DOE aims to break ground for PHL’s first LNG plant by 2018

By Lenie Lectura - September 27, 2017

https://businessmirror.com.ph/doe-aims-to-break-ground-for-phls-first-lng-plant-by-2018/

The Department of Energy (DOE) has scheduled the groundbreaking for the country’s first liquefied natural gas (LNG) hub in 2018, with project completion still being eyed within the six-year term of President Duterte.

“The buy-in is there. The investors are in. And we expect to commence groundbreaking of this project in 2018,” Energy Secretary Alfonso G. Cusi said during the 35th Asean Energy Business forum.

Cusi added the government is aiming to turn the Philippines into a hub for LNG, amid a depletion of natural gas from the Malampaya gas field in Palawan in less than a decade. Currently, around 3,500 megawatts (MW) of power plant capacity is dependent on the country’s sole natural gas source.

“We’ve started with the rollout of the Batangas LNG terminal by 2020 to safeguard against the anticipated depletion of the Malampaya gas facility in 2024,” he said.

LNG is natural gas that has been converted into a liquid state for easier storage and transportation. Upon reaching its destination, LNG is regasified so it can be distributed through pipelines as natural gas.

Other places being considered for LNG hub, Cusi said, are “many areas in Mindanao and in Subic”.

Cusi added the DOE would issue a regulatory framework on LNG soon. A public consultation is also scheduled on October 10. “Starting October 10 there will be public consultation, discussion. After October 20, there’s the publication, which is an administrative requirement.”

Senate Energy Committee Chairman Sen. Sherwin T. Gatchalian  has said there is an urgent need for the power sector to put in place an LNG framework.

“We would be tackling various legislative measures that will talk about LNG, and to hasten the development of the LNG industry here in our country. We really need to put the framework in place,” he said. “We really need to speed up the industry itself. We need to give some development either through incentives and other frameworks, and that calls for legislation.”

The Philippine National Oil Co. (PNOC) was tasked by the DOE to develop an integrated LNG hub with storage, liquefaction, regasification and distribution facility, as well as a reserve initial power plant capacity of 200 MW.

“The Batangas LNG hub project is expected to provide for the requirements of the five existing Malampaya-dependent natural gas power plants in Batangas during Malampaya’s maintenance shutdown.

“On a larger scale, the hub will address the gap in energy capacity once the Malampaya gas field is depleted and the service contract expires in 2024. It will assure the sustained supply of the gas requirements of the five Malampaya-dependent power plants,” the PNOC said.

PNOC President Reuben Lista said the number of interested firms that would want to partner with the state firm to pursue the ambitious LNG project has increased to 68 firms.

The proposed LNG project is still under review. PNOC could tap the International Finance Corp. (IFC), a member of the World Bank Group, for the conduct of a feasibility study.

Cusi, in his speech, said LNG is an emerging trend that is changing the energy landscape. He pointed out that there is increasing demand from Asia, where players will eventually transition from net exporters to net importers. Cusi also noted an increasing supply from the rest of the world where new supplies have come on stream, especially from the United States.

Also, gas prices are becoming cheaper due to the reconfigurations of these supply and demand mechanics.

“In this region, these changes are already taking place, and at a fast pace.… Asean countries will be net importers requiring 20 million tons. This is set to rise to at least 45 million tons in 2030. Now, that’s just on the demand side of the equation. As demand continues to grow, things look promising on the supply side as well. Indeed, global supplies of LNG are on course to increase by 50 percent between 2014 and 2021,” Cusi said.

He also cited the effects that US LNG exports on the global LNG market due to the shale gas revolution in the mainland. Once a net importer, the US is now a net exporter of natural gas and is expected to become the world’s third biggest exporter of LNG by 2020.

“This has had a disruptive effect on the markets, as the prospects of rising US gas exports have put pressure on the pricing formula of several existing long-term contracts.  What is happening is that a market once-dominated by long-term contracts between a small number of suppliers and an equally exclusive club of buyers, such as Japan and South Korea, have been blown open by the influx of US gas.

“Given these new developments, Asean needs to start planning for this future. We need to think of how we can ride this LNG wave, to ensure that we can safeguard our energy security. We’ve started doing just that in the Philippines,” Cusi added.