Oracle Coalfields

Chief executive Shahrukh Khan of Oracle Coalfields talks to IRJ about perseverance.

I am from Pakistan originally with a background in business administration and economics and though I grew up in the US and was educated in Boston and London, it is London that has been my home for 30 years.

In Pakistan, not only is electricity a problem but also the fuel mix. The oil and gas sector dominates the mix but over time the economy has expanded and it has put a squeeze on consumption. So over the last several years there has been rekindled interest to look at alternative fuel stock and coal is the only option.

For the last 20 years people knew that Tharparkar district had coal. All Oracle did was verify that and bring some discipline to it so that we can make this project feasible and technically sound and that is what we have been doing for the last 12 years with a lot of patience and persistence.

And it is very much in the government’s interest to deliver on these projects because if they don’t then Pakistan remains dependent on imported fuel and that is not particularly helpful for the electricity sector. Imported fuel is very expensive and there is a vicious circle developing because whatever price they buy that goes to the consumer and on the consumer side, they can’t afford to pay, that is why you have the load shedding issue. The situation is a pressure cooker for the country. Even opposition parties are using the Thar coal field as a trump card.

Oracle represents major British investment into Pakistan and with that we have responsibility. This may be Pakistan’s first large scale coal mining operation and it needs to be done right the first time. The communication gap we have to address in the global investor market is to explain what we are doing, and that the depth and breadth of this project is much larger than Oracle.

There are a lot of myths regarding the commercial sustainability of Thar coal. We created a road map with global experts and what we did was what you would expect of any resource company, take the project to prefeasibility and further drilling, verify all the work that was done before in order to be guided by international standards. The Chinese had their own interpretations; the Germans had theirs, but nothing that would conform to Sydney, London or Toronto.

We secured our licence in 2007 and did further drilling under the supervision of SRK Consulting. That took us to a mineral resource of 529 million tonnes (Mt) which only covers a 20km2 area within our block. In the mining area we have probable reserves of 113Mt.

The next myth was that it was technically impossible to get the coal. So we addressed that, our documentation shows that this project is technically sound, the coal is good coal, sulphur is less than one per cent, ash is under six per cent and moisture level is 45 per cent. So then we asked how does this quality compare to existing producing assets in the world and both Germany and Australia, major producers of lignite coal for their strategic energy mix, have lesser quality of coal. And when you dry the coal it is no different than Indonesia.

When the power sector assessed our coal they said all that is required is that boilers need to be designed to the quality of the coal.

So what is the next myth? That there is no water in Thar, it is a desert. How are you going to get the water to the power groups and to the mines themselves?

There are three aquifers in Thar, two above the main seam and one below. We engaged our peers at Aquaterra in Australia under the supervision of SRK and over an eight month period they did further bore hole hydrology drilling on four key areas. As it turns out, there is so much water that it is a headache for us what to do with it. It can easily feed a 1000MW power plant.

With the third aquifer we can help communities overnight, the second is for power generation and we provided all the data to support that they don’t need extensions or new infrastructures; they can use our water after treating it and feeding it to the power plant. And anything left over we re-inject back into the main aquifer.

We don’t want to treat extra water as waste. Water is a commodity as far as I am concerned. I am looking 50 or 60 years ahead, eventually people will be fighting for water.

Then people said the mine will sink. We did seven trial pits and had a German geologist working with us. We narrowed the open cast mine and for the three degrees we were able to bring it back we saved $60 million off the capital expenditure.

We decided it was time to apply for a mining lease and were the first foreign company to do so. The application was a 2,000-page document. The Sindh government asked me to print 20 copies. SRK printed all that, I know because they sent me the bill. But in the end we got government approval and the green light. It was unanimously agreed that Oracle should be issued the lease.

We are using a modular approach to develop the mine. We can do staged development and funding so that it does not become an onerous exercise to raise substantial money from day one. We are talking to a major international contractor. I have been talking to banks in Pakistan also, we have engaged Citigroup as our financial adviser and we have been identifying potential equity investors in the Middle East, in the Far East.

There is no way around an energy crisis but we have to do this right the first time. And as more international companies come in, they are still two years behind us, they are short of where we are at today and they have to match our environmental studies, our social development programme.

This is incredibly important. Yes, I need to make money for my investors, but at the same time there is a philosophy behind it.

Thar coal is a game changer for Pakistan.

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