June 26, 2018 | 10:25 pm
THE Department of
Energy (DoE) expects to start receiving towards the end of the year firm
proposals for an integrated facility for imported liquefied natural gas (LNG),
an official said.
“We’re pretty confident
that a lot of the discussions are nearing maturation,” Leonido J. Pulido III,
an assistant secretary at the DoE, told reporters on Tuesday during the
department’s “E-Power Mo” campaign for energy resiliency.
“So we feel — at least
based on the reports that they’ve given us — within the third or fourth quarter
of this year we will be receiving more concrete [or] what we call the full
application for the construction of an integrated LNG facility,” he added.
Mr. Pulido said the
department is drafting “certain policies” to address the concerns of would-be
investors. The policies have yet to be approved by DoE Secretary Alfonso G.
Cusi, he added.
The investors’ concerns
center on the expiration by 2021-2022 of some of the power supply agreements
(PSA) between the natural gas-fired power plants and their customers, he said.
At present, the
country’s natural gas supply comes from the Malampaya gas field off the coast
of Palawan province. Five gas-fired power plants in Batangas province, with a
combined capacity of 3,211 megawatts (MW), are the main customers for the gas,
which is expected to be depleted between 2022 and 2024.
“When those PSAs end,
then there’s a concern as to the financing program for the construction of the
LNG integrated facility,” Mr. Pulido said.
He said the
pre-application conferences between the DoE and the investors are meant to
reassure the latter that the mid-merit market, which the gas-fired power plants
serve, will require the generated capacity.
He said about 11
investors had come forward with their interest in building an integrated LNG
facility, although he could not immediately identify them.
In April, the DoE
identified nine companies that have expressed interest: Cleanway Energy Dept.
Corp., First Gen Corp., Tokyo Gas Co. Ltd., China National Offshore Oil Corp.,
Philippine National Oil Co., VIRES Energy Corp., SK E&S Co. Ltd., Carmine
Energy Pte. Ltd. and DeEnergy International Corp.
“Some of the talks
between the foreign investors and the local companies are becoming more mature.
In one of our meetings last week, they said the discussions are somewhat more concrete,”
Mr. Pulido said.
“It’s not exactly a
selection. This is not like a bidding process. It’s more of a permitting
process where you have to first identify your market and if your design [or]
your business proposal fits your market and is commercially viable then we will
issue the notice to proceed . . . and the permit to construct,” he said.
He said that although
it is possible for several companies to build an integrated LNG facility, the
entry barrier is high because of the capital involved.
“It’s estimated to be
about between $1 [billion and] $1.5 billion. So once a certain market is
secure, then it doesn’t make sense for another entity to come in and build the
same facility,” he said.
Mr. Pulido said with
the current market for natural gas, the country could probably support one or
two LNG facilities.
For now, the would-be
LNG project or projects are meant to cater to the power plants although the
transport and industrial sectors are potential markets for the imported fuel,
which is said to be the cleanest of fossil fuels.
Coal-fired power plants
may also opt to convert to gas-fired facilities, Mr. Pulido said. He said he
was hopeful that an LNG project would break ground in early 2019.
He said the DoE is also
advocating legislation that will institutionalize the DoE’s rules on natural
gas. He said the law should include a provision that will allow the national
government to build the LNG facility should a private entity fail to qualify or
is unwilling to take on the investment risk. — Victor V. Saulon
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