PNOC eyes P29-B proceeds from ‘banked gas’ sale

Published January 15, 2017, 10:00 PM By Myrna M. Velasco

http://business.mb.com.ph/2017/01/15/pnoc-eyes-p29-b-proceeds-from-banked-gas-sale/

State-run Philippine National Oil Company (PNOC) is expecting to fetch P29 billion worth of proceeds from the sale of its ‘banked gas’ that could still fuel up to 200 megawatts of power capacity.

PNOC President and Chief Executive Officer Reuben S. Lista said the company may pursue direct sale of the ‘banked gas’ to interested takers or convert it into equity for partnership deals on their planned integrated liquefied natural gas (LNG) facilities in Batangas.

“We are not exactly in a hurry to sell it because there are a lot of interested parties who would want to buy it… and also, we can use or convert that as part of our equity in our LNG projects,” he said.  Bidding for the banked gas was undertaken by the past administration but there was no contract award made to any party.

The company, it was noted, still has 98 gigajoules (GJ) of banked gas that it can draw from the Malampaya field’s production. A gigajoule is equivalent to one billion joules; and 6GJ would be approximately 160 liters or one US standard barrel of oil of energy equivalent when combusted.

Using the prevailing Ilijan price as reference at $6.0 per million British thermal unit (BTU) and at current peso-dollar exchange rate, the company’s chief executive emphasized that the proceeds may reach P29 billion.

However, if based on the actual price of gas in the Asian market with reference to the Japan Crude Cocktail (JCC), which is the Customs-cleared pricing benchmark for liquefied natural gas (LNG) imports in the region, the total proceeds would be higher at P70 billion to P80 billion at prevailing market prices of up to $11-$12 per million BTU or even higher – inclusive of logistics costs.

Initially, the company sold 6.0 gigajoules of its banked gas and payment for that transaction will start coming June next year for P500 million. Buyer in that deal was not named.

“That fraction of the banked gas was sold in 2010, but the buyer will just start with its payments this 2018… so we will have additional income of P500 million every year starting June next year,” Lista said.

The remaining banked gas, if not sold to another party, may be utilized by PNOC to fuel its proposed 200MW LNG-fired power facility in Batangas.

PNOC gained ownership of the Malampaya banked gas via government-to-government purchase from the National Power Corporation (NPC) in 2009 that had been underwritten by the Secretaries of the Departments of Energy and Finance at that time.

The sold fuel represented the unused gas of the 1,200-MW Ilijan power facility during its initial years of operations. The transaction value had been at P14.4 billion.

Legal Opinion Numbers 46 and 48 issued by the Department of Justice in September 2009 stipulated that “the DOE Secretary and the DOF Secretary may execute the deed of sale (for the banked gas) without the need of a new Presidential directive.”

The justice department further noted that ‘subrogation rights’ had effectively been given to the Philippine government, thus, “it has the right to sell the banked gas.”

“All the attributes of ownership are therefore present with the government, and accordingly, it can perform any acts of ownership over the subject which includes the right to sell,” it added.