Recently, there have been articles in the press on initiatives for the relaunch of Tuwairqi Steel Mills Limited (TSML), which was established in 2008 near Pakistan Steel Mills.
It could not be put into service due to a dispute over gas prices. Financial adviser Shaukat Tarin is said to have asked the relevant agencies to look into the case.
Many new developments, both positive and negative, have taken place since 2008. Gas in Pakistan has become scarce, gas prices have increased and international prices are very uncertain.
Thus, the prospects for a mutually acceptable and viable solution do not seem promising.
On the bright side, however, there are two major technological and resource developments, which can help develop a viable solution for the relaunch of TSML.
TSML claims an investment of $ 350 million, which remains blocked due to the dispute over the price of gas. He’s knocked on the doors of international arbitration. He intends to put in an additional $ 700 million for the stimulus. She also wants to use local iron ore.
TSML expected gas supply at a low rate of $ 1.23 per million British thermal units (mmbtu) – a price offered to priority sectors like fertilizer producers. There is no proof or contract to this effect.
A lot of people are even opposed to the fertilizer industry getting such a low tariff rate, let alone the steel industry.
Since TSML’s annual gas demand is 12 billion cubic feet (32.877 million cubic feet per day), that would mean a subsidy of $ 16.2 million per year and $ 162 million over 10 years.
If the opportunity cost of LNG is estimated at $ 10 per mmbtu, that would mean a subsidy of $ 48 million per year, critics might argue.
The two developments are the Global Hydrogen Initiative and Pakistan’s Thar Coal Development.
In 2008, Thar’s coal was buried under the desert. It is only recently that Thar coal has emerged. There are two major coal and power mining initiatives – one initiated by the SECMC and the other by the SSRM.
A 10,000 megawatt coal-fired power plant could be built soon, although green initiatives have cast some uncertainty in this direction.
Initial studies have been carried out exploring the possibilities of gasification of Thar coal producing both syngas and liquid fuels such as diesel. Thar’s coal-based syngas may be an ideal, if not better, solution for the Midrex-DRI process that TSML has installed.
The cost aspect is uncertain, but it is expected to be cheaper than LNG.
The other development is the Global Hydrogen Initiative. Hydrogen can be used to reduce iron ore.
Iron ore is usually in the form of an oxide. In the conventional blast furnace process as installed at Pakistan Steel, carbon / coke is used to reduce iron ore and add carbon for carburization.
In alternative processes, hydrogen is used in various combinations to reduce iron ore and carbon is added in various forms for carburization.
Fortunately, TSML’s vertical shaft Midrex process lends itself to conversion to hydrogen.
Types of hydrogen
There are four types of hydrogen depending on the raw material used: oil, gas, coal and water. Of the four, Pakistan has coal and Thar water as well as solar power.
Pakistan does not have gas or oil in these quantities and at acceptable lower prices for the steelmaking process. So, green hydrogen appears as a possibility.
Green hydrogen is produced by the electrolysis of water – fresh or even marine. Electrolysis requires electricity, which can be produced using solar energy.
We are not lacking in sunshine because we have more than double what there is in the steel-producing countries of Europe.
Electrolysis technology, however, is expensive but is expected to become cheaper on the solar PV model. By 2030, it could be as cheap as $ 1 per kg or $ 8 per mmbtu.
If concessional or subsidized financing is available, a green hydrogen plant can be installed near TSML by the plant itself or by a third party.
Alternatively, Thar’s syngas can be used to produce hydrogen, which can be competitive even now. Saudi Arabia is very interested in hydrogen, and the developers of TSML are from Saudi Arabia.
Thus, the gasification of Thar coal appears to be a viable and realistic option that should be considered, provided that Chinese aid is obtained within the framework of the CPEC.
China is also going green, at least on foreign projects. In this case, the green hydrogen path may need to be explored.
TSML and Pak Steel Technologies
For the non-specialists, let’s give some information about Pakistan Steel Mills and TSML.
Pakistan Steel is an integrated blast furnace based steel mill, which starts with iron ore and coal as raw material and produces finished and semi-finished steel products like billets, structural steel, sheet metal and sheets, etc.
Its production capacity is 2.2 million tons per year (mtpa) while TSML has half that capacity. TSML will produce semi-finished steel products.
Direct iron reduction (DRI) replaces scrap and its price is assumed to equal the price of scrap.
TSML has adopted a gas-intensive production process called DRI where the gas is used to reduce oxides of iron and other ores to produce iron in the form of sponge iron as opposed to the pig iron that is produced. in the blast furnace where iron ore and coke are burned together – the equivalent of which has been installed in Pakistan Steel. The DRI vertical well process has been adopted by gas-rich countries like Iran, Qatar, Oman, Saudi Arabia, and other countries in the Middle East, some of which also have gas and iron ore. cheap and plentiful.
Most of the advanced countries with iron ore and coal as well as high demand for steel like China, Russia, USA and European countries have adopted the blast furnace route.
It seems that for small markets like Pakistan the scrap or DRI based arc furnace route is good which avoids the need for big blast furnace projects like Pakistan Steel because we are facing problems these days.
There are proposals for co-production or integration of the two projects – TSML and Pakistan Steel, although both suffer from the unique problems of operating and restarting their main equipment. There is a potential for synergy and cooperation between the two projects.
It is hoped that TSML will be able to make downstream investments. Its economy and profitability will improve with the integration and it is hoped that no further concessions on gas prices will be necessary. There is enough ground around to spread out.
It must be understood, however, that no competitive and profitable industry can live on subsidy crutches. Projects should be designed taking into account resource endowments and comparative advantage.
The government has no money. The money has to come out of the businesses and the people who make money.
The writer is a former energy member of the Planning Commission and author of several books on the energy sector
Posted in The Express Tribune, December 27e, 2021.
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