Pakistan Unveils Thar Coal Mine Expansion to Shield Energy Grid from Geopolitical Import Risks

KARACHI: Pakistan officially inaugurated a significant expansion of its Thar coal operations on Monday, boosting domestic fuel availability for electricity generation while regional geopolitical tensions escalate the cost and risk of energy imports.

The third phase of the Thar Block II mine, located in the southern Sindh province, raises annual production capacity by 47 percent, jumping from 7.6 million tons to 11.2 million tons, according to provincial officials. The incremental 3.6 million tons is designated for the 660-megawatt Lucky Electric Power Company facility near Karachi, a plant that has historically depended heavily on imported coal.

This development arrives as Pakistan, a net energy importer with constrained foreign-exchange reserves, grapples with elevated fuel prices stemming from the conflict between the US and Iran. Disruptions to supply chains and shipping lanes through the Strait of Hormuz have intensified the nation’s vulnerability to expensive imports, making the substitution of foreign fuels with domestic resources a central pillar of Islamabad’s energy-security strategy.

Pakistan has already markedly increased its reliance on Thar coal, extracted from a desert region bordering India that holds one of the largest lignite deposits globally. Government data released last month indicates that six power projects, with a combined capacity of 3,960 MW, utilized Thar coal fully or partially during the last fiscal year, producing 16,447 gigawatt-hours of electricity and consuming 13.8 million tons of the domestic fuel.

“Today, we are saving $1.6 billion of foreign reserves in Pakistan because of Thar coal,” said Bilawal Bhutto Zardari, chairman of the ruling Pakistan Peoples Party in Sindh and a former foreign minister, during the inauguration ceremony.

The Sindh government reported that the Phase III project, funded entirely through self-financing, is projected to conserve an additional $220 million annually in foreign exchange and reduce power-generation costs by Rs15 billion ($53 million) per year.

The increased output will enable greater coal deliveries to Lucky Electric, whose 660 MW unit at Port Qasim near Karachi has traditionally operated on imported fuel. Official data reveals that during the previous fiscal year, Thar coal comprised 33 percent of the plant’s fuel mix, with imports accounting for the remaining 67 percent.

Consistent deliveries of Thar coal to the Lucky facility commenced on Sept. 1, highlighting a strategic focus on substituting imported coal at existing stations rather than constructing new generation capacity.

Three power plants with a combined capacity of 1,320 MW were already receiving full supply from the Block II mine prior to this expansion. With the inclusion of Lucky Electric, the mine is now capable of supporting facilities totaling 1,980 MW in capacity, per the Sindh government.

Commercial power generation from Thar coal launched in 2019, concluding decades of efforts to develop the desert’s extensive lignite reserves. Data from the National Electric Power Regulatory Authority shows that four plants with a combined capacity of 2,640 MW were classified as local-coal generators in the last fiscal year, while 4,620 MW of installed coal-fired capacity was categorized as dependent on imported coal.

Bhutto Zardari noted that officials in Islamabad had previously deemed the resource commercially unviable and initially sought to expand its utilization beyond the electricity sector.

Earlier this February, Pakistan progressed a $1.12 billion initiative to convert Thar lignite into urea, part of a wider strategy to lessen reliance on imported fertilizer and natural gas.

Sindh Chief Minister Murad Ali Shah stated that authorities are also exploring coal-to-gas conversion technologies and aim to eventually elevate Block II’s annual mining capacity to 20 million tons.

Additionally on Monday, Bhutto Zardari inaugurated what the Sindh government identified as Pakistan’s first coal-drying unit at Thar Block I, where a Chinese-backed operation supplies a 1,320 MW power plant. The process of drying lignite, a low-grade coal with high moisture content, enhances its combustion efficiency prior to use.

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