San Miguel is ambivalent over LNG investment option

Published October 26, 2018, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2018/10/26/san-miguel-is-ambivalent-over-lng-investment-option/

With apparent higher cost of electricity generated from gas technology, leading energy player San Miguel Corporation (SMC) has indicated that it is still ambivalent over liquefied natural gas (LNG) facility as an investment option.

SMC President Ramon S. Ang forthrightly stated that “LNG is not competitive,” as he asserted that cost of generation alone may hover as much as P5.00 per kilowatt-hour.

If compared to prevailing electricity tariffs in the market, Ang cited the potential hurdle that gas technology would be confronting as tough competition to fuels that could produce power at a most competitive rate.

“If we import LNG, we will have to sell our power at P5.00 per kwh. Currently, our PSAs (power supply agreements), we’re selling at P3.00 per kwh but we still find it difficult finding a market,” he stressed.

With the current pace of developments in the domestic power market, the SMC executive noted that acceptable rates in bilateral power contracts are now hovering at P2.70 to P2.80 per kwh.

He said LNG’s place in the energy mix remains a Herculean play, unless the government really comes up with a policy that shall support its incursion into the country’s technology options.

San Miguel previously sounded off its wish to partner with the Lopez group on prospective LNG import terminal facility – but tie-up negotiations have not advanced so far aside from the exploratory talks held by the relevant parties.

The diversifying conglomerate has its own interest in the gas industry as it will eventually be the rightful owner of the 1,200-megawatt Ilijan gas-fired plant – that will be at the lapse of the asset’s build-operate-transfer (BOT) contract in 2022.

San Miguel’s plan is either to take its foray into LNG terminal venture or it may just procure LNG supply then from the entity that will be putting up the import handling facility.

In the absence of new commercial gas discovery that shall replace the Malampaya field, the country has to take the LNG importation pathway so it can sustain its gas needs starting year 2024 – the timeframe when the Malampaya service contract expires.