PNOC scales down LNG project

PHILIPPINE National Oil Co. (PNOC) has scaled down its proposal to build a liquefied natural gas (LNG) facility in Batangas under a “solicited” process that allows the government corporation to set specifications for the $600-million project.

“We are just putting up an LNG hub,” said PNOC President and Chief Executive Officer Reuben S. Lista in a briefing on Monday at the company’s headquarters at the Bonifacio Global City in Taguig.

With the downscaled project, a previous plan to build a power plant as off-taker of the natural gas is put on hold. The Department of Energy (Doe) previously wanted an initial 200-megawatt (MW) gas-fired power plant alongside the LNG facility.

Instead of a land-based terminal, it will now be a floating storage regasification unit (FSRU) that also serves as the terminal for the imported LNG. Imported natural gas is liquefied for ease of shipping, then regasified or reverted to its former state in the country of destination.

The FSRU will initially have a capacity of 3-million tons per annum (MTPA), which can power a 3,000-MW power plant, should PNOC’s partner decide to put up a generation facility, Mr. Lista said.

The briefing was also attended by PNOC’s consultants from multilateral lending agency Asian Development Bank (ADB), the entity hired by the company to advise on the project.

“Within the next six months, we hope to complete the process. But definitely we will meet the guidelines dictated by the [Energy] Secretary [Alfonso G. Cusi],” Siddhartha Shah, head of ADB’s public-private partnership advisory services unit, said.

Mr. Lista said the FSRU’s capacity could be scaled up to 5 MTPA depending on future power demand.

“We have to finish this project before 2022,” he said.

The target date is ahead of the expected depletion by 2024 of the Malampaya gas find, the country’s only source of the fossil fuel that powers five gasfired power plants in Batangas province with a combined capacity of 3,211 MW.

Mr. Lista said PNOC would come up within the month the specifications for the project for which interested private companies could use to submit their proposals. The submitted proposals would then be short-listed to come up with the best offer using financial, technical and legal criteria.

The prequalified proponents would be given 30 days to tender their final proposal, with the result coming out in three months.

“Ako, I’ll give it eight months,” Mr. Lista said about his expected final selection of a PNOC partner.

“We need a consortium to do this,” he said, adding that each member could have its expertise such as the builder of the hub, the distribution pipeline, and the anchor for the floating storage and regasification unit.

Glenda G. Martinez, PNOC senior vice-president for management services, said the development of the facility is “critical” for the country in view of the expected demand for electricity in the next decades.

“Not only will this terminal supply the existing gas-fired power plants and other industrial gas customers, it will also act as a hub for all other gas needs nationwide,” she said.

Ms. Martinez said PNOC conceptualized the Batangas LNG hub project to serve several purposes, including the government’s presence in a “nationally strategic infrastructure.” It will also give the government oversight or control over the construction, development and operation of the facility.

“A significant project at its infancy should not be left in the hands of the private sector,” she said.

Ms. Martinez said PNOC’s stake in the project, will be through its property, pipeline franchise, and even its banked gas. The stake, which Mr. Lista said would be a minority, would allow the state company to have a board seat or management representation.

The LNG hub was previously envisioned to be a government-to-government project, but failed to be included in the government’s investment priority plan for 2016, Mr. Lista said.

A subsequent process for an unsolicited proposal also failed as seven proponents failed to comply with joint venture guidelines as well as the provisions of the build-operate-transfer law, he added.