Manila, Philippines (BBN)- The Asian Development Bank (ADB) has approved a $30 million project loan to Engro Elengy Terminal Private Limited, a special purpose company which will build Pakistan’s first liquefied natural gas (LNG) re-gasification terminal.
“Pakistan urgently needs to utilize its existing power generation capacity fully, while reducing its reliance on costly imported diesel fuel for electricity generation,” said Mohammed Azim Hashimi, an investment specialist in ADB’s Private Sector Operations Department.
The loan, to the special purpose unit of listed Pakistani company, Engro Corporation Ltd, will be used to build and operate the re-gasification facility at Port Qasim, Karachi, the ADB said in a statement on Friday.
The plant will have the capacity for re-gasification of up to 3.0 million tons of LNG per annum from March 2015 onwards. The fuel, suitable for use at most of the country’s combined cycle power plants, will be supplied to the state-owned Sui Southern Gas Company’s gas distribution network via a new high pressure pipeline.
The converted fuel will help the government make an estimated savings of about $1 billion per annum on its current fuel import bill of nearly $15 billion.
Since 2008, Pakistan has been suffering from crippling power shortages, caused by a lack of fuel, which has resulted in unscheduled industry shutdowns, power interruptions in cities, and public unrest. The country’s natural gas resources are also under severe strain with a recent survey showing that the rate of gas extraction is declining by over 2% a year, even as demand accelerates.
Re-gasification converts LNG into natural gas, making it easier to store and distribute through pipelines to end users including power generators. The project will help avoid up to 2 million tons of greenhouse gas emissions a year.
The ADB works closely with the government to attract private sector capital into Pakistan’s energy sector, and has helped finance the country’s first two private hydropower projects and first three private wind power projects.
It also offers long term commercial financing which is not readily available in Pakistan. The regasification project is expected to set legal and financial benchmarks for similar projects in future.
The ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.
BBN/SSR/AD-27Feb15-2:07 pm (BST)
