China has agreed to build several power plants in Pakistan to help the South Asian nation deal with its worsening electricity crisis. When completed over the next several years, these plants, including Nandipur (425 MW, Thermal), Guddu(800 MW, Thermal) and Neelam-Jhelum(1000 MW, Hydro), Chashma (1200 MW, Nuclear) will add more than 3000 MW of power generating capacity for the energy-hungry country. Pakistan is currently facing a deficit of 4,000 to 5,000 megawatts, resulting in extensive load-shedding (rolling blackouts) of several hours a day.
China has already installed a 325-megawatt nuclear power plant (C1) at Chashma and is currently working on another (C2) of the same capacity that is expected to be online by 2010. The agreements for C3 and C4 have also been signed. The United States has objected to China supplying C3 and C4 on the grounds that any Pak-China nuclear cooperation would require consensus approval by the NSG, of which China is now a member, for any exception to the guidelines. The US is applying double standards since it supported and got approval for such an exception from NSG for its own nuclear deal with India.
Under another agreement, China has agreed to invest about $600 million for setting up an integrated coal mining-cum-power project in Sindh. The project will produce 180 million tons of coal per year, which is sufficient to fuel the proposed 405 MW power plant. Pakistan is currently world's seventh largest coal-producing country, with coal reserves of more than 185 billion tons (second in the world after U.S.A.'s 247 billion tons). Almost all (99 percent) of Pakistan's coal reserves are found in the province of Sindh. Pakistan's largest coal field is Thar coal field which is spread over an area of 9100 square kilometers, and contains 175 billion tons of coal. So far this coal field has not been developed but efforts are underway.
The Export-Import Bank of China will lead the multi-national bank financing and China Export and Credit Insurance Corporation (Sinosure) will provide political risk and credit default insurance for the first 425 MW project at Nanipur, Gujranwala estimated to cost $329m, according to Associated Press of Pakistan. Other participating banks include BNP-Paribas, HSBC Bank plc, and CIC France. The lead contractor is China's Dongfang Electric Corporation Limited, with G.E. France as a sub-contractor.
Political risk has been rising in many developing nations, including the South Asian nations of Bangladesh, India, Pakistan and Sri Lanka (see 2008 political risk map). The cost of insurance against political and economic risk has also been going up, as the global economic crisis unfolds. Hong Kong-based Political & Economic Risk Consultancy Ltd. has recently rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009.
With their national coffers bulging and their exports driven economy slowing, the Chinese see opportunity in the developing world where others see political and economic risks. It is an opportunity for China to assure the continuing availability of raw materials and oil for its growing industries and to diversify its export markets. In addition to helping bail out the ailing US economy, China is using some of its vast cash reserves of $2 trillion to offer supplier financing as well as insurance for the non-Chinese partners to cover political and credit risk in the emerging markets. With bilateral trade volume of about $7 billion, Pakistan is only one example of Chinese interest. Others include politically-risky Afghanistan, and many nations of Sub-Saharan Africa where the Chinese are financing and building major infrastructure projects. In Afghanistan, China has committed nearly $2.9 billion to develop the Aynak copper field, including the infrastructure that must be built with it such as a power station to run the operation and a railroad to haul the tons of copper it hopes to extract. The Aynak project is the biggest foreign investment in Afghanistan to date, according to Reuters. The trade between Africa and China has grown an average of 30% in the past decade, topping $106 billion last year.
Looking at how the Chinese are working with many developing nations in Asia and Africa, it appears to be an unwritten Chinese policy to offer trade and investment in projects rather than direct cash aid. Given the rampant government corruption in many developing nations, including Pakistan, the Chinese policy is a sound one. It attempts to benefit the people and the nation more than the corrupt politicians and government officials who they must deal with.
In terms of Chinese dominance in power infrastructure development, one only needs to look at the heavy Chinese presence in the Indian power sector development. According to the Wall Street Journal, Chinese companies are now supplying equipment for about 25% of the new power capacity India is adding to its grid, up from almost nothing a few years ago. They have sent thousands of skilled workers to Indian plant sites, some of which boast Chinese chefs, Chinese television and ping pong.
Clearly, the Chinese objectives are not entirely altruistic. Their strategy is driven by enlightened self-interest in the developing world, which they see as source of commodities that their industries need as well as growing export market for their products and services. But the Chinese want to do good and do well at the same time by helping to lift people out of poverty in the developing world. By doing so, they want to be seen as friends and partners by the people in Asia, Africa and Latin America. The strategy enhances China's status as the new superpower that takes its global leadership role seriously.
Related Links:
Chinese Do Good and Do well in Developing World
World's Largest Solar Deals
Pakistan Inks Neelum-Jhelum Deal
Political Risk Insurance
Political and Economic Risk Consultancy
Pakistan's Electricity Crisis
Forget Chinindia! It's Chimerica to the Rescue!
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Sindh govt allocates Rs. 3.7 billion for Thar coal development in 2011-12 budget, according to Dawn:
KARACHI, June 11: Tormented by the power shortages the Sindh government focuses on developing indigenous coal reserves. In the next Annual Development Plan it has earmarked Rs3710.937 million for Thar coal project.
For energy sector a total of Rs1214.499 million has been kept in the ADP 2011-12. This include Rs1100 million for the coal gasification project.
Sindh Finance Minister Syed Murad Ali Shah while explaining salient features of the budget for 2011-12 said: “Thar coal reserves of 175 billion tons are ample for provision of cost-effective energy for centuries”.
He said that once the reserves were properly exploited they could help in generating 20,000MW by 2020.
Recently, in international competitive bidding, two Chinese companies, an Australian company, and Pakistan Petroleum Limited participated.
As a result, two Chinese companies have been selected to undertake coal exploration, power generation and establishing petro-chemical complex at two blocks of Thar.
He said the bankable feasibility study for joint venture project of the Sindh government and Engro was created to boost the potential in a record period of eight months.
The Sindh government and the federal government have included this project in the list of projects to be taken up with the Pak-China Joint Energy Working Group (JEWG) formed during the last visit of the Chinese prime minister to Pakistan, he said.
Leading Chinese companies have shown strong interest in executing this project. The mining and power generation from this project is expected in 2015-16 depending upon the financing arrangements for the project.
The test burn at Underground Coal Gasification (UCG) is expected during coming financial year. After successful testing, the project will be scaled up to produce 2x50MW electricity.
He said the government has made serious efforts to provide critical infrastructure for development of Thar coal.
A scheme for bringing water to Thar from Makhi Farash has been approved by ECNEC, feasibility studies for effluent disposal and laying of broad-gauge railway line are to be completed in June, 2011.
Work on improvement and widening of road for movement of heavy machinery from Karachi to Mithi-Islamkot is expected to start in next year.
According to rough calculations an amount of $1.20 billion is needed over a period of next five years to develop the required infrastructure for Thar.
Serious efforts are also in place to exploit the Gharo-Keti Bandar wind corridor.
During the Sindh chief minister`s recent visit to South Korea an MoU to generate 2000MW of wind energy was signed with Korea Southern Power Company.
The issue of electric power is of great priority for Sindh. The CCI has given approval to the removal of a limit on the ceiling of 50MW, which was earlier set at which provinces could construct power plants.
The Sindh government has signed a letter of intent with the Three Gorges Project Corporation, China`s premier electricity producer, to help explore the hydro power potential in Sindh.
A team from CWE, a subsidiary of the Three Gorges, recently visited Sukkur Barrage to gauge the potential for constructing a power plant.
Under the village electrification programme 446 villages were provided electricity during 2010-11, while the process for providing power to 350 more villages is underway.
Pakistan planning to purchase two nuclear power plants from China, reports The Express Tribune:
ISLAMABAD:
Pakistan has planned to purchase two nuclear power plants with a combined capacity of 2,000 megawatts from China, which will be utilised for setting up Karachi Nuclear Power Plant-2 (Kanupp-2) and Kanupp-3 and help mitigate the energy crisis.
According to documents available with The Express Tribune, China National Nuclear Corporation (CNNC) and Pakistan Atomic Energy Commission (PAEC) are likely to enter into an agreement to conduct a joint study to finalise design modifications, which would enable Pakistan to acquire two nuclear power plants, each having power generation capacity of 1,000 megawatts.
After completion of this project, a contract for establishing Kanupp-2 and Kanupp-3 will be negotiated.
The Planning Commission has said CNNC may be asked to grant intellectual property rights for the existing 1,000-megawatt plant and suggest steps which could help Pakistan avoid violation of property rights.
China has three state-owned corporations, which can own and operate nuclear power plants, including China National Nuclear Corporation (CNNC), China Guangdong Nuclear Power Holding Company (CGNPC) and China Power Investment Corporation (CPIC).
CGNPC currently operates four nuclear power plants of 3,758 megawatts in China and also involved in 16 other projects having capacity of 25,000 megawatts, which are under construction. The company’s focus has been on three-loop 1,000-megawatt plants.
The Planning Commission also questioned whether PAEC had approached the three nuclear power plant developers in order to ensure fair competition in offering the plants. “Moreover comparison of intellectual property rights of other nuclear power plant vendors may also be brought out,” the commission said.
In an attempt to increase power generation capacity, the government focuses on developing nuclear energy on a relatively bigger scale. Accordingly, the Energy Security Action Plan has envisaged increasing the share of nuclear power by installing 8,800-megawatt nuclear power plants by 2030.
The import of nuclear power plants will lead to electricity generation at cheaper rates compared to the thermal source, contributing to tackling the power crisis. About a month ago, power shortages reached their peak at around 8,000 to 8,500 megawatts, forcing long hours of outages across the country.
The load-shedding has disrupted industrial activity, denting overall economic growth of the country, which stood at 2.4 per cent last fiscal year.
http://tribune.com.pk/story/289908/energy-requirement-pakistan-to-buy-two-nuclear-power-plants-from-china/
Here's a report in The Hindu saying India and Pakistan are the only two countries starting up nuclear power plants in 2011:
India and Pakistan are the only two countries starting construction of a nuclear power plant in 2011, even as plants are being shut down in many countries and nuclear power generation has declined.
It may be a little too early to predict the long-term decline of nuclear energy; but analysis indicates that countries are turning to other energy sources as a result of high costs, low demand and perceived risks from recent disasters.
Despite reaching record levels in 2010, global installed nuclear capacity - the potential power generation from all existing plants - declined to 366.5 gigawatts (GW) in 2011, from 375.5 GW at the end of 2010.
Fall in production
“Due to increasing cost of production, a slowed demand for electricity and fresh memories of disaster in Japan, production of nuclear power fell in 2011,” the Washington DC-based Worldwatch Institute said in its report recently.
Much of the decline in installed capacity is the result of halted reactor construction around the world, the report pointed out adding in the first ten months of the current year, as many as 13 nuclear reactors were closed, thereby reducing the total number of reactors in operation around the world from 441 at the beginning of the year to 433.
It is also interesting that while construction of 16 new reactors began in 2010 — the highest number in over a decade — the number fell to just to two in 2011. The two countries to start construction are India and Pakistan.
Pointing out that China is an exception to the global slump in nuclear electricity generation in terms of both the number of plants being built and capacity of planned installations, the report added that the US too does not seem to be abandoning its nuclear power just yet.
Prominence to decline
Although nuclear power remains an important energy source for many countries, including Russia and France, it is likely that its prominence will continue to decrease.
To maintain current generation levels, the world would need to install an additional 18 GW by 2015 and another 175 GW by 2025. In the aftermath of Fukushima and in the context of a fragile global economy, an increase that sharp is improbable, the independent research organisation pointed out.
China, India, Iran, Pakistan, Russia, and South Korea have together contributed around five GW of new installed capacity since the beginning of 2010. During this same period, nearly 11.5 GW of installed capacity has been shut down in France, Germany, Japan, and the UK.
http://www.thehindubusinessline.com/opinion/columns/g-chandrashekhar/article2695407.ece?homepage=true
China has showered goodies on Pakistan as its top diplomat Dai Bingguo is visiting Islamabad, complains Times of India.
China has offered Pakistani companies tax free status if they operate in the border province of Xinjiang while ICBC, the Chinese bank, is working on ways to finance the Iran-Pakistan oil pipeline project.
In Islamabad, Dai appealed to world powers to support Pakistan and not desert it at this time. Pakistan has considerable influence on Afghanistan, which must be taken into consideration by those trying to resolve the crisis in Kabul, he suggested after meeting Pakistani president Asif Ali Zardari and prime minister Yousuf Raza Gilani.
The taxation move suggests China is serious about building a rail line connecting Pakistan and is preparing the economic infrastructure to support it. The new rule unveiled on Saturday offers a 5-year tax exemption to companies operating in Kashgar, which borders Pakistan and Horgos on the Chinese border with Kazakhstan.
Beijing had earlier announced to build a logistics centre in Kashgar, which saw bloody ethnic riots earlier this year, to revive the local economy and divert attention of the minority Muslim community from separatist leaders fighting to build an independent East Turkmenistan nation.
Pakistan recently announced that the Industrial and Commercial Bank of China, the largest of Chinese banks, has been appointed as the main financier in a consortium that will finance the $1.2 billion Iran-Pakistan gas pipeline. Beijing's hand is clearly visible in the decision because the project is based on the assumption of a politically stable Pakistan, which is not the case at present.
China, which has already invested $200 million to build the Gadwar port in Pakistan and helped the country build two nuclear power projects, is betting on the ability of the Zardari government to ensure stability by mending fences with the country's military leadership.
http://timesofindia.indiatimes.com/world/china/China-offers-goodies-to-Pakistan-urges-world-powers-not-to-abandon-her/articleshow/11233118.cms
China signs 6 agreements with Pak, according to Business Recorder:
Pakistan and China on Friday signed six bilateral agreements including a Currency Swap Agreement to further bolster their existing trade and economic co-operation.
The agreements worth over US $700 million were signed between the two sides at a ceremony held here at the PM House and was also witnessed by Prime Minister Syed Yusuf Raza Gilani and State Councillor of China Dai Bingguo.
The Supplementary Agreement on Extension of Five Year Development Programme on Trade and Economic Co-operation between the two countries was signed by Secretary Economic Affairs Division, Wajid Rana and Vice Minister of the Chinese Ministry of Commerce, Li Jinzao on behalf of their respective governments.
The Inter-Governmental Framework Agreement on Additional Financing for Improvement of KKH ($90 million) between the two countries was also signed by Wajid Rana and Li Jinzao.
The Currency Swap Agreement was signed by Governor State Bank of Pakistan, Yaseen Anwar and Vice Governor of the People's Bank of China, Du Jinfu.
The Concessional Loan Agreement on Additional Financing for Improvement of KKH ($90 million) between the Economic Affairs Division (EAD) and the Export-Import Bank (EXIM Bank) of China was signed by Secretary EAD, Wajid Rana and the Vice Governor of EXIM Bank, Sun Ping.
The Loan Agreement on Provision of $259 million Preferential Buyer's Credit for KKH (Karakorum Highway) Realignment at Attabad between EAD and the EXIM Bank of China was also signed by Wajid Rana and Sun Ping.
The Loan Agreement on Export Credit Facility of $464 million for Power Plant between Guddu Power Company and EXIM Bank of China was signed by CEO Central Power Generation Company Limited (GENCO- II), Aslam Sheikh and the Vice Governor of China's EXIM Bank, Sun Ping.
http://www.brecorder.com/business-a-economy/single/672/189/1264324/
Here are excerpts of a Nation Op Ed on Seoul Nuclear Security Summit:
Experts are of the opinion that modest progress had been made in Seoul and many of the tough issues to fully solve the problem were addressed because the participants were unwilling to make binding and transparent agreements. “The current nuclear material security regime is a patchwork of unaccountable voluntary arrangements that are inconsistent across borders…….Consistent standards, transparency to promote international confidence, and national accountability are additions to the regime that are urgently needed,” said Luongo.
The communiqué also omitted a reference to the need for “concrete steps” towards a world without nuclear weapons, a phrase which had been included in an earlier draft statement. A Seoul government official told the media (on condition of anonymity) that some nations had been uncomfortable about expanding the scope of the summit into nuclear weapons reduction and disarmament, and the call for concrete steps.
The Republic of Korea has done a commendable job in steering the conference in a prudent way. One of its striking features is that the conference agenda was kept away from multilateral politics and a consensual approach was adopted. The summit succeeded in creating a shared space for discussion and coordination.
Pakistan has keenly participated in the nuclear security summits. This indicates its continuity of resolve and abiding commitment to the cause. Since the Washington Summit, Pakistan has set up centres of excellence for training and emergency response mechanisms; upgraded physical protection arrangements; and revised export control lists. Following the Fukushima accident, it has conducted thorough stress tests of its nuclear power plants and is in the process of deploying Special Nuclear Materials (SNM) portals on key entry and exit points to prevent illicit trafficking of radioactive materials.
Pakistan is fully committed to continue working at the national level to maintain the highest standards of nuclear security and cooperate with the international community for achieving a secure and peaceful world.
http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/columns/02-Apr-2012/seoul-summit-2012
Here's Dambisa Moyo's interview on China's relationship with Africa:
A: There’s nothing wrong about China going around the world making resource deals to support its growing population. What it’s doing makes a lot of sense. Yes, my concern is that other countries will not catch on until it is too late. In a zero-sum world, what will happen if China wins the race for resources? Other countries seem to be asleep while China is making a concerted effort. Some 24 ongoing wars and violent conflicts have their origins in commodities, and this trend is poised to continue. China is befriending what I call “the Axis of the Unloved”—countries and regions such as Africa, Brazil, Colombia, Argentina and parts of Eastern Europe that have been basically ignored by the Western economies. China is the leading trading partner and foreign investor in many of these countries—a very different approach to the West’s largely aid-based model.
Q: The Chinese economic edge in this is that its state capitalism offers advantages that the Western laissez-faire model does not.
A: Favoured Chinese companies have a zero or near-zero cost of capital. State-owned banks provide highly concessional credit lines, in the form of government grants or low-interest loans. Favoured companies also benefit from tax breaks and the preferential allocation of key contracts. Like the US$12-billion credit line extended to Wuhan Iron and Steel, a major steel producer, by the state-owned China Development Bank, for financing “overseas resource base construction.” And of course it helps to have a war chest of over US$3 trillion, while Western economies are struggling with cash constraints.
Q: The Chinese political edge is that it’s famously untroubled by governance issues in the countries it deals with.
A: Well frankly, in practice there is little to distinguish between the commodity counterparts of Western nations and those of China. U.S. and European countries are just as happy as China to strike deals with countries with less than pristine reputations—whether it’s Saudi Arabia, Venezuela or Russia. Two wrongs don’t make a right, but in this narrow sense, it’s unfair to constantly point fingers at China.
Q: So you think that criticism of China on both scores—cheating, so to speak, economically and being too comfortable with dictators politically—is often unfair and wrong?
A: Cheating is one thing, meddling in the markets is a whole other thing. Virtually all governments meddle in the commodities markets. Western governments are particularly egregious in this respect. The United States paid US$6 billion in commodity subsidies in 2010. OECD countries spend a total of US$226 billion on agricultural subsidies yearly. And in the EU, the Common Agricultural Policy sees some 40 billion euros spent on direct farm subsidies. So if meddling in the market is “cheating,” China has a lot of company. And the West has never had much of a problem dealing with despots and dictators if there is a benefit to be gained.
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A: I think the reasons are quite clear. China pursues strictly business, symbiotic relationships, trading access to commodities for infrastructure, employment and other economic benefits. Take employment. The construction of the Imboulou Dam in [the Republic of the] Congo in 2010 employed 2,000 locals (compared to 400 Chinese). Survey results indicate that Africans much prefer to deal with the Chinese than with Westerners. In Ivory Coast, Mali, and Kenya, more than 90 per cent of respondents see China’s economic growth as “a good thing.” In Tanzania, 78 per cent agree, but only 36 per cent feel the same way about American influence. The difference is stark. Across the developing world, people want jobs, infrastructure and investment and the Chinese engagement does exactly that. ....
http://www2.macleans.ca/2012/06/04/dambisa-moyo-on-resource-scarcity-and-chinas-race-for-deals/
Here's a report on China supplying 1000 MW Chashma 3 nuclear power plant:
China confirmed this week it will sell a new 1,000-megawatt nuclear reactor to Pakistan that the United States says would violate Beijing’s obligations under a nuclear supplier control group.
Chinese Foreign Ministry spokesman Hong Lei was asked Monday about a report in the Free Beacon March 22 that first disclosed the secret agreement for the reactor reached last month in Beijing between the China National Nuclear Corp. and the Pakistan Atomic Energy Commission.
“China has noted the relevant report,” Hong told reporters in Beijing.
Normally, Chinese government spokesmen deny such reports and label them “groundless” as a way to avoid comment. The spokesman’s use of the phrase “noted the relevant report” is unusual and a tacit admission the report is accurate.
U.S. intelligence and diplomatic officials privately said the agreement was reached in Beijing during a visit by a high-level Pakistani delegation of nuclear industry officials from Feb. 15 to 18.
The Chinese at the meeting urged Pakistan to keep the deal secret to avoid expected international opposition by states that say the sale violates China’s commitment to the Nuclear Suppliers Group, a 46-member association aimed at preventing the spread of nuclear weapons.
China agreed in 2004 not to sell additional reactors to Pakistan’s Chashma nuclear facility beyond the two reactors that began operating in 2000 and 2011.
However, Hong denied the sale violates the voluntary NSG guidelines.
“The cooperation between China and Pakistan does not violate relevant principles of the Nuclear Suppliers Group,” he said. “In recent years, China and Pakistan do indeed carry out some joint projects related to civilian use of nuclear energy. These projects are for peaceful purpose only, in compliance with the international obligations shared by both countries, and they are subject to guarantee and monitor by international atomic energy organization.”
However, U.S. intelligence officials said the China National Nuclear Corp. (CNNC) is Beijing’s main nuclear weapons producer and is working to modernize Pakistan’s nuclear arsenal in addition to the civilian reactor construction at Chashma.
China also is working to develop Pakistan’s nuclear fuel reprocessing capabilities, the officials said....
http://freebeacon.com/concerns-proliferating/
Here's a PakObserver report on Chinese investment in Pakistan:
Friday, March 29, 2013 - Islamabad—China is committed to invest heavily in Pakistan’s energy and other sectors to improve lives of people, Deputy Chief of Mission of the Chinese Embassy Yao Wen said Thursday.
Speaking at a function at a local school here, Yao Wen said Chinese are already working on 120 projects in Pakistan with around a quarter related to energy.
In addition, during the last five years volume of bilateral trade has grown by 70 per cent to over $ 12 billion with Pakistani exports increased two-fold from $1 billion to $2.2 billion, he informed.
Yao Wen stressed the need for enhancing collaboration between educational institutions and exchanges of students and researchers to promote intellectual cooperation.
Lauding the role of Pakistan in regional and global peace, stability and development, he said that Pakistan has offered great sacrifices to ensure peace.
Speaking on the occasion, President Ex-Chinese Association Raza Khan lauded the Chinese assistance and cooperation in various fields, terming it a great service to people of Pakistan.
He lauded the active involvement of Chinese Ambassador Liu Jian in capacity building of students and said that supporting needy students was a great service for social development. Raza Khan stressed the need for increasing people-to-people exchanges to promote understanding and carry forward cause of Pak-China friendship.
Terming China a sincere friend, Joint Secretary Ministry of Education Prof. Muhammad Rafiq Tahir said that two countries should fully unleash their potential of cooperation to benefit masses.
http://pakobserver.net/detailnews.asp?id=202003
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