Unnatural cause of delays

BARCELONA–With world crude oil prices rebounding to over $70 per barrel, the pressure remains pushing further up the inflation rate in the Philippines until the end of this year. Much of the 6.4% inflation rate average in August was accounted for the successive weeks of price hikes in gasoline, diesel and other oil products.

Fortunately, the Philippines is no longer much vulnerable to crude oil crisis with the advent of alternative sources of energy and advances in technology. This much we appreciate the value of discoveries of our indigenous sources of energy, from renewable energy to natural gas deposits, foremost of which is in Malampaya, Palawan.

It was indeed quite an eye-opener to learn the latest global trends in the natural gas industry after attending the international Gastech conference and exhibition held in this cosmopolitan capital city of Spain's Catalonia region. The country of Spain is among the biggest users and promoters of liquefied natural gas (LNG) that is not only much cheaper but also more environment-friendly than carbon-emitting oil products.

Though endowed also with rich deposits of natural gas, our own country – the Philippines – is keeping pace with the global trend toward a cleaner and cheaper fuel like LNG.

The Energy World Corp. (EWC), an Australian-based company is building what could be the first LNG facility in the Philippines. The EWC is 100% owner and developer of what this company claims will be the first ever LNG hub terminal in the Philippines. Its LNG import-export facility in Pagbilao in Quezon Province has yet to be put up as of this writing.

The EWC considers their Pagbilao hub terminal to be “a strategically important asset for the Philippines’ nascent gas industry” that will be able to handle up to three million third party-access (tpa) of LNG.

The global oil and gas newspaper “Upstream” distributed here to Gastech delegates and participants, reported that the Philippines has been eyeing LNG imports for at least two decades now. And that the Philippine government has ambitious plans to make the nation an LNG hub to rival Singapore.

But to date, no such LNG hub project have gotten off the ground yet.

According to the same newspaper, our state-owned Philippine National Oil Company (PNOC) and the Department of Energy (DOE) are currently evaluating proposals from international players that could partner on an integrated LNG import/power project. Such project would likely utilize a floating storage regasification unit (FSRU) ahead of an onshore receiving and re-gas facility, the report added.

The FSRU is a special type of ship used for transiting and transferring LNG via sea. Imported natural gas is liquefied in a liquefaction plant for ease of shipping, then converted back to its former gas form in a regasification plant in the country of the buyer.

Meanwhile, a local contractor AG & P in the Philippines has a focus on small-scale LNG projects that could be employed both in the Philippines and overseas.

But a bigger conglomerate in the Philippines, the Lopez family-owned First Gen is also much into the construction of LNG facility for its own wholly integrated Clean Energy Complex in Batangas City.

Known for having pioneered the use of natural gas as a clean source of energy to generate electricity, the First Gen’s project to put up their own LNG facility gets a boost following declared offer by San Miguel Corp. (SMC) head honcho Ramon Ang to partner with them on this endeavor.

Ang announced the offered investments in the country’s first-ever LNG facility to meet the future fuel requirements and expand the capacity of SMC’s 1,200-megawatts (MW) Ilijan power plant in Batangas.

The SMC-run Ilijan plant, a gas-fired generating plant, Ang cited, plans to raise its capacity to 3,000 MW after their independent power producer agreement (IPPA) contract expires in 2022.

However, the Philippine gas industry is stymied by the seeming lack of clear policy decisions from the PNOC.

This was long after the DOE tasked the PNOC, headed by retired Coast Guard Admiral Reuben Lista to develop an integrated LNG hub with storage, liquefaction, regasification and distribution facility and reserve initial power plant capacity of 200 MW. As DOE Secretary, Alfonso Cusi sits as board chairman of the PNOC while Lista is the president and chief executive officer of the PNOC. Upon directives from the DOE, the PNOC started receiving proposals.

In January this year, First Gen submitted a proposal to the PNOC requesting the state-owned company to participate in the Lopez firm’s onshore storage and regasification terminal project to be put up within the Clean Energy Complex which houses the 1,000 MW Sta.Rita and the 500 MW San Lorenzo combined cycle natural gas-fired power plants; the 420 MW San Gabriel and 97 MW Avion open cycle natural gas-fired power plants.

The $1 billion LNG terminal will have a capacity of five million tons per annum to support the existing gas-fired power plants of First Gen and potential third-party users. The First Gen started development work on its LNG project as early as 2012.

The First Gen reportedly has completed the initial phase of the planned site of development of the LNG terminal and has progressed to the next phase of the tender process for the selection of the engineering, procurement, and construction contractor of the LNG terminal. The planned LNG terminal project is considered crucial in ensuring uninterrupted supply of natural gas with the projected depletion of the Malampaya gas field starting 2024.

Thus, time is of the essence that this LNG terminal projects can take off the ground, so to speak, in line with the 2017-2040 Natural Gas Roadmap plans drawn up by the DOE to make natural gas “the preferred fuel by all end-use sectors” by the year 2040.

For unclear reasons, the PNOC could not make up its mind up to now, especially after it received other proposals to develop an integrated LNG hub coming from, namely: EWC, PT Jaya Samudra Karunia and PT PGN LNG Indonesia/ PT Bosowa Corporindo with their local partner MOF Corp.; Kepco, Lloyds Energy and the China National Offshore Oil Co.

Last week, Lista announced the PNOC has scaled down its proposal to build LNG facility in Batangas under a “solicited” process that will allow the state-owned firm to set specifications for a $600-million project. But instead of a land-based terminal, the PNOC chief wants a floating FSRU to serve as terminal for the imported LNG. Is the retired Admiral still in his Coast Guard mentality? It would take longer period to build one FSRU. Unless Lista has in mind another power-barge type facility which does not conform with DOE’s Roadmap.

Sadly Listsa has not lived up to his surname which means “ready” in the Spanish language.

The window period is getting shorter for the LNG terminal facility to be put up soon before it's too late to make a big difference for the country's dwindling natural gas supply. For whatever un-natural cause of delays there may be, the PNOC could ill afford to lose precious time to come to a final decision to put up this LNG terminal.

But todate, no such LNG hub project have gotten off the ground.