ISLAMABAD: Pakistan on Friday signed an agreement with Qatar for the import of Liquefied Natural Gas (LNG) in order to reduce the cost of power generation.

Talking to media representatives in Islamabad, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said that the first shipment of LNG will reach Pakistan by the end of March.

He claimed the power generation cost through LNG will reduce by 40 per cent as compared to diesel.

The Minister also said that the LNG import price will be submitted before the Economic Coordination Committee (ECC) for approval.

“Pakistan heavily relies on its import of furnace oil and diesel to fuel power stations and both fuels are relatively expensive as compared to LNG, which is cheaper and a more efficient alternative. LNG is also cleaner and considered environment-friendly," said Abbasi.

He added that LNG will initially be provided to Kot Addu Power Company (Kapco) and four power plants in Punjab for power generation.

Abbasi also said that Pakistan urgently needs to utilise its existing power generation to capacity, while reducing its reliance on costly, imported diesel fuel for electricity generation.

Re-gasification of LNG will allow generation facilities to reach their maximum potential, using a cleaner and more efficient fuel, and will support the country’s push for greater energy security and diversification.

The converted fuel will help the government make an estimated savings of about $1.0 billion per annum on its current fuel import bill of nearly $15 billion.

Read: Delay in signing of LNG deal to cost govt $272,000/day: Engro

Earlier this week, Engro Elengy Terminal Limited (ETPL) — a subsidiary of Engro Corporation — said the government had failed to sign a deal for import of LNG with any supplier and would be liable to pay $272,000 per day to Engro with effect from March 31, 2015.

It had said that as committed, the Engro’s $135 million LNG terminal was ready to start up provided the government strikes liquefied gas import deal.

“The terminal has been completed in a record time and now we are waiting for the government to finalise LNG procurement deal,” Shaikh Imran-ul-Haq CEO of ETPL had said. “If the commodity is not delivered by March 31, 2015, the government would be liable to pay the capacity charges.”

Talking about their bid regarding the second Floating Storage & Regasification Unit (FSRU) terminal at Port Qasim, Haq had said they were hopeful about the result. He had said that LNG import was inevitable for the country as it would address several energy scarcity issues.

Also read: CNG stations ready for LNG import

The Universal Gas Distribution Company (UGDC) – a company established by owners of CNG stations by pooling their own resources – conveyed to the government last month that it could open $60-70 million worth letters of credit (L/Cs) for importing three shipments of LNG that would be enough to meet CNG sector’s requirement for at least 45 days. The imports could be arranged in 10 days, it had informed the government.

“We are not at stage of opening L/C through our own resources, having gained required financial strength and can well be in a position to get the LNG in March 2015; the target date set by the government,” wrote UGDC chief executive officer Ghiyas A. Paracha to the petroleum minister.

Mr Paracha had told Dawn that owners of 1,350 CNG stations had contributed to the initial paid-up capital required for registration of the UGDC and around 200 more would be joining the initiative soon. He said he had led a delegation to Qatar to examine the LNG supply chain and was impressed with their arrangements and support for Pakistan’s LNG initiative.