Wickrama said discussions were on with Energy World, a firm based in Australia and Hong Kong to set up an LNG power plant and terminal which may involve an investment of up to a billion US dollars, but would be cleaner.
Industries planning to set up plants in the port were in talks with the LNG company on terms and pricing of energy, he said.
Energy World was earlier connected to a proposed a power plant and distribution terminal in Kerawalapitiya, north of Sri Lanka's capital Colombo.
The shift from LNG may delay several projects including a sugar refinery, a plastics plant and a cement factory, which have been approved to be set up in Hambantota port.Wickrama said it was better to get things right the first time than rushing and having to deal with problems later.
Sri Lanka's President Mahinda Rajapaksa also felt strongly that energy used in the port should be as clean as possible and pollution minimized, he said.
An investors familiar with the matter said Sri Lanka's environmental agency and a local university was conducting a study and its report was expected soon.
Pakistan based Thatta Cement said in a stock exchange filing Friday that it was putting on hold a cement grinding and bagging plant due to conflicts with an adjacent car transshipment yard.
It was feared that cement does would harm the cars which were coming fresh out of factories in India, destined for Africa and other destinations.
A company official said they were keen to comply with all environmental requirements in Sri Lanka.
Cairn Energy, which is digging for oil off Sri Lanka's northeast coast, has already found traces of natural gas in two wells. If the plants are commercially viable, production is expected around 2018.