The Department of Energy is heartened by developments in shoring up the country’s supply of gas, but some advocates want a stronger push for renewable energy.
THE Philippines already has two LNG (liquefied natural gas) projects that are enough to fuel the country’s gas plants, at least for now, according to the Department of Energy (DOE).
Linseed Field Power Corp., a local unit of global infrastructure firm Atlantic, Gulf & Pacific Co., launched commercial operations of its LNG import terminal, and received the country’s first LNG cargo delivery in April. It now supplies LNG to the 1,200-megawatt (MW) Ilijan natural gas power plant in Batangas.
The LNG power generation from the Ilijan plant is expected to significantly augment the net dependable capacity of the country in the face of a rapidly increasing demand post pandemic.
“AG&P’s PHLNG is a landmark development that will serve to kick-start the Philippines’s LNG importation and regasification ability, delivering gas to secure the country’s current and future energy demand,” said AG&P Chairman Joseph Sigelman.
The other LNG facility is that of FGEN LNG Corp., which is set to receive its first LNG cargo in the next few weeks. It aims to start commercial operations of its interim offshore LNG terminal project in Batangas in October.
“We are now in the dry commissioning phase that will continue up until around September when the FSRU [floating storage regasification unit)] will be commissioned, and in September we will be doing the wet commissioning phase, which involves the receipt, storage and regasification of LNG.
“We will then use that in our power plants to commission the power plants and LNG for the first time. So, it’s a natural progression,” First Gen Chief Commercial Officer John Russel said.
DOE Director for Oil Industry Management Bureau Rino Abad said under the 2020-2040 Philippine Energy Plan, the projected additional gas-fired power plant capacity that would be needed is around 20,000 megawatts (MW), and this equates to an estimated 26 metric ton per annum (MTPA) of regasification capacity for business-as-usual scenario and around 15,000 MW with an estimated regasification capacity of around 19 MTPA for clean-energy scenario.
“The regasification capacity expected to commercially operate this year from the Linseed (3 MTPA) and First Gen (5.26 MTPA) totals only to around 8.26 MTPA, enough to support the 1,200-MW Ilijan power plant and 2,000 MW of First Gen’s existing four power plants,” he said in an interview.
As of end of 2022, however, Abad said there are 3,500 MW of additional committed gas-fired power plants proposed to commercially operate from 2024 to 2027 with an estimated equivalent of an additional 4 MTPA of regasification capacity.
There are also an additional 7,700 MW, with an estimated equivalent of an additional 9 MTPA, of regasification capacity of indicative gas-fired power plants proposed to commercially operate from 2026 to 2030.
“Hence, there indeed is a need for additional investment on our regasification capacity,” Abad said.
Hopefully, other aspiring LNG players will fast-track their plans to join the LNG bandwagon to fill the gap that the agency’s power bureau expects.
More LNG players
BASED on DOE’s list, a total of seven LNG terminal projects in the country have been approved. Aside from AG&P and FGEN LNG, the other five approved LNG projects are from Energy World Gas Operations Philippines Inc., Excelerate Energy L.P., Vires Energy Corp., Shell Energy Philippines Inc., and Samat LNG Corp.
Samat recently sought the DOE’s green light to proceed with the construction of its proposed $67-million small-scale LNG receiving terminal and regasification facility in Mariveles, Bataan. It is targeted for commercial operation in the first half of 2024 to cater to the needs of small-scale independent power producers, manufacturing companies and transport fleets.
Small-scale LNG terminals are suitable for archipelagic countries like the Philippines since they can supply fuel to on-grid and off-grid areas. Such facilities are modular and can be constructed quickly.
Energy World Gas proponent, Energy World Corp. (EWC), is about to complete the final phase of the construction of its LNG terminal and power plant in Pagbilao, Quezon. The lack of a transmission facility connecting its power project to the grid was cited as the main reason for the years of delay.
Shell, meanwhile, revived last year its planned LNG project to be located in Batangas City. It was in 2013 when the company first informed the DOE about its LNG plans that could entail an initial investment cost of P3.5 billion.
Vires Energy, a subsidiary of A Brown Corp., said commercial operation of its P6.15-billion LNG project—a floating storage and regasification unit and the 450-MW gas plant in Batangas—is expected by 2027.
Excelerate Energy, meanwhile, has yet to inform DOE of its updated LNG plans.
Those that are not on the DOE’s list yet but expressed interest to also join the LNG bandwagon are Aboitiz Power Corp., Atimonan One Energy (A1E), and ACE Enexor.
Aboitiz Power and Japanese partner Jera are undertaking feasibility studies for an LNG project that could be put up in the Visayas or in Luzon.
A1E, a wholly owned subsidiary of Manila Electric Company’s power-generation arm Meralco PowerGen Corp. (MGen), is seeking approval to put up a 2,400-MW gas power plant and an LNG terminal for approximately P175 billion in Quezon province.
ACE Enexor, meanwhile, has partnered with Gen X Energy to develop a 1,100-MW plant in Batangas that is capable of using natural gas and green hydrogen as fuel.
The DOE said all these developments are positive signals reflecting the continuous interest of the private sector in investing in critical infrastructure that will allow the country to import and utilize imported LNG, and complement the available gas from the Malampaya reservoir to meet the country’s growing energy demand.
Is LNG a burden?
THE Power for People Coalition (P4P) alleged that electricity sourced from gas is expensive, more so now if they are imported. “There is nothing to welcome except more misery for consumers,” said Gerry Arances, P4P convenor.
The energy consumer advocate said the operation of the two LNG facilities also means more tankers passing through the vulnerable Verde Island Passage, a center of maritime biodiversity on which two million Filipinos depend on for their livelihood. “Higher volume of tanker traffic means increased possibility of accidents,” according to Arances.
His group is urging the DOE to focus more on renewable energy. “All the DOE needs to do is to give more priority to ramp up their use in the grid. It’s time for DOE to make a U-turn, abandon its LNG plans, and embrace renewable energy,” he said.
The Institute for Energy Economics and Financial Analysis (IEEFA) said the economic sustainability of LNG remains in doubt amid power deal issues and global price volatility.
IEEFA noted that the cost of the country’s first LNG cargo remains undisclosed.
But, at current LNG prices in Asia, IEEFA estimates that rates from LNG-fired power generation in the Philippines could be roughly P9 per kilowatt hour (kWh). And based on average global LNG prices last year, LNG-fired power could cost as much as P16/kWh.
The Philippines, according to IEEFA energy finance analyst Sam Reynolds, already pays among the highest power prices in Asia due largely to over-reliance on volatile imported fossil fuels. “When global coal, oil and gas prices spike, so do consumer electricity bills,” he said.
IEEFA stressed that any upside risk to LNG prices could derail the LNG import outlook given the power sector’s inherent sensitivity to fuel price increases in combination with the government’s policy to keep electricity prices affordable for consumers.
Gas aggregation
TO help cushion the impact of a surge in imported LNG prices brought about by the Ukraine-Russia war, there is a proposal to blend the Malampaya natural gas with imported LNG.
This gas aggregation strategy of Razon-led Prime Infrastructure Capital Inc. (Prime Infra) and Lopez-led First Gen recently won DOE’s support.
“That’s what we are trying to prevent from happening in terms of spikes in the price of imported LNG, and the plan is to blend the lower price of Malampaya natural gas with the imported LNG so that we can soften the impact or the volatilities of imported LNG,” DOE Secretary Raphael Lotilla said.
Prime Infra and First Gen are already in discussions to develop a gas aggregation framework that provides the lowest cost possible for consumers, enhanced energy security and competitive market for power generation; and complement ongoing commercial development of new indigenous natural gas fields.
The gas aggregator framework “establishes a resilient and efficient natural gas supply chain,” Prime Infra President Guillaume Lucci said in a statement.
The proposal, Lucci added, “would ensure a stable and sustainable baseload power supply.”
Prime Infra, through its subsidiary Prime Energy Resources Development B.V., is a member of the Malampaya consortium. It holds a 45-percent operating stake in the Malampaya gas-to-power project.
Malampaya extension, a key achievement
THE DOE has cited the renewal of the Malampaya service contract (SC) as one of the major accomplishments of the current administration.
The extension of SC 38 until February 22, 2039, was a key indicator of progress in the development of the natural gas industry in the Philippines, the agency said in a report.
Extending SC 38 allows full production of the Malampaya field through full utilization of its remaining gas reserves of about 147 billion cubic feet. The DOE added that this would jump-start the exploration and development of other fields in the area believed to hold up to 210 billion cubic feet more of natural gas.
Already, the operator of the Malampaya gas project has exceeded its target output for the months of April, May and June this year.
Gas sales in the second quarter of 2023 reached 280 million standard cubic feet per day (MMSCFD) against a target of 274 MMSCFD.
“We intend to maintain a reliable supply of indigenous gas to our customers while we continue the hard work of exploring for new sources to address the natural decline of the Malampaya gas field. We remain committed to being the partner of choice in providing energy sufficiency and security to the country,” said Prime Energy General Manager Donnabel Kuizon Cruz.
Lotilla explained that it was necessary to extend the service contract so that the consortium would be encouraged to drill new wells near the Malampaya field.
“The next step to that, since the drilling facilities will already be here, is it will actually be cheaper for drilling and other exploratory activities to be conducted in nearby areas of the country as well,” said Lotilla, referring to Sulu Sea and areas in the West Philippine Sea.
“So, the coming in of LNG complements this because the gestation period for the full development of all the other alternative gas fields will take some time. The importation of LNG will therefore secure the gas supply for the Ilijan and the First Gen plants in the meantime that we don’t have sufficient natural gas supply from Malampaya,” said the energy chief.
The establishment of LNG facilities addresses the expected shortfall in the country’s power supply at least in the near and medium terms. Despite concerns raised by some groups and experts, this is one of the intervention projects that the country desperately needs to address a possible energy crisis.
Image credits: Oleksandr Kalinichenko | Dreamstime.com, Agpglobal.com, Energyworldcorp.com, Firstgen.com.ph
