United States and Pakistan Energy Cooperation Strategy: Priorities Through 2020 For The U.S.-Pakistan Clean Energy Partnership

Fact Sheet
Washington, DC
May 24, 2016


The United States and Pakistan have a multifaceted partnership that reflects a shared interest in increased economic ties and Pakistan’s stability and growth. As part of that cooperation, the U.S.-Pakistan Clean Energy Partnership will help Pakistan overcome its energy challenges by facilitating private sector investment in clean energy to fuel Pakistan’s economic growth. Announced by Prime Minister Sharif and President Obama in October 2015, the U.S.-Pakistan Clean Energy Partnership will build on Pakistan’s existing clean energy resources, including hydro, natural gas, wind, solar, geothermal, and biomass, to significantly increase Pakistan’s power supplies over the next five years.

The United States and Pakistan have a strong history of energy cooperation, dating to U.S. support for construction of the Mangla and Tarbela hydropower dams in the 1960s and 1970s. More recently, in line with the Enhanced Partnership with Pakistan Act of 2009 (also known as Kerry-Lugar-Berman), the United States committed more than $1 billion to support energy sector cooperation with the Government of Pakistan. These cooperative efforts made almost 2,300 additional megawatts (MW) available to Pakistan’s national grid from 2009-2015, benefitting some 26 million Pakistanis and increasing the revenue of the country’s distribution companies by over $400 million annually. This complements Pakistan’s broader, homegrown efforts to expand generation, improve distribution and transmission, diversify its energy mix, and achieve full cost recovery in the energy sector.

Looking forward, the U.S.-Pakistan Clean Energy Partnership will specifically seek to facilitate increased private sector investment, including from U.S. companies, in on and off-grid renewable and natural gas sources of power and energy. In particular, the Partnership will define as “clean energy” and focus on projects in natural gas, hydroelectric, wind, solar, and other renewables, as well as reform and efficiency initiatives. Coordination of joint activities under the Partnership will be undertaken by the U.S.-Pakistan Energy Working Group, the established vehicle for cooperative efforts between the two governments under the bilateral U.S.-Pakistan Strategic Dialogue. USAID, in partnership with the Pakistani government, will develop an action plan to jointly manage its programs with Pakistan under the U.S.-Pakistan Clean Energy Partnership.

The Partnership serves to advance the capacity of the United States and Pakistan to take action in addressing climate change. As Pakistan faces severe water scarcity and is one of the countries most vulnerable to effects of climate change such as droughts, floods, and heatwaves, choosing to develop clean energy sources supports a shared interest in mitigating public health risks and further damage to the planet.

Under the Partnership, the United States and Pakistan will cooperate to advance key reforms to Pakistan’s energy sector, foster a regulatory framework and business climate facilitative of private investment, and, pending U.S. Congressional approval, commit targeted investments of U.S. assistance that will enable U.S., Pakistani, and international private sector developers to add at least 3,000 MW of clean power capacity to Pakistan’s electricity system. This partnership is expected to leverage at least $1 billion in private finance through 2020. The Pakistani government will ensure that the projects are processed within the specified timeline per relevant Government of Pakistan policy. The United States will partner with the Pakistani government through various agencies, including USAID, State, Commerce, Energy, the Overseas Private Investment Corporation (OPIC), the U.S. Export-Import Bank, and the U.S. Army Corps of Engineers.

To advance the goals of the U.S.-Pakistan Clean Energy Partnership, the United States and Pakistan will work together in the following areas:

  • Catalyzing and facilitating private sector investments in clean energy;
  • Expanding and increasing the resiliency of transmission infrastructure;
  • Increasing capacity and private investment through technical assistance; and,
  • Cooperating on advanced technologies and innovation to develop the energy sector.

Catalyze Private Sector Investments in Clean Energy: In cooperation with Pakistani government partners, USAID will provide technical assistance, investment risk guarantees, and targeted investments to support energy infrastructure that bolster Pakistani government efforts to attract at least $1 billion in private funding. USAID will also work closely with OPIC, private financial institutions, and multilateral development banks to bring additional financial resources to the table in support of enhanced private sector investment.

  • Inform Potential Investors: The Pakistani and U.S. governments will hold annual Business Opportunities Conferences to highlight investment opportunities, as part of the broader bilateral trade/investment relationship. We will include energy sector companies in these events. The next Business Opportunities Conference in New York in 2016 will provide a forum for matching interested investors in a number of industries. The United States also hosted a U.S.-Pakistan Clean Energy Business Opportunities Conference, held in Washington in December 2015, which highlighted Pakistan private sector investment opportunities in natural gas, wind, solar, hydro, geothermal, and other clean energy projects.
  • Provide Financing for Select Projects: OPIC is a key mobilizer of renewable energy projects in Pakistan through its provision of financing and political risk insurance. It has recently executed loan agreements to five private wind power projects in Pakistan, one of which reached commercial operations in late 2015 and two of which are under construction. In January, the U.S. Export-Import Bank opened for long-term sovereign financing in Pakistan and provides a renewed opportunity for provision of credit and increased market access for U.S. goods in Pakistan. USAID will also facilitate a loan guarantee program to make up to $80 million of credit available through local banks, through risk-sharing provided by the USAID Development Credit Authority.

Expand Transmission Infrastructure: The U.S.-Pakistan Clean Energy Partnership is providing support for transmission infrastructure that aims to create efficiencies and opportunities for private investment in Pakistan’s power sector development. USAID will invest in transmission lines capable of evacuating power from OPIC and other wind power projects, enabling an additional 680 MW of clean electricity to be made available for use in Pakistan. The Pakistani government’s Alternative Energy Development Board (AEDB), National Transmission and Dispatch Company (NTDC), and National Electric Power Regulatory Authority (NEPRA) have all been active partners in these efforts. USAID will continue its work with the NTDC to strengthen the transmission system, including enabling power evacuation from clean energy projects, enhancing the capacity of the grid to withstand variability, and strengthening the central electricity market. Both organizations will continue to work together to evacuate power from Pakistan’s wind, hydro, solar, and geothermal resources to the national and regional grids. NTDC also will continue to use a USAID-funded grid study to determine the nature and extent to which intermittent renewable resources can be fed into Pakistan’s transmission system. USAID will also provide technical assistance related to grid infrastructure design and development for renewable energy projects in conjunction with NTDC.

Increase Capacity and Investment through Technical Assistance: Under the U.S.-Pakistan Clean Energy Partnership, USAID and others will provide technical assistance to develop greater power generation, strengthen regulatory institutions, and formulate market-based rules to attract greater local and international private investment. This technical assistance will continue support for reforms in Pakistan’s energy sector, such as improvement and corporatization of the distribution system.

  • Increase Hydroelectric Power Generation: Pakistan has hydro power potential of 50,000 MW, of which only about 7,000 MW are currently being used. Hydroelectric power is clean energy that provides inexpensive power, while contributing to flood control and food security. The United States supports Pakistan’s efforts to harness greater power generation, including through USAID’s technical assistance to planned hydropower projects. U.S. experience has shown that dams can have long-lasting profound impacts on people and the environment. Therefore, we support making these decisions carefully, based on the best science available, in consultation with all affected stakeholders, and in accordance with international best practices. The U.S. Army Corps of Engineers will continue its cooperation with the Ministry of Water and Power to create river water management models and capacity development programs in river basin management. USAID will continue to partner with the Pakistani government to assist with run of the river and storage dam hydropower plants.
  • Expand Access to Natural Gas: Natural gas constitutes about 50 percent of Pakistan’s primary energy supplies. USAID’s technical assistance to the sector was key in the Pakistani government’s recent successful negotiation of a long-term liquefied natural gas (LNG) contract with Qatar, and USAID’s support to the sector helped Pakistan to develop an LNG terminal system that is bringing LNG to consumers. USAID will continue to assist Pakistan in increasing its natural gas supplies to minimize and eliminate a supply gap of 2,000 million cubic feet (mmcf)/day and provide technical assistance in the gas sector to expedite exploration, production, transmission, and distribution of gas. USAID will help Pakistan strengthen the policy and regulatory functions of the Ministry of Petroleum and Natural Resources, including the Directorate General of Petroleum Concessions, and the Oil and Gas Regulatory Authority. USAID support will help Pakistan develop an effective gas sector framework that takes into consideration various sources of gas such as domestic (natural, shale, and tight) and imported gas, and improve the transmission and distribution efficiency of the existing gas networks. Separately, the U.S. Department of Commerce’s Commercial Law Development Program (CLDP) will provide capacity building to the Ministry of Petroleum and Natural Resources on expanding domestic conventional and unconventional gas production and to Pakistan’s Oil and Gas Regulatory Authority on regulatory reform that would catalyze investment in LNG and gas distribution infrastructure.
  • Enhance Distribution System Profitability: USAID will continue work with selected electricity distribution companies (DISCOs) to increase revenue and reduce commercial and technical losses, increase the transparency of operations, and provide useful information to the Pakistani government and potential private investors to facilitate the commercialization and privatization process. This technical assistance will strengthen the ability of DISCOs to determine accurate service costs to customers and improve information provided to regulatory partners for setting optimal tariff levels. OPIC is also providing debt financing to the private sector to support upgrades to the distribution infrastructure of Karachi city’s privately-owned distribution company, K-Electric.
  • Provide Technical Support to Attract Greater Private Investment: USAID will continue supporting AEDB and the Private Power and Infrastructure Board in processing applications from private investors and institutions such as NTDC and the Ministries of Water and Power and Petroleum and Natural Resources. This support will further develop an environment conducive to private sector investment in Pakistan’s energy sector. USAID will assist NTDC and the National Power Construction Corporation in building their capacity for managing integration and operation of renewable energy projects, including assistance in upgrading and developing systems and hardware. USAID will initiate work with provincial organizations to strengthen their internal processes and organization and enable greater provincial autonomy in power generation, transmission, and distribution to lessen the burden on the national grid. CLDP will continue to work with the Oil and Gas Development Company Ltd. to incorporate best practices in its operations and to develop its upstream development capacity, including working jointly with foreign investors. CLDP may also provide legal technical assistance on cross-border natural gas pipelines.
  • Develop Pakistan’s Resource Assessment Capabilities: The United States will collaborate with the Energy Sector Management Assistance Program (ESMAP) in ongoing resource assessment activities for wind and solar energy through installation of additional data gathering stations. The work will include assisting in developing assessment capabilities for the country’s geothermal resources.
  • Provide Assistance to National Regulatory Authorities: USAID will help NEPRA and the Oil and Gas Regulatory Authority prepare private energy transmission policies and tariff guidelines, streamline the issuance of generation licenses and tariff processes, simplify procedures for Independent Power Producers (IPPs), establish price-setting procedures, and expand the regulator’s capacity to work on privately-funded projects.

Cooperate on Advanced Technologies and Innovation to Develop the Energy Sector: Using the expertise of the U.S. Department of Energy and its National Laboratories, the United States will provide technical support in the areas of energy efficiency, distributed generation and mini grid design and management, and development of the renewable energy sector. The United States and Pakistan will continue to work together in education to develop future energy sector leaders and technical experts and to increase home-grown innovation and entrepreneurial capabilities.

  • Develop a National Integrated Energy Planning System: Pakistan, led by the Ministry of Planning and in cooperation with the United States (USAID, U.S. Department of Energy, and U.S. National Laboratories) will develop an Integrated Energy Planning System (IEPS) for Pakistan’s energy sector. This energy policy tool will serve to underpin Pakistan’s energy policy reform agenda – particularly in assessing the appropriate balance of energy generation, the role of renewables, transmission/distribution, and demand-side management. A robust IEPS will grow Pakistan’s capacity to forecast future energy demand and identify clean, cost-effective generation and transmission projects.
  • Begin Targeted Energy Efficiency Activities: The Pakistan and U.S. governments will work together to create an energy efficiency pilot project with a Pakistani government building as part of implementing an energy efficiency improvement plan. Additionally, National Lab experts will work with relevant agencies and other donors to continue development of Pakistan’s first pilot project for efficiency labels on home appliances.
  • Grow a New Generation of Energy Leaders: As one of three U.S.-Pakistan Centers for Advanced Studies, USAID has established a university partnership in energy between Arizona State University in Tempe, Arizona, the National University of Sciences and Technology (NUST) in Islamabad, and the University of Engineering & Technology (UET) in Peshawar to develop groundbreaking energy research and solution hubs. The centers at NUST and UET will become sustainable energy think tanks that will drive innovation and entrepreneurship. They will coordinate closely with industry and policymakers to develop practical solutions to train a new generation of engineers, business people, and policymakers to meet the future energy needs of Pakistan.

The United States and Pakistan additionally recognize the important role that multilateral development banks and other countries play in Pakistan’s energy sector and that complementary efforts can benefit the sector. The U.S. government is open to coordinating work under the U.S.-Pakistan Clean Energy Partnership with other countries and institutions to facilitate greater access to electricity and natural gas for Pakistan’s population. For example, the United States supports the work of the World Bank and Asian Development Bank to expand energy access to Central and South Asian countries through transmission and transport infrastructure development. Through plans for the 1000 MW Central Asia-South Asia electricity transmission and trade project (CASA-1000), which will bring surplus hydropower from Central Asia to Afghanistan and Pakistan; the Turkmenistan, Uzbekistan, Tajikistan, Afghanistan, and Pakistan electricity transmission project (TUTAP); and the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline project, regional governments and multilateral banks are working together to bring new resources to the region that will boost Pakistan’s energy security.

At the request of the Pakistani government, the United States and Pakistan are partnering to bring greater private sector investment in clean power development that will promote growth and innovation in both countries, and help to address global climate change and prevent related public health risks. Recent investments, such as a U.S. company’s participation in Pakistan’s LNG imports, General Electric’s investment in wind generation and natural gas plants, and Citibank’s financing of K-Electric upgrades, demonstrate how both countries can benefit from private investment in Pakistan’s energy sector. The U.S.-Pakistan Clean Energy Partnership’s broader benefit of developing Pakistan’s domestic energy resources strengthens the country’s energy security and advances both nations’ goals of accelerated economic growth and stable development.


Appendix
The United States & Pakistan: Strong and Enduring Cooperation on Energy
March 2016

The U.S.-Pakistan Clean Energy Partnership, launched in October 2015, builds on strong ongoing cooperation between the United States and Pakistan to improve Pakistan’s energy sector, and increase and diversify its energy supply to drive economic development. Since enactment of the Enhanced Partnership with Pakistan Act (commonly referred to as “Kerry-Lugar-Berman”) in October 2009, the United States has committed more than $1 billion of civilian assistance focused on Pakistan’s energy sector. To date, this assistance has supported Pakistan’s energy reform efforts and already added or restored an equivalent of 2,300 megawatts (MW) of generating capacity to the Pakistani energy system—providing for the needs of nearly 26 million people. It has included clean energy infrastructure upgrades, a range of technical and regulatory technical assistance, and direct financing. An interagency effort, cooperation on Pakistan’s energy sector has included USAID, the Department of Energy, the Overseas Private Investment Corporation (OPIC), the U.S. Department of State, and the U.S. Army Corps of Engineers, and is coordinated under the Energy Working Group of the U.S.-Pakistan Strategic Dialogue.

As part of this cooperation, the United States has made significant investments in Pakistan’s hydropower and geothermal power generation capabilities; U.S. work in this area since 2009 has:

  • Funded the completion of construction of the new Gomal Zam Dam and Satpara Dam hydropower projects and rehabilitation of the Tarbela Dam hydropower plant, as well as accompanying irrigation infrastructure. The United States has additionally committed funding to hydropower projects at Mangla Dam and Kaitu Weir.
  • Funded ongoing, comprehensive environmental and social, technical, and financial assessments, which will underpin Pakistan’s efforts to finance and build the Diamer Basha Dam.
  • Upgraded and modernized the Guddu, Jamshoro, and Muzaffargarh thermal power plants.

The United States is providing targeted investments and technical assistance to support Pakistan’s transmission and distribution system reform initiatives. Cooperation in these areas includes working to reform and corporatize distribution company operations and improve revenue collection. U.S. work in this area since 2009 has:

  • Updated transmission equipment, resulting in improved efficiency and an increase in transmission capacity, providing for the needs of nearly 13.8 million people.
  • Contributed to improved operational performance of ten power distribution companies, enhancing efficiency and energy output providing for the needs of nearly 3.3 million people.
  • Contributed to improved governance and management systems and regulatory reforms, resulting in savings of an equivalent of 212 MW of generation capacity and increasing distribution company revenue by $429 million annually, going forward.
  • Installed over 9,000 smart meters nationwide and helped Pakistan establish Power Distribution Control Centers around the country, thereby helping the Government of Pakistan reduce unscheduled load shedding by up to 85 percent.

The United States is also working with Pakistan to strengthen regulatory institutions and governance in the petroleum and gas sector, including assistance aimed at reducing energy subsidies and rationalizing pricing. U.S.-Pakistan cooperation and technical assistance is helping Pakistan increase its access to gas imports and develop domestic gas resources in the future. Since 2009, the United States has:

  • Provided technical assistance to support Pakistan’s efforts to establish its first Liquefied Natural Gas (LNG) import terminal at Port Qasim, and provided technical assistance to Pakistan as they negotiated a 15-year LNG supply contract with Qatar Gas and other LNG supply contracts.
  • Provided technical experts to the Ministry of Petroleum and Natural Resources, the Oil and Gas Development Company Limited, and the Oil and Gas Regulatory Authority on best practices in gas market regulation to support of Pakistani reforms to its gas distribution sector. The United States worked with relevant authorities to prepare reports on petroleum sector governance, gas pricing, and priority gas recipients.
  • Analyzed oil and gas well drilling cores to help Pakistan map the lower Indus Basin potential for development of shale gas resources.
  • In cooperation with Pakistani Government partners, the United States is providing risk guarantees and financing and organizing private sector events to stimulate and attract private investment in clean energy. Since 2009, the United States has:
  • Provided debt financing and political risk insurance, through OPIC, which supports U.S. private sector investment in Pakistan. OPIC’s portfolio includes funded and committed loans and insurance policies amounting to more than $650 million for six renewable energy power generation projects and one electricity distribution infrastructure project in Pakistan. This includes $189 million in financing for three 50 MW private wind power projects, which will run on turbines provided by a U.S. company. OPIC has approved an additional $199 million in financing for two 50 MW wind projects.
  • Organized the U.S.-Pakistan Clean Energy Business Opportunities Conference in 2015 and the Diamer Basha Dam Business Opportunities Meeting in 2014 to introduce investment opportunities to the U.S. private sector.

The United States is making direct investments and providing technical assistance to bolster Pakistan’s development of new renewable energy private sector development projects. To date, the United States has:

  • Committed to invest in new transmission lines capable of evacuating power from wind power projects and make available an additional 680 MW of electricity to the Pakistan grid, including the OPIC-financed projects described above.
  • Conducted an analysis of the transmission system capacity to accept variable sources of renewable energy. The study is being used by the National Transmission and Dispatch Company to analyze where variable power can be accepted by the grid, which will be used to allocate development permits.
  • Completed an assessment of Pakistan’s wind resources in 2007 through the U.S. Department of Energy’s National Renewable Energy Laboratory. The study enabled development of the Garo-Bandar-Jhimpir Wind Corridor in South Sindh that will have installed capacity of about 1,000 MW.