Submitted

By
HASSAN MAHMOOD SHAH
0333-5973167
hmshah87@hotmail.com

And

Sharjeel Ahmed Khan

sharjeel_iiui@yahoo.com
0333-5377870

INTERNATIONL INSTITUTE OF ISLAMIC ECONOMICS (IIIE)

INTERNATIONAL ISLAMIC UNIVERSITY ISLMAMABAD (IIUI)

 CONTENTS

Acknowledgement

Coal

Early age use:

Modern age use:

World coal reserves:

Coal as alternative energy source:

Coal is a cost-effective alternateive fuel:

Environmental effects of coal:

Coal reserves in Pakistan:

Major coal consumers in Pakistan:

Coal and energy security in Pakistan

Why coal neglected so far?

 Acknowledgement

All praise to almighty Allah, the most merciful and compassionate

without his help and blessings, we were unable to complete the project.
We are taking this opportunity to express our heartiest gratitude and
respect to our teacher Mr.Tayyeb, for his guidance, constant encouragement,
constructive and sincere criticism and immaculate appraisal of this project.
Thankful gratitude for the loving parents, who provided us every
suitable support both morally and financially and always pray for our
achievement in life.

(HASSAN MAHMOOD SHAH)

(SHARJEEL AHMED KHAN)

Coal
Coal is a readily combustible black or brownish-black sedimentary rock
normally occurring in rock strata called coal beds. It is composed primarily
of carbon along with variable quantities of other elements, chiefly sulfur,
hydrogen, oxygen and nitrogen. Coal is extracted from the ground by
mining, either underground or in open pits. Coal is a trading commodity.
The international market price of coal has gone up from around $30 per
short ton in 2000 to around $150.00 per short ton as of September 26, 2008.
As of October 31, 2008, the price per short ton has declined to $111.50.

Early age use:

coal was used in Britain during the Bronze Age (2000–3000 years BC),
where it has been detected as forming part of the composition of funeral
pyres.The earliest recognized use is from the Shenyang area 4000 BC where
Neolithic inhabitants had begun carving ornaments from black lignite, but it
was not until the Han Dynasty (206 BC–220 AD) that coal was also used for
fuel. In the past, coal was converted to make coal gas, which was piped to
customers to burn for illumination, heating, and cooking.

Modern age use:

Coal is used as a fuel and as a reducing agent in smelting iron ore in a blast
furnace, and in making steel. Coal produces valuable by-products that
include coal tar, ammonia, light oils, coal gas and Ethanol. Coal can also be
converted into liquid fuels like gasoline or diesel by several different
processes. Coal is primarily used as a solid fuel to produce electricity and
heat through combustion.

World coal reserves:

British Petroleum, in its annual report Country TOTAL Share

USA 246,643 27.1
2007, estimated at 2006 end, there were Russia 157,010 17.3
909 billion tons of proven coal reserves China 114,500 12.6
India 92,445 10.2
worldwide, or 147 years reserves-to- Australia 78,500 8.6
South Africa 48,750 5.4
production ratio.The 930 billion short Pakistan 3,050 0.3

tons of recoverable coal reserves estimated by the Energy Information

Administration are equal to about 4,116 BBOE (billion barrels of oil
equivalent).

Of the three fossil fuels (coal, oil and gas) coal has the most widely
distributed reserves; coal is mined in over 100 countries, and on all
continents except Antarctica. The largest reserves are found in the USA,
Russia, Australia, China, India and South Africa.

Major coal producers

Reserve Life
Country 2006 Share
(years)
China 2380.0 38.4 % 48
USA 1053.6 17.0 % 234
India 447.3 7.2 % 207
Australia 373.8 6.0 % 210
Russia 309.2 5.0 % 508
South Africa 256.9 4.1 % 190
Total World 6195.1 100 % 142
 • The reserve life is an estimate based only on current production levels
for the countries shown, and makes no assumptions of future
production or even current production trends.
• If growth in usage at this rate continues then it is assumed, reserves
would be exhausted in 31 years.

Major coal exporters

Country 2005 Share

Australia 257.6 32.0%
Indonesia 147.6 13.4%
China 79.0 9.8%
South Africa 77.5 9.6%
Russia 62.3 7.7% Coal as alternative energy
USA 49.9 6.2% source:
Total 804.2 100%

Coal can be an alternative to oil.

Liquefaction is one of the backstop technologies that could potentially limit
escalation of oil prices and mitigate the effects of transportation energy
shortage that will occur under peak oil. This is contingent on liquefaction
production capacity becoming large enough to satiate the very large and
growing demand for petroleum.

Coal is a cost-effective alternateive fuel:

Estimates of the cost of producing liquid fuels from coal suggest that
domestic U.S. production of fuel from coal becomes cost-competitive with
oil priced at around 35 USD per barrel, (break-even cost). With oil prices as
low as around USD 40 per barrel in the U.S. as of December 15, 2008, liquid
coal lost some of its economic allure in the US, but will probably be re-
vitalized, similar to oil sand projects, with an oil price around 70$ per barrel.
It takes 438 kg (966 lb) of coal to power a computer for one full year. One
should also take into account transmission and distribution losses caused by
resistance and heating in the power lines, which is in the order of 5–10%,
depending on distance from the power station and other factors.

In China, due to an increasing need for liquid energy in the transportation

sector, coal liquefaction were given high priority even during periods of oil
prices below 40$ per barrel. This is probably because China prefers not to be
dependent on foreign oil, and instead utilize their enormous domestic coal
reserves. As oil prices were increasing during the first half of 2009, the coal
liquefaction projects in China were again boosted, and these projects are
profitable with an oil barrel price of 40$.

Environmental effects of coal:

The U.S. Energy Information Agency's 1999 report on CO2 emissions for
energy generation, quotes a lower emission factor of 0.963 kg CO2/kWh for
coal power. The same source gives factor for oil power in the U.S. of
0.881 kg CO2/kWh, while natural gas has 0.569 kg CO2/kWh. Estimates for
specific emission from nuclear power, hydro, and wind energy vary, but are
about 100 times lower. There are a number of adverse environmental effects
of coal mining and burning, especially in power stations.

These effects include:

• Release of carbon dioxide, a greenhouse gas, which causes climate

change and global warming. Coal is the largest contributor to the
human-made increase of CO2 in the air.
 • Generation of hundred of millions of tons of waste products, including
fly ash, bottom ash, flue gas desulfurization sludge, that contain
mercury, uranium, thorium, arsenic, and other heavy metals
• Acid rain from high sulfur coal
• Interference with groundwater and water table levels
• Contamination of land and waterways and destruction of homes from
fly ash spills.
• Impact of water use on flows of rivers and consequential impact on
other land-uses
• Dust nuisance
• Subsidence above tunnels, sometimes damaging infrastructure.
• Coal-fired power plants without effective fly ash capture are one of
the largest sources of human-caused background radiation exposure
• Coal-fired power plants shorten nearly 24,000 lives a year in the
United States, including 2,800 from lung cancer.
• Coal-fired power plant releases emissions including mercury,
selenium, and arsenic which are harmful to human health and the
environment.

Coal reserves in Pakistan:

Pakistan’s major known coal reserves are located in the province of Sindh,
specifically in Thar, estimated at 175.5 billion tons which account for the
bulk of Pakistan’s total reserves, estimated at 185 billion tons. Other coal
deposits of significance in Sind are located at Sonda (Jharruk) 5.5 billion
tons and Lakhra (Dadu) 1.33 billion tons. Pakistan is 6th largest coal rich
country in the world and the aggregate energy potential of these resources is
more than the combined energy potential of the resources that Saudi Arabia
and Iran possess.

Major coal consumers in Pakistan:

Major industrial consumers are cement industry, brick kilns, power plants,
chemicals and steel industry. It is also used for domestic fuel consumption.
Major suppliers are China, Indonesia and South Africa.

Coal and energy security in Pakistan

Pakistan is one of the lucky countries which are blessed with vast deposits of
coal. By increasing the share of coal in our energy mix we could have
conserved more valuable gas, which is deplete able resource. Unfortunately,
we have compromised our future by relying excessively on natural gas, and
are now running the risk of energy security.

Coal has gained special importance due to growing concerns for energy
security prompted by the abnormal surge in world oil prices mounting
tensions of the western countries with Iran, interruptions in the international
supply network of gas from Iran and Russia and ongoing stand-off in the
Arabian Gulf.

Why coal neglected so far?

Usage of coal as a source of energy, in the developing countries, has been

down played by powerful multinational oil companies and cartels who do
not wish to see coal as a substitute of oil that they sell. Negative perceptions
about the utility of coal have some how, adversely affected policies of the
countries such as Pakistan. Coal as a fuel had been ranked low on the list of
Pakistan’s development priorities primarily due to concerns about its quality
and requirement for huge upfront capital. Apart from this, in the absence of a
strong political will to promote coal based power projects, foreign investors
have not been supported as much as they ought to be. Quite a few were
forced to withdraw their initiatives after incurring heavy losses. As a result
what we see today is that share of coal in Pakistan’s energy mix is about 5 %
and in power generation even less than 1%.

Unfortunately there are factors, other than those mentioned above, that have
not supported investor’s initiatives for the exploitation of Pakistan’s coal
resource in the past. These are as follows:

• Lack of necessary infrastructure (roads, water, life support systems,

community services and communication network) to support project
activity.
• Inconsistent government policy. Inaccessibility to national grid.
Political uncertainty.
• Security concerns – Law and order situation.
• Tariff issues originating from uncertainties surrounding price
instability of the capital equipment and other input costs as well as
inherent risks associated with a typical coal mining and power
generation venture.
• Uncertainties in the lead time required in the delivery of capital
equipment.
• Mining is a provincial subject. Thus hostage to vested interests.
• Coordination with Federal and Provincial Government departments
and ministries.
 • The Quality Issue: Unfortunately, utility of the coal deposits found at
Thar had been viewed doubtful.
• In the context of climate change, CO2 mitigation initiatives may
become mandatory for the countries like Pakistan. This may add to the
cost of coal power generation. The pollution abatement costs make the
projects yielding negative returns.

Consequently, Pakistan continues to rely considerably on imported coal to

fulfill requirements for a range of industrial applications.

Thar coal reserves:

Pakistan’s major known coal reserves are located in the province of Sindh,
specifically in Thar, estimated at 175.5 billion tons which account for the
bulk of Pakistan’s total reserves, estimated at 185 billion tons. Current
estimated value of the Thar coal deposits is $ 8 trillion and if converted into
energy its values comes to $ 25 trillion. It has the potential to generate
100,000 MW of electricity for 300 years.

Socio-Economic effects of Thar coal project:

On July 27, a three-member team of the World Bank experts on coal and
mining visited Thar coal fields and met the representatives of civil society
organisations and the local community. The team also visited village Thario
Halepoto near Islamkot, Tharparkar.
The first concern countered by the WB team was the fear of local people
whether Thar and Sindh will actually benefit from the exploitation of the
world’s largest resource of energy.

Perhaps it was the first-ever official visit and initial brain-storming meeting
of the World Bank officials of this nature to look at the Thar coal issues. The
team comprised Ms Ekaterina N. Mikhaylova, Senior Project Officer Oil,
Gas, Mining and Chemicals Department, Mr Robert Murphy, a Consultant
of Oil,Gas, Mining Policy Division. They were accompanied by officials of
the Sindh Mines and Mineral Department and the Thar Coal Energy Board.

Officials of the Sindh Energy Board and Minerals and Mining Department
claimed that the development of Thar coal reserves has been included in the
priority list of projects likely to be launched during the current financial
year.

Members of the WB team said their mandate was to hear the views of the
community and civil society representatives to prepare their policy
framework expected to be completed in one year. Representatives of leading
Thar-based NGOs including TRDP were present.

Ever-since 1964, when the first feasibility report on the use of Thar coal was
completed, a number of similar studies have been carried out by experts,
establishing the huge abundance of good quality, easily extractable coal and
other mineral deposits in Tharparkar and their potential benefits.

An estimated over 175 billion tons of proven reserves of good quality coal is
spread over 9,000 square kilometers of the Thar Desert. Compare it with the
figures of India’s total coal deposits of 140 billion tons. Yet, for 40 years,
these reserves have remained untapped.

People in Thar live in sub-human conditions and remain deprived of even

access to safe drinking water, sewerage, healthcare, transport and education.
Other issues include bonded labour and violation of the fundamental rights
to employment and access to food availability.

Thar coal expert Syed Mohibullah Shah is of the view that technology exists
to produce potable water from coal while the mineral is utilised for power
generation. Thar coal has a very large water content (over 40 per cent of its
weight) and +is capable of providing an abundant water supply for the
locals.

People of the area acknowledge that the country is under severe electricity
and energy crisis and Sindh is ready to cater the needs but ask as to who will
guarantee the protection of the rights of the local people. The community is
of the view that it should be the first beneficiary of any coal project.

Thar Coal exploitation can spearhead major economic development and

employment generation activities. With over 200,000 jobs flowing from it
over the years, the project could rank right at the top among all investments
made in Pakistan—domestic or foreign.

The first-ever baseline survey of the area and people was shared with the
World Bank team and the Sindh officials were advised to do more studies
and surveys to understand the area and community.
Keeping in view the importance of the issue, Thardeep Rural Development
programme (TRDP) has done a baseline survey on the socio-economic and
environmental aspects of this project. The report is re-produced in Sindhi,
English and Urdu. The aim of the re-production of the research study was to
provide baseline information and scientific data to policy and decision
makers and other stakeholders for an open debate.

This research will help to understand the demographic and geographic

patterns of Thar, local community, environmental issues, socio-economic
realities, and human landscape and project related issues like displacement,
rehabilitation, burdens for the local people and the affected communities.

The input/feedback/ briefing by the local civil society activists on socio-

economic and political situation of the area and community’s concerns and
expectations of the project was very impressive in terms of their level of
fundamental knowledge about the project. WB team was very impressed by
the level of community’s understanding and information regarding Thar coal
issues including technical and socio-economic and environmental impact.
From the technical issues of gasification and tariff controversy and the
ownership of the recourse, every issue was discussed at length.

Following issues were tabled by the community representatives:

Policy level issues: Ownership of the project should be solely with

government of Sindh; elected representatives of the area be given visible
charge/control in decision making; the community (especially field area)
should be part of decision-making body. There should be a single body
controlled by the provincial government to deal with investors and other
issues.

Community issues: There is no clear policy for community welfare in Thar

coal project; Sindh has a bitter experience of IFIs engagement in different
projects and a lack of trust between the community and the donors/investors.

Displacement issues: Protection of cultural, heritage and religious sites;

guarantees of employment for the local people; compensation issues as per
current day rates of the lands and other belongings and; change in
environmental landscape, impact on water and other livelihood commodities

The local community is happy to see its area developed but wants protection
of political, social, economic, cultural and environmental rights for which a
genuine effort on the part of Sindh government is required. The community
feels more comfortable with the Thar Coal and Energy Board (TCEB) which
it believes be treated as the only notified legal and authorised body to
exercise all powers in deciding matters pertaining to mining and power
generation from Thar coal. It should also address all the concerns and fears
of the local people.

Thar coal quality issues and their remedies:

Unfortunately, utility of the coal deposits found at Thar had been viewed
doubtful. Lignite coal has certain characteristics that makes it a low BTU
fuel and difficult to extract and transport. It has high moisture content
(almost 40 – 50%) and mineral matter (especially sodium). These can affect
adversely the efficiency of the plant by causing severe slugging and fouling
in conventional boilers and thus make operation costly. But SFBD
technology designed to produce dry coal, now developed commercially,
provides a solution to these problems.

The other concern about the quality of locally available coal relates to the
presence of high sulfur content which can be dealt with Circulating
Fluidized Bed (CFB) technology. Also the Integrated Gasification and
Combined Cycle (IGCC) technology is designed to make best use of high
moisture lignite coal for power generation. Coal found in Pakistan has high
sulphur content. Therefore for certain applications, Pakistan has to rely on
imported coal. However local coal can be processed to produce clean coal by
setting up sulphur washing plants at respective mine sites. Thus appropriate
technologies are available to ensure desired utility of the available coal
deposits in Pakistan.

Thar coal and Environmental Concerns:

While coal is going to be the fuel of next century, the issue of emissions
control and pollution abatement shall have to be properly addressed in the
context of climate change. In the longer term one must also keep in mind
that CO2 mitigation initiatives down the road may become mandatory for
the countries like Pakistan. a typical power coal plant generates 3 million
tons of CO2 or 17 tons of carbon per megawatt and draws about 2.3 billion
gallons of water per annum from nearby source while on land, whereas Sind
is seriously deficient in the supply of water even for agriculture; produces
mercury which not only renders water useless for human consumption but
also for irrigation purpose as well.
Pakistan energy plans and coal:

In recognition of the growing importance of coal, it should be the

cornerstone of our future energy policy. GoP is committed to increase
substantially the share of coal in Pakistan’s current energy mix. Under the
Vision 2030 strategic plan, Pakistan’s coal power generation is planned to be
increased from present 200MW (which is about 1 % of total power
generation) to 1060 MW by 2010 and to 19,910 MW by 2030. Also share of
coal in the overall energy mix is planned to be increased from 5% to 19% by
2030 and to 50% by 2050.

What to be done now?

To meet the targets of vision 2050 strategic plan, besides initiating thar coal
project, Pakistan must explore new reserves of coal. However, given the
checkered history of the plans to exploit existing coal reserves in Pakistan,
these targets appear to be over ambitious. GoP will have to bring about a
drastic shift in the list of its development priorities and demonstrate its
seriousness through a strong political will to make these goals look real.

The thar coal project and exploitation of cheaply available indigenous coal
would help Pakistan benefit in two ways. Firstly it would help achieve
objective of self reliance and relieving burden of costly oil imports and
secondly to generate power, as a least cost solution.

Thar coal project: a comprehensive strategic plan.

Government should consider creating a high powered body (Commission for
the development of thar coal) which should not only serve as a think tank
for the formulation of strategic plans and policies but also should serve as
one window facility and a high powered decision making body for the
speedy implementation of coal mining and power projects.

The proposed commission may draw representation from Federal Ministries

of Planning, Water and Power, PPIB, NEPRA, WAPDA, KESC, Provincial
Government Planning and Development Department, Mineral and Mining
Dept and Sindh Coal Authority (for the province of Sindh), HDIP, PMDC
and professionals, consultants, research institutions and experts.

Private sector should be encouraged, through a package of incentives, to

come forward and participate in the socio-economic uplift of the target
areas. They may also be invited to participate in the private/public sector
joint venture schemes which government must launch for the socio-
economic uplift of target areas so that basic conditions to attract investors
could be satisfied.To name a few, these schemes could include recreational
facilities, shopping centers, sports facilities, housing schemes, educational
institutions, hospitals, etc. Also, in order to attract serious investors, a more
detailed feasibility study is needed, especially on the mineability and
suitability of Thar coal on the quality and utility.

In addition more information and data on configuration and size of the

reserves being claimed for large scale power generation projects be made
available, it is imperative that extensive research may be undertaken by the
national scientific research institutions to determine feasibilities of
appropriate technologies that would ensure most efficient yet cost effective
exploitation of the coal resources. Pakistan must establish institutional
linkage with China to benefit from their extensive R&D program to develop
cost effective and environment friendly technologies involving coal as fuel.

Foreign institutions that have excelled in coal mining/power generation

technology from countries such as UK, Germany, USA, South Africa,
China, India, Poland and Russia may be invited to establish institutional
linkage for carrying out coal based technical studies and research projects.
This would provide a platform for the exchange of knowledge, learning of
best industry practice, transfer of know-how and technologies, adoption of
international quality standards, knowledge on the application of modem
technologies, etc-etc.

The Board of Investment has an important role to play and need to move fast
to attract potential investors from the world over. The proposed high
powered commission for the development of coal should serve as a one
window operation to support smooth implementation and timely completion
of projects free of procedural hurdles.
 REFERENCES

1. Pakistan, energy planning in a strategic vortex .

By Charles K. Ebinger, American Universities Field Staff.

2. Physics and Contemporary Needs.

By Saleem A. Ansari, A. Irej Jalal, Riazuddin Shoaib, Khan A.

Shoaib.

3. www.brecorder.com/

4. www.wikipedia.org/

5. pakobserver.net/

6. Turning coal into barrels of oil by Alauddin Masood.

7. Pakistan Politics: Thar coal turning into another Kalabagh Dam

By Ansaar Abbasi.

8. Pakistan’s Thar coal: a comparative study By Kamran Riaz.