By Val A. Villanueva - February 14,
2019
With the clock ticking fast and
before the Shell-operated Malampaya gas field runs out of reserves, the
government should act with dispatch to find clean energy sources that could
augment the country’s power needs.
The Philippines ought to find
posthaste a Malampaya replacement to drive its power plants in Luzon. The
Malampaya field is projected to run dry by around 2023 or 2024. The three
gas-fueled power plants of Malampaya supply 40-45 percent of the power needs of
Luzon with its estimated population of 20 million.
The projected depletion of power,
which could pull down economic growth, is alarming. Government records show
that the country’s current dependable power reserve is very low—between 5
percent and 10 percent only—when compared with Singapore, which has at least a
50-percent reserve. The Department of Energy (DOE) forecasts a need of roughly
43,765 megawatts of additional power capacity by 2040, up from the existing
capacity of 13,877 MW, representing a compound annual growth rate of 6 percent.
The Luzon grid, which accounts for 70 percent of the current capacity, is
expected to triple from 9,726 MW to 29,852 MW by 2040, a growth rate of 5
percent per annum.
Without new gas resources to
compensate for Malampaya’s reserves, the economic outlook is dire. We have to
smolder more coal to generate power, a setback from the country’s avowed
environmental conservation program. Just like in past administrations, the
Philippines is not casting a critical eye on the expansion of gas-fired power
generation, favoring instead “dirty” coal to augment the country’s mounting
exigence for cheap power sources. This is largely due to the government’s lack
of comprehension on what liquefied natural gas (LNG) can contribute to the
energy synthesis.
But the depleting Malampaya reserve
has also paved the way for President Rodrigo Duterte to appease his Chinese
patrons by seeking joint gas exploration with China, with whom the Philippines
has been at odds due to competing maritime claims in the West Philippine Sea.
In a committee hearing on energy
that the Senate held on June 18, 2018, the DOE showed that LNG is the most
economically inexpensive among renewable energy sources. I’m not sure if Energy
Secretary Alfonso Cusi has finally acknowledged the important role that gas has
in filling the country’s yawning energy gap, but if last year’s Senate energy
committee hearing is an indication, the DOE could have finally recognized that
accelerating gas production and distribution is the way to go. Gas, indeed,
could easily meet mid-merit and peaking power generation, a huge boost to meet
the country’s rapidly growing power demand.
Just recently, the DOE approved
billionaire-businessman Dennis Uy’s Phoenix Petroleum and China National
Offshore Oil Corp. LNG terminal project in Batangas. Uy’s Mislatel has also won
the bid to be the country’s third telco provider. Uy is a close associate of President
Duterte and one of his major contributors in the last election. Phoenix and
CNOOC Gas & Power Group formed a joint venture called Tanglawan Philippines
LNG. But the terminal’s size is too minuscule, leaving room for other projects
to fill Luzon’s gas requirement. There is roughly 3.2 gigawatts of gas-fired
capacity in Batangas City, and the 2.2-metric-ton-per-annum capacity of the
Tanglawan terminal is just not sufficient to meet power-sector demand.
Industry players are at a loss on
why the government seems to have forgotten that Energy World Corp. (EWC), an
Australia-based publicly listed company, has an LNG project in Pagbilao,
Quezon, that is almost 100-percent complete. The only roadblock for it to swing
into high gear is the refusal of the DOE, the National Grid Corp. of the
Philippines (NGCP), the National Transmission Corp., the Grid Management
Committee and powerful lobby groups to allow the company to piggyback on the
existing transmission grid.
In the same Senate energy committee
meeting last year, the DOE, the Energy Regulatory Commission and NGCP
were all asked to assist EWC to ensure that its power plant could start
operations as soon as possible. The request fell on deaf ears, despite EWC’s
full compliance with all government regulations and requirements.
Former Quezon Gov. Eduardo
Rodriguez, on whose property the LNG Pagbilao project partly nestles, told
BusinessWise that EWC will no longer push for the connection of the project to
the existing grid. Instead, the company will pursue building its own. EWC is
now finalizing loan arrangements with various banks to build a 14-kilometer
grid. He also said that, while the grid is being constructed, the company would
hopefully be able to finish the first LNG Hub Terminal within the year.
EWC is developing the first LNG Hub
Terminal with full containment and onshore LNG tanks with pumpable capacity of
130,000 cubic meters of LNG each. The plant also consists of a dedicated jetty
and marine infrastructure for the loading and unloading of LNG ships, as well
as regasification, control center and workshops, and other ancillary
facilities. Adjacent to the Hub Terminal facility, EWC is also constructing the
first LNG Fired Combined Cycle Gas Turbine Power Station with a capacity of 650
MW aimed at providing clean electricity, which will be sold through Whole
Electricity Spot Market to the Luzon Grid in line with the DOE’s vision for
clean energy in the future.
Rodriguez explained that once the
LNG-fired power plant and the hub terminal become operational, the produced gas
can also be converted from LNG to CNG (compressed natural gas) that can be used
by the transport sector.
“Cheaper fuel would mean cheaper
costs of basic commodities. Second, the amount of a CNG tank will be 20 percent
cheaper than an LPG tank commonly used by households,” said Rodriguez, adding
that this domino effect would be favorable to the consuming public.
It will be interesting to see if EWC
would be able to fully operate given the short-sighted decision of the DOE to
allow only one LNG company to operate in the country. Cusi earlier revealed
that, out of 18 groups, his agency had short-listed two other companies aside
from the partnership between CNOOC and Phoenix Petroleum: state-owned
Philippines National Oil Co., which is seeking a partner for the project; and
Tokyo Gas, which is partnering with the
Philippines’s First Gen Corp.
Philippines’s First Gen Corp.
While these companies have yet to
build a single facility, EWC’s LNG Pagbilao project has been locked and loaded.
It has generated a sizeable employment for the townsfolk, and its multiplier
effect is not to be scoffed at. The terminals it has built are all there to
see, and it would be foolish and irresponsible for the government to change the
rules midstream should it deny EWC’s project to fully operate. EWC has already
sunk in around $750 million of direct investment it has committed to the
Philippines, and has created employment opportunities during the construction
period. It’s Cusi’s call if he’s prepared to face the ire of foreign investors.
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