Gas seen as ‘More Expensive Option’ for Mindanao Grid

Manila Bulletin 
By Myrna M. Velasco 
Published: August 22, 2013 
To push for future diversification in Mindanao grid’s power supply, liquefied natural gas (LNG) is being aligned as an alternative but a study commissioned by the World Bank presented it to be a pricier option.
The simulations presented by Canadian Gas Services International (CGSI), the entity tapped by the World Bank for the study, indicated that gas or LNG will be twice to thrice more expensive than coal – the latter being anticipated as the major source of   Mindanao’s new power supply starting 2015.
However, if compared to diesel or bunker-C fuel with forecast delivered costs of $20 to $36 per MMBTU over 20-year stretch, gas will emerge less expensive.
The size of the anchor power plant for proposed LNG storage facilities should be in the range of 300 to 450 megawatts, the study noted.
In particular, the planned LNG facility at the Phividec Industrial Estate in Cagayan de Oro will have a delivered gas cost of $13.80 per million BTU in year one and increasing to $18.30 by year 20. The projected average gas price for the duration will be $13.27 per MMBTU.
 “Of this total, approximately $12.95 is attributable to the commodity, while the remaining $0.32 is allocated to the cost of the distribution infrastructure,” the study has emphasized.
Comparatively, the cost of coal-based generation will be roughly twice lower at $4.19 per million BTU equivalent at year1 (which is reckoned at year 2013); and will just climb to $4.78 by year 20 (or in 2032). Looking at the numbers crunched in the study, the escalation in coal prices is also seen happening very slightly.
For the proposed gas plant in Iligan, the delivered cost is seen kicking off at an even higher level of $15.37 per million BTU and will increase further to $20.90 in year 20. The estimated average will be $14.67 per MMBTU.
Gas plant installation in General Santos, on the other hand, will have delivered cost of $16.43 per MMBTU for year one and inching up to $21.97 until year 20.
When it comes to bringing the gas supply in Mindanao region, the business model propounded by the study is for government to allow the entry of “gas aggregator” to meet the demand of end-users, including industries intending to do fuel shift.
On the sphere of regulating gas prices, the proposal will be to bestow such powerful function to the Department of Energy (DOE) – a diversion from earlier proposals that such must be given as added role for the Energy Regulatory Commission.
The study said, the “DOE would be entitled to adjust prices, issue fines or in the extreme, suspend or revoke a license.”
But if pricing will be given to other entities, it was proposed that “the DOE should retain either an oversight and review function, or at the very least an enforcement function in the event that some independent body or party is put in place to arbitrate disputes as to prices or service levels.”   source