DEPARTMENT of Energy (DOE) officials on Tuesday raised the possibility of government taking the lead in constructing a liquefied natural gas (LNG) facility should efforts to attract private-sector investment not be enough.
“That idea came out,” Energy Assistant Secretary Leonido J. Pulido III said. “It was discussed when we had the recent hearing with the Committee on Energy chaired by Senator [Sherwin T.] Gatchalian.”
Pulido cited “mature natural gas industries” in which the government had to step in and make the investments critical to the development of their industry because the private sector was unwilling to take on the necessary risk.
The committee earlier held a public hearing on the proposed Downstream Natural Gas Industry Development Act (Senate Bill 765) filed by Senator Francis G. Escudero. In covering the downstream part of the industry, the bill focuses on the transmission, distribution and commercial supply of natural gas.
Gatchalian said the committee would work to broaden the coverage of the bill to cover the midstream part of the industry, touching on topics such as LNG hubs, floating storage and regasification units, among others. This would strengthen the country’s capacity to make use of LNG sourced from other countries that enjoy a bountiful supply of the fuel.
“The best way to develop the potential of natural gas is to craft a strong legal framework that will touch on all important points of the industry as a whole,” he said.
The DOE official acknowledged the fact that financing a capital-intensive project such as LNG would be “critical.” “We leave that to the wisdom of the Legislative. Of course, we have some ideas but that position paper will have to be submitted to the Senate.”
Energy Undersecretary Felix William B. Fuentebella said that two units of the Philippine National Oil Co. (PNOC) could be tapped to actually construct and operate an LNG facility.
The law does not allow the government to be involved in the power generation sector.
“There are two schools of thought with regards to that. There are those of the opinion that government cannot totally come in under the Epira [Electric Power Industry Reform Act] but there’s also that school of thought that…the Epira…only talks about Napocor [National Power Corp.] not going into power generation,” Fuentebella said.
“There is a Department of Justice opinion, however, that PNOC-RC (Renewables Corp.) can come in because it is a renewable corporation and corporate arm of the DOE and also that PNOC-EC (Exploration Corp.) can have that capability for power generation. On any eventuality, we can pursue any of these options so that we can fulfill our mandate to provide quality, affordable and secure supply of energy,” he added.
The DOE earlier issued rules governing the Philippines Downstream Natural Gas Industry. Interested LNG investors have long waited for this policy meant to guide them in pursuing this capital-intensive project.
Department Circular 2017-11-0012 also outlines the issuance of permit for the construction, expansion, rehabilitation, modification, operation and maintenance of downstream natural gas facilities.
About 10 firms have signified interest to the DOE to pursue the construction of LNG facilities.
The DOE is bent on completing the planned LNG project before the expected depletion of the Malampaya offshore gas find near Palawan Island in 2024.
The Malampaya project currently supplies fuel to five natural gas plants with a total installed capacity of 3,211 MW. This amounts to 21.33 percent of the installed capacity of the Luzon grid and almost 15 percent of the country’s total installed capacity.
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.