KARACHI, July 24: Sui Northern Gas Pipelines Ltd (SNGPL) would supply 85 million cubic feet a day of natural gas to enable Rousch Pakistan Power Ltd to convert into gas from fuel oil, a government statement said on Wednesday.

Rousch, which is backed by German equity, is an independent power producer located in Khanewal in the Punjab province supplying 412 megawatts of electricity to the country’s biggest state-run power utility, Water & Power Development Authority. The statement didn’t say how much time would it take for the conversion, but it said the switch would help in an annual saving of $80 million. The supply would be under a 12-year contract.

“This will also ease road/rail traffic congestion and improve environment, as the need to transport about 500,000 tons of furnace oil per annum to the plant shall be eliminated,” the statement said.

The statement said an agreement has been reached between Wapda and Rousch where the IPP would reduce tariff to 5.11 cents a kilowatt hour from 5.18 cents a kilowatt hour.

The government has been encouraging power plants to switch to locally produced natural gas from imported fuel oil after a string of discoveries in the last three years.

Pakistan currently produces 2.4 billion cubic feet a day of natural gas, against demand for 3.4 billion cubic feet.—Dow Jones Newswires