LNG based power production to cost $9.5 cents per kWh

The Liquefied Natural Gas (LNG) based power production will cost $ 9.5 cents per kilowatt hour (kWh) as compared to energy produced through diesel, which costs approximately $ 18 cents per kilowatt hour. The energy produced through local gas costs approximately $ 7.5 cents per kWh, according to official sources here on Wednesday.

Pakistan has signed a 15-year agreement with Qatar to import up to 3.75 million tonnes of liquefied natural gas a year, a major step in filling the country's energy shortfall. The deal, Pakistan's biggest, will help the country add about 2,000 Megawatts of gas-fired power-generating capacity and improve production from fertilizer plants now hobbled by the lack of gas.

According to experts in oil and gas sector, the deal sealed with Qatar for import of LNG at the price of 4.78 dollars per mmbtu was the cheapest of its kind in South Asia. The landmark deal would save the country Rs.100 billion per annum and would contribute meeting the country's energy needs by 25 percent.

The settled price was 13.37 percent of the brent and was cheaper than the gas to be imported through Iran-Pakistan and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects.

The LNG project, a game changer for Pakistan will save the country more than one billion dollars per year when expensive energy is replaced with the cheaper and cleaner fuel. The LNG as a fuel for power generation over furnace oil is more efficient in power generation - 60 per cent efficiency on re-gasified LNG versus 45 percent on alternate fuel - has much lower operational and maintenance costs and thus is friendlier on the economy in the form of much lower electricity tariff for the masses.

This is the reason, the world is turning towards LNG, Global and emerging economies such as China, Korea, Japan, India, Thailand, Indonesia, European Union and Brazil ensure LNG remains part of its energy mix. Japan imports 80 million tonnes of LNG every year, India imports 15 million tons per annum. In addition to being cleaner and safer fuel, LNG import would be recognized as the fastest solution to ease the burden on Pakistan's economy.

In Pakistan, natural gas accounts for 35 percent of all power generation, 23.8 percent of industrial use, 15.6 percent fertilizer, 5.4 percent CNG and 18.1 percent household uses. Pakistan currently stands with a gas shortfall of two billion cubic feet per day or 33 percent of its total gas demand. Pakistan's indigenous gas supply is expected to deplete to 1,500 million cubic feet per day in 2030 from current 4,000 million cubic feet per day and the demand/supply gap is likely to increase to a mammoth 7,000 million cubic feet per day in the next 15 years while local gas is fast depleting.

The economic cost of this gas shortage is incurring Pakistan losses of up to one billion dollar per year, as the country is forced to import expensive furnace oil, kerosene, LPG and diesel to make up for energy requirements. Around 1200-1500 Megawatt of power generation capacity is under 35 percent utilization because of unavailability of gas. Additionally, the government continues to pay the capacity payments to such power producers under the Independent Power Producers (IPP) regime. The LNG import is the fastest short-term solution to Pakistan's crippling economic needs.