well. Then we showed them the plans for the houses and they signed off here as well. However, I then thought that as these people do not really understand an architectural plan on paper, it would be better to build a model house and show it to them.

A: What will the model houses look like?
SAS: The houses will be built on 1,000 square yards. We have commissioned Murli, one of the best known architects and town planners in Pakistan, to do this. He went and talked to the people; we hired Sindhi-speaking women to talk to the Thari women in order to understand their requirements. They told us they wanted their own space at the back of the house so that they could observe purdah more easily. They wanted back lanes so that they could go to their neighbours’ houses without having to walk on the main roads. Almost 50% of the population is made up of Hindus and although they live in the same village, the Hindus live in one part and the Muslims in another, with a main road in between. We decided to construct the village in the same way; we are not there to change their culture or tell them how to live. We will construct a mohalla for them; there will be a mosque and a mandir and a community market and a community centre. The villagers have approved the model and we will now start building. We approached the Indus Hospital to set up the Marvi Mother and Child Clinic. A qualified gynaecologist and a paediatrician are already in place and in three year’s time, we plan to develop it into a 70-bed hospital.

A: Who is managing the clinic?
SAS: The Indus Hospital.

A: Who is providing the funding?
SAS: It will come either from the project or we will raise the money. On the education front, we have approached The Citizen’s Foundation and we plan to open schools in all seven taluka (tehsil) headquarters. Initially, there will be three primary and two secondary schools, with a capacity to enrol 2,000 children per school; ultimately with seven schools, 14,000 children will be enrolled. We also plan to set up a training institute. Because of our project, a lot of other companies are moving in there. A Dubai-based company bought six or seven acres in Thar to set up a technical training school. They asked us to train the people there and eventually they would send them to Dubai – and this is what made us realise the importance of having a big training institute in Thar. A catering company also approached us to set up a catering school to train cooks, who could then find work abroad, as Tharis are known to be good cooks. A lot of other things are coming up on the periphery of our project and benefitting the people. The project will be a game changer for Pakistan; it will provide cheaper electricity, and because the coal is indigenous, Pakistan will no longer have to import fuel.

A: How do you manage water and electricity?
SAS: There are three aquifers in Thar; at 70, 100 metres and 130 metres. At 70 metres, the water is sweet and suitable for consumption. As far as water for the project is concerned, we have signed an agreement with the Sindh Government to take the water from the Left Bank Outfall Drain (LBOD) starting in Nawabshah (this is dead water as it is very saline in content) clean and then use it; in this way we will not affect the water available to the locals. We are using RO (reverse osmosis) to clean the water from the second and third aquifers and supplying it to the neighbouring villagers. The Sindh Government is putting in place several RO plants, so people are happy because they are now getting more water. As far as electricity is concerned, Thar is connected to the local grid, although there is eight to 10-hour load shedding a day, this is not unusual.

“Almost 50% of the population is made up of Hindus and although they live in the same village, the Hindus live in one part and the Muslims in another, with a main road in between. We decided to construct the village in the same way; we are not there to change their culture or tell them how to live. We will construct a mohalla for them; there will be a mosque and a mandir and a community market and a community centre."

A: Can the people there afford electricity?
SAS: Almost all the houses have electricity and the houses we will be constructing will all have electricity. Almost 99% of the people will be employed by us and will be able to afford electricity. Thar’s population is migratory. If there is rain, they stay put and engage in agriculture; if there is none, they move towards the Indus and return to the plains when the rains come. We are changing the culture. If they are employed by us, whether it rains or not, they will still receive their salary. Also, as we are supplying them with water, in case the rains fail, their animals will have water to drink; migratory patterns will change and we believe these changes are for the better. Roads have been constructed, water schemes are in place and hospitals are under construction; a lot of good work is happening. We have hired women to work for us; earlier, even the men could not find jobs, now women too are working.

A: In which areas are Thari women employed?
SAS: I am hoping that by the end of next year, eight to 10 women will be driving our trucks. The majority of women are willing to work. We have employed one of the women at the Marvi Mother and Child Clinic. We realised she was literate and we have employed her to write down the names of the women patients who go to the clinic. Once she joined, other women approached us and we have hired a few of them as midwives.

A: Looking to the future, is the plan to exploit all of Thar’s coal reserves? Furthermore, coal is not a particularly clean source of energy and at some point will the development of alternate clean energy sources become sufficient enough to preclude the use of coal?
SAS: Engro will only exploit Block 2. Coal mining is extremely expensive and other ventures and new technologies will have to come in to mine the rest. In terms of the environment, there are many mitigation technologies, such as sulphur dioxides and nitrate oxides, to minimise pollution. As for alternative sources of energy, we believe that fossil fuels have a life of another 40 to 60 years, until that time other technologies will evolve. So far, there is no technology in the world that has reached the level where fossil fuels have become unnecessary. Our project has been set up for 30 years; Pakistan is desperate for energy, the country is going downhill because we do not have sufficient power, and the power we do have is very expensive, so something has to be done.

Shamsuddin Ahmed Shaikh was in conversation with Mariam Ali Baig.
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Comments (10) Closed

Zahid MAHMOOD Dec 20, 2016 02:54pm

It's a good initiative and need of the hour. He seems to be a genuine person who knows his job as he cover all operational and social aspects. Wish him good luck.

azfar Dec 21, 2016 12:37am

Good to see your commitment with the locals. Keep the good work.

Syed yousaf Dec 28, 2016 08:17am

A good interview with extremely positive outlook. Wishing all the best for the project and Pakistan

Akram Jan 02, 2017 03:01pm

Dear Shams,

WOnder ful job for Pakistan. Yes we could not expect less that that.

Great as usual

My regards,

Muhammad Akram SCBS Lahore

AFTAB AHMED Jan 06, 2017 11:47pm

How can engineers not be found in Thar.. Thari engineers can be found very easily they are there, if u want to have them. this is merely an excuse I guess, that SECMC can't find them..!

Thoroughthinker Jan 07, 2017 07:44pm

A very encouraging development. We must also find some similar use for a much larger coal reserve of Lakhra.

Richard Thomas Jan 09, 2017 02:34pm

The only game changer for Pakistan will be the elimination of corruption. Any projects that do not fill the pockets of Pakistani politicians and bureaucrats and add to their foreign bank accounts will not be even be considered by them. Eradicate corruption and there will be thousands of game changers for this country

Mohammed Khalid Ali Jan 24, 2017 04:26pm

Shamsuddin Shaikh used to head Engro Foods before this. He is a very dynamic individual. Inshallah he will succeed. and will be able to implement the project on time. Sindh government is very keen in implementing this project on time and has given full backing as it has done in other projects eg Sindh Nooriabad power projects of 50MW each. Oroduction is expected by end of March 2017.

Rambo Jan 27, 2017 11:57pm

Germany has solar radiance levels of 2 to 3 but they are generating 30 % of electricity through solar power plants. Pakistan's solar radiance levels range from 6 to 7 . This means we can generate twice the electricity with same amount of solar cells. However here we are . Burning more coal to generate electricity. Yes we have a severe shortage of power. But do we have any regard for global pollution levels. Are we so selfish that we dont care about our future generations. Dont we have a responsibility to handover this planet to our future generations in best possible state.

zaraq Jan 31, 2017 05:28pm

@Rambo Solar technology is joke. 100 mw quad-e-azam solar project only produces 14mw on avg. on the other hand wind turbine projects are giving good returns and far more efficient in Sindh but our media ignores them because it is in Sindh and PPP govt. will be appeased. all investments are recovered within 3 years in wind turbine projects. NEPRA has recently reduced upfront tarrif rate for wind based power units after seeing more and more investors were keen to invest in. 50,000 mw energy can be generated in less then 3 years they are fast to implement