ENERGY Secretary Alfonso G. Cusi wants the Philippine National Oil Co. (PNOC) to present compelling reasons behind a plan to sell unused Malampaya natural gas, more known as banked gas, before any further steps are taken.
“They must present justification for the options it has presented. These must be evaluated,” Cusi said.
The PNOC, in a recent congressional hearing, said, “It is imperative for it to extract and fully recover the remaining purchase cost, as well as optimize its potential value at the earliest time possible which should be before 2024.”
The state firm was referring to the remaining banked gas equivalent to 97.67 petajoules valued at around P11.9 billion. Proceeds can be used to finance a plan by the PNOC for the country to be an liquefied natural gas (LNG) hub.
There is a plan 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 megawatts.
While the hub is targeted to be completed in 2020, the Malampaya gas field is expected to be depleted by 2024.
“To address the matter, the PNOC identified two options. 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,” said the PNOC.
Cusi said this plan must be presented to the PNOC board where he sits as chairman.
“There are so many questions such as is this beneficial to the country? What is the purpose? What shall be done with the money? If burn it, how much revenue would be generated? Whether sell or not, will this affect the country’s plan of becoming an LNG hub?” Cusi asked.
The first option, the PNOC said, is an offshoot of a realization that locally selling the banked gas may pose some difficulty with existing gas sales and purchase agreements (GSPAs), with the earliest expiring in 2022.
All off-takers—the Ilijan power plant and the five First Gen power plants—have existing GSPAs.
“This would mean that the PNOC’s opportunity to locally sell the banked gas may start only in 2022. [The year] 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.
Also, international trading of banked gas is a challenge given 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,” the PNOC said. “Building a liquefaction plant requires extensive capitalization and may not be economical given the limited volume of gas to be liquefied.”
The second option, the PNOC added, was seriously considered.
“This option can be more viable by adopting the floating storage and regasification unit with gas-fired power plant technology,” the PNOC said. “With the technology already existing in the market, burning the gas and selling it as electricity may start as early as next year.”
Modular floating power plants, it added, are much faster to construct and can be considered a good solution in the monetization of the banked gas.