1. How to Maximize Air Quality Benefits of CNG as a Transport Fuel in Pakistan by S. Naushab Sarwar General Manager Hydrocarbon Development Institute of Pakistan National Urban Air Quality Workshop, Karachi, 13-14 September 2006

2. 1.Natural Gas Share in Energy Mix, Resources, Sectoral Consumption & Infrastructure 2.Use of CNG in Gasoline Vehicles 3.How to Maximize Air Quality Benefits of CNG 4.Conclusions Contents

3. Natural Gas Share in Energy Mix, Resources, Sectoral Consumption & Infrastructure

4. Energy Supply Mix 55.5 Million TOE Oil 29.4% LPG 0.4% Natural Gas 50.3% Nuclear 1.2% Hydro 11.2% Coal 7.6% Oil & Gas: 80.1% Oil Import Bill: $4.6 b

5. Pakistan Energy Supplies:1993 to 2005 1993199419951996199719981999200020012002200320042005 0 5 10 15 20 25 30 Million TOE Oil Gas LPG Coal Primary Electricity (Hydro+Nuclear) Fiscal years ending 30 th June

6. Reserves, Production and Resources of Oil & Gas OilNatural Gas (million(trillion barrels)cubic feet) Discovered84451.5 Produced53518.7 Remaining30832.8 Annual Production241.3 Theoretical Resource Potential Oil27 billion barrels Gas282 trillion cubic feet

7. Domestic 21.9% Commercial 3.5% Industrial 37.9% Agriculture 2.3% Transport 32.3% Miscellaneous 2.1% Sectoral Energy Consumption

8. Sectoral Oil and Gas Consumption Cement 1.2% Industry 19.5% Domestic 14.8% Commercial 2.3% Power 43.7% Fertilizer 16.4% Transport 2.1% Gas Transport 61.5% Miscellaneous 2.2% Oil Domestic 1.3% Industry 10.5% Agriculture 1.0% Power 23.5%

9. Fuels Used in Road Transport Diesel 7.5 mTOE (7.2 mt) (59% imported) Petrol 1.4 mTOE (1.3 mt) CNG 0.6 mTOE (67 MMCFD) 79.3% 14.6% 6.1% $ 1.7 billion spent on import of diesel oil Present CNG Consumption: 107 MMCFD

10. Nur/Bagla Golarchi Turk Khaskhali Mazari T.M.Khan Bobi Bhit Zamzama Mazarani Sawan Kadanwari Miano Qadirpur Sui Loti Pirkoh Rodo Dhodak Meyal Pariwali Tut Dakhni Sadkal Dhulian Retana Bangali Turkwal l Adhi Misa Keswal INDIA AFGHANISTAN BALOCHISTAN SINDH PUNJAB NWFP Karachi Hyderabad Dadu Nawabshah Sukkur Quetta Multan Faisalabad Lahore Islamabad Peshawar JAMMU & KASHMIR DISPUTED TERRITORY JAMMU & KASHMIR DISPUTED TERRITORY SSGC LINES SNGPL LINES GAS FIELD Hassan Mirpur PAKISTAN GAS INFRASTRUCTURE GAS TRANSMISSION AND DISTRIBUTION NETWORK Transmission (KM)9,062 Distribution (KM)67,942 No. of Customers (million) 4.27 Fields connected24

11. Use of CNG in Gasoline Vehicles

12. Concept Experimentation Pilot Programme Policy & Regulatory Framework Commercialization Industrial Development The CNG Process in Pakistan: Gasoline Vehicles

13. HDIP’s Pilot Programme A model R&D project leading to development of a new nationwide industry Pilot CNG stations established by HDIP in 1982 at Karachi and in 1990 at Islamabad HDIP also established CNG Stations at Quetta and Lahore and installation of CNG Station at Peshawar is under construction CNG Rules formulated in 1992

14. CNG Industry Development 1,050 CNG Stations, 1000,000 vehicles 200 stations under construction Pakistan has become 1 st CNG using country in Asia and 3 rd in the world Investment of Rs. 22 billion has been made and Rs. 2 billion in pipeline 22,000 jobs created Achieved petrol replacement and now focusing on diesel replacement

15. Growth of CNG Industry in Pakistan Pakistan is the largest CNG using country in Asia and 3 rd in the world 2000 2001 2002 2003 200420052006 CNG Stations 700 1 Jan1 Jul1 Jan1 Jul1 Jan1 Jul1 Jan1 Jul1 Jan1 Jul 0 100 200 300 400 500 Growth Rate 57% per year 600 800 900 Sep 1000 1100

16. Main Elements of Pakistan Government CNG Policy Strong government commitment Liberal licenses for CNG retailing Free market consumer price of CNG Natural gas tariff for CNG linked to petrol Priority of natural gas connection for CNG Exemption of import duty and sales tax for 5 years on import of machinery and kits

17. Positive Experience CNG as motor fuel has been accepted and gaining popularity as economical and environment friendly fuel Investors have found CNG business very profitable Financial institutions have shown keen interest Vendors’ market has also reacted positively 3-Wheeler (Rickshaws) have also been converted on CNG Diesel replacement is in process

18. Negative Experience Lack of site availability in urban areas Initial resistance by Oil Marketing Companies and Refineries Procedural delays from Local Authorities Lack of safety consciousness in smaller investors

19. How to Maximize Air Quality Benefits of CNG

20. Future Plan : Options for Diesel to CNG Conversion Strategy Dual fuel system Dedicated CNG OPTION – I: Conversion of diesel buses Gradual replacement of diesel bus fleets by CNG driven buses OPTION – II: Preferred Option Several engineering and management problems experienced

21. How to Maximize Air Quality Benefits of CNG (1/4) Introduction of CNG buses/mini- buses/wagons in major cities Encourage conversion of existing diesel buses to CNG Setting target dates for replacement of diesel buses with CNG All new buses/mini-buses/wagons to be inducted in Karachi, Hyderabad, Lahore, Faisalabad, Peshawar, Quetta & Rawalpindi/Islamabad should be dedicated CNG vehicle of petrol-CNG dual fuel Contd...\

22. How to Maximize Air Quality Benefits of CNG (2/4) Replacement of two-stroke rickshaw with CNG rickshaw (replication of Lahore model) Provincial Governments should provide incentives to CNG buses/min- buses/wagons like: a.Lucrative routes b.Exemption from route tax, excise tax and registration fee. Setting up of large CNG refueling stations Contd...\

23. How to Maximize Air Quality Benefits of CNG (3/4) Extension of benefits of exemption from custom duty and sales tax on CNG equipment and buses for another 5 years No registration of two-stroke rickshaws in specified major cities after June 2006 Facilitate introduction of CNG buses through picking up (fully or partially interest on bank loans) by the government Local manufacturing of CNG vehicles & equipment may be given priority through attractive incentives under a phased plan Contd...\

24. How to Maximize Air Quality Benefits of CNG (4/4) State Bank of Pakistan may encourage the commercial banks to establish lines of credit for CNG buses/mini-buses/wagons and for establishing manufacturing facilities in Pakistan Motivation of CNG equipment manufactures and investors for technology transfer through joint ventures with foreign manufacturers of compressor and CNG cylinders Establishment of testing facilities for CNG equipment according to International quality standards in HDIP

25. Conclusions

26. Conclusions (1/3) Following the pioneering research, development and demonstration efforts of the Hydrocarbon Development Institute of Pakistan (HDIP), the commercial use of CNG in petrol vehicles has been successfully implemented in Pakistan The CNG technology has received widespread public acceptance and private sector investor confidence. A high demand for CNG fuel exists countrywide Contd...\

27. Governmental policy incentives have been key to CNG development but no direct subsidies were provided and CNG price has been market based Potential for foreign exchange saving and environmental conservation in Diesel Oil replacement by CNG is very significant and is being now taken up Local manufacturing of CNG equipment and dedicated CNG buses are essential for sustainability of CNG industry Contd...\ Conclusions (2/3)

28. In order to maximize air quality benefits of CNG, diesel replacement is essential. All the stakeholders should work to achieve this in accordance with the Cabinet decision regarding “Replacement of Diesel Oil by CNG” CNG industry development in Pakistan is a Success Story that can be replicated by other developing countries with natural gas reserves and infrastructure Conclusions (3/3)

29. Thank you