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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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Philippines’ LNG Hopes Are Fading Fast

It should be plain to see by now for those who follow energy news that the Philippines is not only struggling to put its first LNG import terminal in place but that it’s a possibility that it will never happen. Under a type of déjà vu scenario, another energy player’s plans that were earmarked as the best hope to put up an LNG terminal in the southeast Asian country has bitten the dust.

Media in Manila reported on Monday that Philippine National Oil Co. (PNOC) had terminated its selection of a joint venture partner for its proposed LNG hub in the country, formally ending its bid to spearhead what could have been a state-led facility for the imported LNG.

PNOC’s announcement came after Philippine Energy Secretary Alfonso G. Cusi told reporters that the company, which serves as the commercial investment arm of the Philippine Department of Energy (DoE), was looking instead to join other entities that are venturing in a similar project, the Manila-based Business World reported.

“When I gave the instruction to put up the LNG terminal I was hoping, I told them the lead is PNOC. So if you’re the lead, do it, start it. I was hoping that they will be able to do it. They were doing it; they were looking for partners for the technical and commercial. Fine. I said let’s just start the project).”

Yet the problem, according to Cusi, is that the proposed project could not be started immediately because PNOC had to do initial studies and prepare the budget that will be presented to Congress for approval. “I said, we’ve been in this for two years. I said, had that been started, if that had broken ground, maybe next month we’d be operating the first power plant. Until now we’re still in the drawing board,” said Mr. Cusi, who is the ex-officio PNOC chairman. Related:The Only Way For The Aramco IPO Is Downstream

“We’ve been looking. Who are the parties that could make it happen? It’s our aspiration for the country to become [an] LNG hub for the region and at the same time to assure the continuous supply of gas for our national energy security,” Cusi added.

It’s a re-run of the same narrative of more red tape, indecision, and foot-dragging that has once again created problems - all too common in the country of nearly 100 million people. As I reported on January 12, numerous other LNG project proposals in the Philippines have been discussed in recent years but have never materialized. Moreover, talks for energy projects in the country often fall apart amid regulatory and financing hurdles, as well as companies trying to appease not only officials in Manila but provincial and local officials who often scare away international business with their under-the-table demands and rampant corruption.

Ticking clock

The problem for the Philippines isn’t just one of government indecision and rampant corruption but its set against a ticking clock if the country can't quickly put in place an LNG import terminal since the country’s offshore Malampaya natural gas field is nearing depletion. Malampaya’s three gas-fired power plants provide around 40 percent of power generation requirements for Luzon – the country’s main island, which also includes the capital Manila and its estimated population in excess of 20 million people. Estimates vary, but most experts claim, including the Philippine DOE, that gas at the Shell-operated field will be depleted in less than five years. The quandary for Philippine DOE energy planners is that without new gas supply to offset Malampaya’s reserves, the country will have to burn more coal for power generation, even though the DOE has been advocating the opposite strategy for the past few years. The DOE, for its part, is powerless other than being able to act in an advisory capacity.

By Tim Daiss for Oilprice.com

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