First Gen plans to lease floating storage regas unit for LNG by Q1

October 7, 2019 | 12:03 am By Victor V. Saulon

https://www.bworldonline.com/first-gen-plans-to-lease-floating-storage-regas-unit-for-lng-by-q1/

FIRST GEN Corp. targets to lease a floating storage regasification unit (FSRU) for liquefied natural gas (LNG) early next year when it has determined the volume that it needs to import fuel to existing power plants and potential capacity expansion, its top official said.

“Until we know what we need, that’s when we can contract. So when we do that, is probably some time first quarter of next year,” said First Gen President and Chief Operating Officer Francis Giles B. Puno in an interview.

He said the standard storage size of an FSRU is about 120 metric tons (MT) to about 150-160 MT. But the volume should also factor in the number of times transport ships will be bringing in LNG from foreign sources, and the volume of gas used by the existing power plants.

“There are international service providers that can provide the floating storage regas unit itself. There are many vendors that do that,” he said, adding that the company is in talks these vendors. “That discussion has been there for some time already as well.”

Mr. Puno said the “base case” today for First Gen remains the construction of an onshore LNG import terminal.

In December last year, the company signed a joint development agreement with Japan’s Tokyo Gas Co., Ltd. to build the terminal within the Lopez-led company’s power generation complex in Batangas City.

In September this year, First Gen named Japan’s JGC Corp. as the engineering, procurement and construction contractor. The immediate focus of the partnership is to complete a detailed study to modify the existing jetty in Batangas to accommodate large- and small-scale LNG vessels, while continuing to receive liquid fuel.

First Gen, the country’s leading gas power generation company, has around 2,000 megawatts (MW) in operating gas facilities comprising of four gas-fired power plants, namely: the 1,000-MW Santa Rita power plant, the 500-MW San Lorenzo, the 414-MW San Gabriel, and the 97-MW Avion power plant.

Mr. Puno said site preparations for the onshore terminal had been completed.

“Then we’ll build the jetty — the reconfiguration of the existing jetty. So now that’s going through detailed studies,” he said.

Feasibility studies will help configure the jetty to accommodate the FSRU, which is a big vessel that will be permanently docked.

“We’re studying that to see if there’s any fatal flaw, technical specification that needs to be done to essentially adjust the existing jetty that we have. So that will determine also the size of the ship that we can bring in,” he said.

First Gen targets to start using the FSRU in 2021, although it has an existing contract with the consortium behind the country’s Malampaya gas until 2024.

Mr. Puno said there are times when Malampaya gas capacity is “maxed out” thus the need to buy imported LNG towards the end of the concession when there might be uncertainty on the reliability of the home-sourced natural gas.

“They (Malampaya consortium) need to reinvest. So whereas before we were planning to construct and hopefully start operating the onshore terminal by 2024, the floating storage allows us to accelerate that sooner just in case, for example, Malampaya is not enough,” he said. “It also allows us to expand quicker, like build more capacity potentially.”

He said the FSRU would allow the company to take advantage of the current market situation where the price of gas is “cost competitive.”

“At some stage, we’re hoping that we can even import gas at a price that is at least equal if not cheaper than the existing Malampaya. So that’s also good for the consumers,” he said.

The existing gas contract with Malampaya only has the Santa Rita and San Lorenzo plants under a “firm” deal. For the San Gabriel and Avion plants, the contract is “flexible.”

Mr. Puno said plants under the flexible contract would “potentially” use the imported LNG. “Or maybe new capacity. That’s one. And secondly, we also have Ilijan, ‘yung sa San Miguel [Corp.], which will expire in 2022, I believe. So in two years’ time, they will need more gas as well.”

“Right now, we’re also in discussion with them (San Miguel) on being able to sell gas to Ilijan,” he said.

First Gen has identified “numerous” LNG suppliers, which are kept engaged in the discussions, Mr. Puno said. He said locking in a contract at this time would be premature.

Mr. Puno also said that the company’s dollar commitment for imported gas is an even bigger number than the investment for the regasification infrastructure, but did not disclose figures.

“Once the demand is already firmed up then we can contract. And contracting really is not that difficult. The question really is do we have the infrastructure to bring in the gas and then utilize that,” he said.

He said First Gen is looking to initially contract with gas suppliers for the FSRU, which is a smaller volume than that for the onshore facility.

“Anyway, the contract for Santa Rita and San Lorenzo will only expire in 2024. We don’t need as much gas today than in 2024. In 2024, definitely we’ll need the gas,” he said.