PNOC mulls sale of banked gas from Malampaya field

State-run Philippine National Oil Co. (PNOC) is considering the sale of unused Malampaya natural gas, more commonly known as banked gas, to finance its planned liquefied natural gas (LNG) hub.

In a document submitted to House Minority Leader and Quezon Rep. Danilo Suarez during yesterday’s congressional hearing, PNOC said it has 97.67 petajoules of banked gas valued at around P11.9.

The state-run firm said it becomes imperative to extract and fully recover the remaining purchase cost as well as optimize its potential value at the earliest time possible, citing that the Malampaya gas field is expected to be depleted by 2024.

“To address the matter, PNOC identified two options, to wit: first, is to trade the banked gas outside of the country; and second, to extract and burn the banked gas, that is, by converting it first to power through burning and sell it in the form of electricity instead,” PNOC said.

Originally, the banked gas was designated as reserves for future use, particularly by Ilijan power plant and the five First Gen power plants with existing gas sales and purchase agreements (GSPAs), when the Malampaya gas supply runs out.

In PNOC’s first option, it plans to trade the banked gas outside the country, which is an offshoot of a realization that locally selling the banked gas may “pose some difficulty” with existing GSPAs, with the earliest expiring in 2022.

“This would mean that PNOC’s opportunity to locally sell the banked gas may start only in 2022. 2022 maybe a bit late and may hamper the initiation of the LNG hub project due to delayed realization of the needed equity for the project,” it said.

However, it sees a challenge in the sale of banked gas outside the country which is the lack of infrastructure.

“International trading may be challenging since physical transport of gas is not viable unless it is converted to liquid state through liquefaction. Building a liquefaction plant requires extensive capitalization and may not be economical given the limited volume of gas to be liquefied,” PNOC said.

Its second option, meanwhile, is to extract the banked gas and burn then sell it in the form of electricity, which is more viable.

“This option can be more viable by adopting the floating storage and regasification unit with gas-fired power plant (FSRU-PP) technology. With the technology already existing in the market, burning the gas and selling it as electricity may start as early as next year,” PNOC said.

Earlier, PNOC was tasked by Energy Secretary Cusi to put up an integrated LNG hub with storage, liquefaction, regassification and distribution facility, as well as a reserve initial power plant capacity of 200 MW.

Targeted to be completed in 2020, the project is being eyed to help meet the requirements of gas-fired power plants supplied by Malampaya and make the country a LNG hub in Asia.