China Energy, Glencore to build $1-B integrated LNG plant in PH

Published September 30, 2018, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2018/09/30/china-energy-glencore-to-build-1-b-integrated-lng-plant-in-ph/

With the pioneering venture of an all-Filipino company Limay LNG Power Corp. (LLPC), China Energy Equipment Company (CEEC) and the United Kingdom business unit of Glencore, an Anglo-Swiss multinational commodity trading and mining firm, had been tapped to build the country’s first integrated $1.0-billion floating storage regasification unit (FSRU) amalgamated with a 1,100-megawatt liquefied natural gas (LNG) power plant project at a 12-hectare Philippine National Oil Company (PNOC) property in Bataan.

The power plant component will cost $700 million, according to LLPC President Barbara Catapang; and CEEC was formally engaged as the turnkey engineering, procurement and construction (EPC) contractor for the project in a deal that was signed on September 28 this year. In an exclusive interview, Catapang indicated they will be applying for pioneer incentives with the Board of Investments (BOI) for the venture, “as this is the first FSRU LNG project we will have in the country, and it will be our cleaner source of energy.”

If approved, the company will then be granted with up to seven-year income tax holiday, duty free importation of equipment as well as other fiscal and non-fiscal incentives. The project developer firm is also aiming next to secure an “energy projects of national significance (EPNS) certification” from the Department of Energy (DOE) for the venture.

Following last week’s EPC signing, Catapang said they are eyeing financial closing in six months and the notice-to-proceed to the contractors will be served next year. Project completion and advancing the power plant to commercial operations are targeted second quarter of 2022. The plant will be equipped with H-Class gas turbine technology to be supplied by American energy giant GE.
Aside from China Energy, the other members of the consortium for the EPC are local firm Melekon Contractors Inc. as the project developer; while Glencore of UK will be the FSRU provider as well as the supplier of LNG.

On the financing sphere, the project-sponsor firm has emphasized that Melekon hired British firm Resero Gas “to raise the equity and debt,” and this early, EIG Global Energy Partners of the United States already “signified interest to provide 80-percent of the equity.”

For the FSRU-anchored LNG import facility, total project cost had been crunched at $200 million to $300 million; and has the potential to go lower depending on the final technology solution that the project developers will eventually decide on so they can achieve cost-competitive pass-on electricity rates to Filipino consumers.

According to Tai Yang, Glencore Business Developer for Oil & Gas Projects and Structured Finance, the LNG power plant’s requirement will be roughly “170,000 cubic meters – that would be sufficient for the power plant itself. On the annual throughput, the FSRU should be able to have 3.0 million tons per annum, but the power plant will just be needing 1.0 million tons per annum,” hence, he asserted that there would still be room for expansion for the facility or in offering the FSRU’s capacity to other prospective gas off-takers (buyers).

For the LNG supply, “we talked about medium to long-term contracts with back-to-back agreement eventually for the power generation component in terms of the PPA (power purchase agreement)…it’s a medium term contract with rollover, like every five years, maybe we can revisit the whole terms of the contract but it has to be back-to-back with the power supply off-take,” Yang explained.
The LNG will be sourced globally, wherein the natural gas will be liquefied at 160 degrees Celsius at the source to ensure ease of transport. “We’re still looking at options whether we build FSRU specifically for this plant or we opt for other models… so obviously, we’re trying to achieve a good tariff for the power off-take because we should have competitive FSRU solution,” the Glencore executive stressed. On the generated electricity’s off-take or supply contracts, LLPC Executive Director Danilo B. Cantiller said discussions are ongoing with Manila Electric Company (Meralco) as well as various retail electricity suppliers (RES) that have been intending to feed the plant’s capacity to various factories, industrial parks as well as commercial establishments in the country.

For turnkey contractor CEEC, Cao Yong who is deputy general manager of the Chinese firm’s subsidiary Northeast Electric Power Design Institute Co. Ltd., conveyed that the Chinese firm has reinforced confidence to be involved in the project for “several reasons… firstly, because the relationship between China and the Philippines now is very good.”

He added “this gives Chinese contractors a good environment to do good projects in the Philippines, and that CEEC has vast experience and competitive advantage to accomplish this project in the Philippines. So we are very confident that we can provide our service to contribute to the cooperation between China and the Philippines on the energy solutions aspect.”