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CASA-1000

The 1000 Electricity Transmission and Trade Project for Central Asia and South Asia (CASA), or CASA-1000, project is a groundbreaking initiative in terms of cooperation in the fields of energy. It is believed that the project will set new levels of economic and regional cooperation in this region that is abundant in natural resources to produce huge amounts of electricity. On February 29, 2014, Pakistan, Afghanistan, Tajikistan and Kyrgyzstan signed CASA-1000 agreement.

Background

Two Central Asian states, the Kyrgyz Republic and Tajikistan are endowed with the world’s most abundant clean hydropower resources. Both these states have a surplus of electricity during the summer. But, their recent neighbours, Afghanistan and Pakistan, suffer from chronic electricity shortages. Pakistan cannot meet its citizens’ electricity needs, especially during the sweltering summer months, leading to frequent power cuts and it also hurt industrials production, sometimes close small businesses, and lead to job losses.

Anatomy of the Project

The CASA-1000 project has three components.

1. Construction of High Voltage Transmission Infrastructure

It comprises following sub-components:

(i) High voltage direct current (HVDC) transmission line with transmission capacity of 1,300 megawatt (MW) in either direction, using a bipolar and earth-return configuration and consists mainly of self-supported lattice tower structures, conductors, and insulators;

(ii) HVDC converter stations which include specialized converter transformers, breakers, filtering equipment, inverters, controls, ground electrodes, and static and dynamic compensation equipment;

(iii) High voltage AC transmission (HVAC) interconnection between the Kyrgyz Republic and Tajikistan; and

(iv) Tajikistan grid reinforcement that will include the construction of about 115 kilometre (km) of 500 kilovolt (kV) line from Regar substation (s/s) to Sangtuda s/s and other parts of the network.

2. Technical Assistance & Project Implementation Support

It will finance the support for project implementation and technical assistance (TA) required to the four country-specific project implementing agencies as well as for the Inter-Governmental Council (IGC) and IGC Secretariat. It comprises following seven sub-components:

i. HVDC and HVAC owner’s engineers;

ii. Environment and social management support;

iii. Audits, financial, and revenue management;

iv. Project management support;

v. Coordination;

vi. Project communications; and

vii. Capacity building.

3. Community Support Programmes

These will develop and implement community support programmes (CSPs) in each of the CASA-1000 countries during the project’s construction period to create a more supportive environment for project implementation.

Recent Developments

Pakistani Prime Minister Mian Nawaz Sharif recently visited Tajikistan and while in Dushanbe he expressed his commitment to an early realisation of CASA -1000 project. By this statement he has joined the ranks of Pakistani heads of government who have been actively supporting CASA-1000.

The share of Afghanistan as a transit country would be 300 MW while Pakistan’s share would add 1000 MW to the national grid during summer. Thus, it’s a win-win situation for the exporting as well as importing countries, however, in spite of agreements between the participating countries coupled with financial assistance pledged for the project by the World Bank, Asian Development Bank as well as 500 million dollars from the United States, the project has been extremely slow to begin implementation. The reason is two-fold ‘ geopolitical concerns as well as the high cost of trade.

Impediments

There is enough evidence to suggest that Russia is concerned at the CASA deal mainly because it is being brokered by the US, and it has therefore offered Tajikistan and Kyrgyzstan to buy their entire surplus energy. With the emergence of the recent Ukrainian crisis, the CASA-1000 would be viewed with even greater suspicion than previously.

There is also a matter of high cost to this trade associated with Afghanistan and Pakistan and therefore reducing the following costs would be critical for the success of the project:

(i) energy infrastructure is deficient in the two countries and Pakistan’s energy infrastructure may be better than Afghanistan’s but our power sector is subjected to massive theft and transmission losses that are well above the average of the region and to date no government has succeeded in tackling with these structural problems; and

(ii) law and order issues with the prospect of the Taliban attacks on transmission as well as pipelines very real on both sides of the border. With the scheduled drawdown of the US forces in Afghanistan by the end of this year the security situation may worsen by next year which would have a direct bearing on the escalation of risk costs of the project.

Pakistan’s Dilemma

It is unfortunate that Pakistan has suffered from regional as well as global politics with respect to implementing economically extremely viable energy projects. Iran-Pakistan gas pipeline, CASA-1000 and securing gas from Turkmenistan have been abandoned due to geopolitical concerns and/or the high risk factors associated with law and order issues prevailing in Afghanistan as well as in Pakistan.

Our government has been collecting gas infrastructure development cess with the objective of generating resources to fund such projects but it is strongly expected that the recipient of this cess would be LNG imports from Qatar for which an agreement has yet to be made. The reason: an agreement on pricing between Qatar and Pakistan would necessarily be on the current international price of gas which would be considerably higher than is available to say India from Qatar as it signed on the dotted line when international gas prices were lower. In other words, there would be a major political fallout if tariffs are raised by as much as would be warranted by LNG imports from Qatar.

Conclusion

The lesson learned is that there is a need to negotiate with Qatar an appropriate LNG price based on an objective and fair assessment of concomitant political and economic costs of regional projects.

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