PHL’s dream: To become Southeast Asia’s LNG hub

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The Duterte administration is keen on making the Philippines the liquefied natural gas (LNG) hub of Southeast Asia, according of the chief of the Department of Energy.

According to Energy Secretary Alfonso G. Cusi, the government is aiming to turn the Philippines into a hub for LNG, amid a depletion of natural gas from the Malampaya gas field in Palawan in less than a decade.

Around 3,200 megawatts (MW) of the country’s power is dependent on the natural gas source.

“We are determining if the Philippines can be the hub for LNG. We missed being the hub for aviation, the hub for maritime, maybe we can become the hub for LNG in Southeast Asia,” Cusi said during a discussion after a forum hosted by GE Philippines in Makati City.

LNG is natural gas that has been converted into a liquid state for easier storage and transportation. Upon reaching its destination, LNG is regasified so it can be distributed through pipelines as natural gas.

“The Philippines already failed in aviation becoming a hub despite our geographical advantage and location, and in maritime. So this would probably [be] an opportunity. It’s a dream,” Cusi added.

The Philippines has yet to construct an LNG facility. Previously, private firms were reluctant to build one because of the huge investment cost and uncertainty in policy direction.

Lately, the Philippine National Oil Co. (PNOC) has been vocal in saying that it will build an LNG terminal and is open to partnering with the private sector.

“The LNG facility should have been done a long time ago because the Malampaya undergoes maintenance every 18 to 24 months. Every time it goes under maintenance, it costs the consumers a lot because the power plants that are dependent on natural gas would have to switch to a more expensive fuel,” Cusi said. “In 2014 it’s something like P10 billion in additional pass-on cost to consumers. In 2016 we tried to prevent the pass-on cost, though it’s still under the process of discussion. We could have avoided that if we have LNG terminal,” he added.

During the discussion, Visal Leng, GE’s Asia Pacific President for oil and gas, said other countries in the region is looking at developing LNG terminals to take advantage of the low price on the gas market.

“You have to consider two things. One is the domestic market. Thailand has a domestic market, Indonesia has a domestic market. We talked about more than 3GW, which is power from gas in the Philippines, which is also its domestic market, which will increase. The logistics. The regional proximity is an advantage that has not been taken advantage of enough, but you also need an efficient market—exchange, safety, security, capital market that needs to work.”

And I think there will still be tough competition with places like Singapore. A bit of domestic demand, efficient market and logistics,” he explained.

Last month Shell Philippines admitted it held exploratory discussions with the government for  a possible partnership on an ambitious LNG project, but no firm decision has been made yet.

“We talked to them, with Admiral Lista…. We are very open to partnerships with various groups, including PNOC,” Shell President Cesar Romero said.

PNOC President Reuben Lista earlier said Shell was among those he had talked to regarding the plan of the government to also build an LNG terminal. No firm offers from Shell were made though, Lista added. “LNG, that’s one area we really want to successfully bring into the country. Kaya lang, it’s a bit tricky because we have to form partnerships…but the key is to be able to understand how economics would work because it is a huge investment.

An LNG facility is $600 million to $1billion, that’s why you need partners to be able to balance it off. Second, the economics must be carefully understood in terms of how the investment will be,” Romero said.

Shell is among the local companies that had expressed intention to build an LNG terminal in the country. The company was mulling over to put up a new entity that would house its LNG business.

Lopez-led First Gen Corp. expressed interest to partner with PNOC for the development of a LNG terminal.

“First Gen acceded to be a minority partner. That I can tell you, but not the details. They have been attending our negotiations, they recognize that they need us more,”   Lista said. PNOC plans to put up an LNG terminal consisting of an initial 200-MW  modular power plant, storage and regasification facilities.

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