News coming out of the Philippines is that yet another group of companies is trying to be the first to build a working liquefied natural gas (LNG) receiving terminal in the Philippines. On Wednesday, Philippine power company First Gen Corp. and Tokyo Gas said they had signed a preliminary agreement to jointly develop a LNG import terminal project in the Philippines.
First Gen Corp. said that Tokyo Gas will take a 20-percent interest in the project, which will be located in Bangles province, south of the Philippine capital, Manila. No further financial details were disclosed. The Manila-based company operates four of the country’s five gas-fired power plants, with total capacity of about 2,000 MW, all of them in Batangas province.
The disclosure comes as the Philippines faces an impending natural gas shortage. Estimates vary, but most experts claim that gas at the country’s offshore Malampaya gas field will be depleted by 2022 or 2023. Malampaya supplies three gas-fired power plants, providing 40 to 45 percent of power generation requirements for Luzon, the country’s main island, which includes Manila with a population of around 20 million.
The possible building of the Philippines’ first LNG terminal also comes less than two weeks after Manila singed a controversial MoU with Beijing on joint oil and gas development in overlapping claims in the South China Sea, which the Philippines calls the West Philippine Sea.
The MoU signing is part of Philippine President Rodrigo Duterte’s push to forge closer ties with China despite the warnings of many in and outside of the country that relying on Beijing may come at both a heavy political cost domestically as well as possible problems once a new administration takes over in Manila in just under four years after Duterte’s one time, six-year term expires.
Other attempts have fallen short
This is not the Philippines’ first attempt at building an LNG receiving terminal. In fact, numerous other LNG proposals have been discussed 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 officials who often scare away international business with their under-the-table demands and rampant corruption. Related: Qatar’s OPEC Exit May Just Be The Beginning
However, in 2015 it appeared that this stalemate would be broken when reports out of Manila claimed that the country’s first LNG terminal was nearing completion. Australian Stock Exchange listed Energy World Corp (EWC) was reportedly finishing an LNG import hub and LNG-fired combined-cycle gas turbine power station, with a capacity of 650 MW, in Quezon province, just south of Manila, to provide electricity to be sold through the wholesale electricity spot market to the Luzon grid.
The EWC plant was to receive LNG from EWC natural gas fields, including those in Indonesia, but would also have to procure supply on the spot market. However, in the ensuing three years EWC’s terminal has never been completed and has largely fallen off the radar of Philippine DOE officials and media in Manila.
State-owned Philippine National Oil Co (PNOC) has also sought to bring together companies to build an LNG terminal in Batangas, but at least twice those attempts have fallen through, while planned meetings with potential investors were postponed. In August, First Gen Corp said that PNOC had rejected its unsolicited proposal to be part of its LNG terminal project in Batangas.
According to a Reuters report, Philippine Energy Secretary Alfonso Cusi said three different groups have been short listed recently to build the country’s first LNG terminal. However, at the end of the day, it remains to be seen if even savvy international investor and Japan’s largest natural gas utility Tokyo Gas can overcome previous hurdles that have driven away other contenders, including both smaller players and larger oil majors.
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By Tim Daiss for Oilprice.com
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As per Mr. Tim Daiss of Oilprice.com these are due to the following:
a) Ball game is change every time a new president is elected
b) Any project has to appease Manila and the local unit (LGU)
c) Corruption and under-the-table demand
d) Big business controls media and even DOE
I fully agree with Mr. Daiss opinion. The only way the country can get out from this rut and benefit for this projects is to set a long term energy plan or policy approved and ratified by our congress and senate. This will ensure a stable and coherent direction of not only LNG but the whole energy industry i.e. upstream and downstream oil and gas industry, transport, power generation etc. This will also entice investor to invest as this will provide the right economic condition for long term investments.
To this day the EWC Pagbilao LNG hub started during the previous administration remains idle as its power connection to the grid remains an issue. And worst DOE just recently issued a CEPNS to only allow EWC to operate as power generator not as LNG hub. Allowing EWC to function as a hub, local business will have a chance to operate small LNG system which can basically disrupt the present power system model as minigrids and DERs will proliferate. More renewable will be place on stream at the expense of coal fired power plants.
The First Gen and its Japanese partner Tokyo Gas terminal project has solid justification to build onshore LNG regasification terminal at its existing facility in Sta. Rita, San Pascual, Batangas. This project basically is justified as First Gen has its own gas power plants (2000 MW) and this can be easily upgraded to backup Malampaya gas.
The China National Offshore Oil Corporation (CNOOC)/Dennis Uy project justification is not as robust as compared to the above project as it only relies on the 1000 to 2000MW power plant it will build. There is also a risk that the additional projected power demand will not be realized in the future if more renewable come on stream. Curtailing the EWC LNG hub to function as a hub might not be enough to justify this project.