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C O N F I D E N T I A L SECTION 01 OF 03 KARACHI 000061 
 
SIPDIS 
 
E.O. 12958: DECL: 02/25/2019 
TAGS: ENGR EINV EFIN ECON PREL PK
SUBJECT: SINDH - WILL THAR COAL FINALLY MATERIALIZE? 
 
REF: A. KARACHI 32 
     ¶B. KARACHI 20 
 
Classified By: Classified by Consul General Stephen Fakan for reasons 1 
.4 (b) and (d). 
 
This is a joint Karachi-Islamabad report. 
 
¶1.  (C) In a series of meetings in February, Embassy and 
Consulate EconOffs have heard Thar coal development described 
in both hopeful and skeptical terms.  Sindh  officials claim 
confidently that Pakistan is "three years away" from mining 
operations in Thar, adding that China and South Korea both 
have expressed interest -- although President Zardari's 
recent trip to China does not appear to have resulted in any 
concrete projects on Thar.  However, both a prominent Karachi 
energy investor and the GOP point man at the Private Power 
and Infrastructure Board (PPIB) harbor doubts that plans for 
Thar will bear fruit soon -- despite the area's vast 
potential -- due to opposition from oil interests, internal 
politics and bureaucratic hurdles.  Pakistanis at both the 
provincial and national level are pinning their hopes on a 
World Bank visit in March, during which they hope to finalize 
a Memorandum of Understanding (MOU) for technical and 
financial assistance that can cut through Pakistani 
bickering.  Officials at both levels also agree that help 
from the U.S. Geological Service (USGS) in developing a 
mineral map for the region would be of enormous benefit.  End 
summary. 
 
------------------------- 
Just One More Study Away? 
------------------------- 
 
¶2. (SBU) On February 13, Sindh Secretary for Mines and 
Minerals Younus Dagha gave EconOff an overview of Sindh's 
plans to develop the Thar coal resources.  Dagha presented an 
optimistic timeline of 6-12 months for additional studies, 
followed by one to two years to dig the first open pit mine, 
making three years before actual coal mining could commence. 
 
¶3. (C) In a February 20 meeting with Islamabad EconOff, Asif 
Ali Abro (please protect), point man on Thar coal at the 
Private Power and Infrastructure Board (PPIB), stressed that 
a hydrological study (currently lacking) was particularly 
important because all three aquifers in the area are highly 
pressurized -- once tapped, experts fear they will burst, 
with unknown ecological costs.  Thar coal's exceptionally 
high water content makes it 50 percent heavier and thus more 
expensive to transport (Ref B).  This, Abro maintained, makes 
it essential to bring the power plant to the coal, instead of 
vice versa, as some developers have suggested.  Depending on 
the results of the hydrological study, water essential to run 
the plant may or may not be readily available. 
 
¶4. (C) Abro concurred with other assessments that high 
shipping costs make Thar coal unattractive for export, adding 
that technology to dry the coal was impractical.  Without a 
domestic client (read: power plant), Abro concluded that Thar 
coal - despite its abundance - was prohibitively expensive to 
develop.  Dagha pointed out that any electricity generated 
will then have to travel 100 kilometers to reach the national 
power grid.  He said each company will need to invest at 
least $2 billion to conduct mining operations and described 
the project "as too big a venture for a single firm to 
handle." 
 
----------------------- 
World Bank Stepping Up? 
----------------------- 
 
¶5. (C) A World Bank delegation plans to accompany German 
Consulate officials on a visit of the area in March to 
examine the site.  Dagha said Pakistan might then also sign 
an MOU with the Bank that would, as part of a larger package, 
provide technical assistance for developing Block One.  Abro 
 
KARACHI 00000061  002 OF 003 
 
 
also spoke of the upcoming Bank visit in hopeful but cautious 
terms.  Bank officials, he asserted, placed too much faith in 
the as yet non-functional Thar Coal and Energy Board (TCEB). 
Established nine months ago to bridge the constitutional 
divide on coal (Note: The Constitution awards provinces the 
authority to develop mineral resources, while the national 
government controls power generation over 50 MW. End note.) 
TCEB's budget, although allocated, has not yet been issued. 
Without funds, TCEB is still unable to hire experts, 
establish offices, and essentially has only one full-time 
staff member who works out of his home, instead of the joint 
provincial-national staffing its mandate requires. 
 
¶6. (C) Abro described TCEB's creation as an "understandable 
response" to the Constitutional contradiction that has made 
developing Thar so challenging, but said that its creation 
failed to get at the real problem:  mistrust between 
provincial and national authorities.  Abro noted that he had 
told Bank officials about his concern over their intention to 
create project management units  attached to TCEB, but still 
reporting separately to the national-level Ministries and the 
Sindhi authorities:  "This will only make things more 
complicated and confused for investors."  Abro said investors 
want simple structures with clear lines of authority. 
 
¶7. (SBU) In addition to a comprehensive study of Thar, Abro 
maintained that Pakistan had an even greater need that he 
intended to urge the Bank to address:  while Pakistan has a 
national policy for power generation projects, Abro said that 
policy document is silent on coal.  Without such guidance, 
neither PPIB nor any other body is in a position to provide 
assurance to investors as to the rules of the game in 
Pakistan.  Technical assistance from the Bank to develop that 
policy, above what they may provide to strengthen TCEB and 
examine Thar, is a must, according to Abro. 
 
---------------- 
Other Assistance 
---------------- 
 
¶8. (SBU) Dagha asked for help from the U.S. Geological Survey 
(USGS) to develop a geological map of the coal deposits and 
to determine if coal bed methane is present in the Thar coal 
seams.  Abro also expressed interest in possible USGS mapping 
assistance, and joined our lament that, thus far, Pakistani 
security concerns have precluded the GOP accepting USGS 
assistance that has been on offer for years. 
 
------------------- 
Foreign Interest... 
------------------- 
 
¶9. (SBU) China is reportedly interested in developing the 55 
km Block Two and the China National Machinery Company has 
also expressed interest in building an electrical power plant 
in Thar (Ref A).  Despite expectations that President Zardari 
would discuss investment in Thar during his recent visit to 
China, no MOU appears to have resulted. 
 
¶10. (SBU) According to Dagha, South Korea's state-owned KEPCO 
would also like to invest in Thar coal development, and has 
reportedly even made inquiries about purchasing some of the 
coal.  Dagha also reported that ENGRO, a chemical and energy 
firm formerly owned by Exxon, is also interested in Thar 
coalfield investments. 
 
----------------------------------- 
...But Domestic Business Has Doubts 
----------------------------------- 
 
¶11. (SBU) Farooq Hassan, a large shareholder in the Karachi 
Electric Supply Company (KESC) and a partner in the 
successful Uch Power Plant, told EconOff that he believes 
Thar coal is the immediate solution to Pakistan's energy 
shortage.  However, Hassan said that although (by his 
estimate) seven trillion dollars worth of coal awaits mining 
 
KARACHI 00000061  003 OF 003 
 
 
in Thar, he did not believe that the GOP is serious about its 
plans to develop the coal fields.  He accused Pakistan's oil 
industry, particularly the Pakistan State Oil Company, of 
blocking coal-based energy development plans.  Hassan said 
his past attempts to develop energy resources have been 
frustrated by the country's internal politics and 
"mindboggling" bureaucratic obstacles. (Note: Hassan holds 
exploration rights to a 64 square kilometer portion of the 
Thar coalfield.  End Note.) 
 
------- 
Comment 
------- 
 
¶12. (C) The development of Thar coal has been "imminent" and 
"essential" for years.  Follow-through has been lacking 
because of federal-provincial jurisdictional squabbles and 
prohibitive development costs.  The arrival of TCEB on the 
scene can be interpreted as a positive step; but unless the 
GOP follows through to get the office up and running -- and 
working cooperatively with Sindh authorities -- we doubt that 
TCEB alone can exert sufficient leadership to cut through the 
bickering bureaucracies. 
 
¶13. (C) We hope the World Bank can capitalize on the fact 
that the GOP may still be smarting from public anger over 
widespread power shortages in the fall and winter (and 
expected again this summer) to compensate for lower world 
petroleum prices that could easily reduce GOP incentive to 
get serious about Thar.  A World Bank acting as "honest 
broker" between national and provincial officials could be a 
catalyst to break this longstanding logjam. 
FAKAN