THE race is on for the country’s first LNG (liquefied natural gas) terminal.
Four LNG players were given the green light by the Department of Energy (DOE) to pursue their capital-intensive projects, with total investments reaching P64.632 billion.
These are Texas-based Excelerate Energy L.P, Batangas Clean Energy Inc. of the Lucio Tan group, Australian firm Energy World Corporation (EWC), and Lopez-led First Gen LNG Corporation and partner Tokyo Gas. They all received a Notice To Proceed (NTP) from the DOE.
Based on DOE’s status of proposed LNG projects in the Philippines as of October 1 this year, Tan’s group would spend the biggest for its LNG Storage and Regassification Terminal in Pinamucan Ibaba, Batangas City, at P37.553 billion ($735 million), but could be the last to go online in the first quarter of 2025.
Batangas Energy’s partner in the LNG project is American firm Gen X Energy, which is affiliated with private equity firm The Blackstone Group.
Excelerate and local partner Topline Energy and Power Development Corp. could be the first to finish its LNG project ahead of the others.
Based on DOE data, commercial operation is targeted in the third quarter of 2021. But the company said last week that its LNG import terminal off Batangas Bay would come online in the second quarter of 2022, ahead by one quarter from First Gen’s target commercial operation date (COD).
“We will submit our a Permit to Construct, Expand, Rehabilitate and Modify [PCERM] to the DOE soon, which is the next step in bringing this nationally important facility online as early as the 2nd quarter of 2022,” Luzon LNG Terminal President Ramon Wangdi said.
Luzon LNG Terminal Inc. is the local subsidiary of Excelerate.
Topline Energy Executive Vice President Michael Acebedo Lopez said construction of its proposed open-access LNG import terminal off Batangas Bay may cost $230 million. The DOE data, on the other hand, indicated that Excelerate’s total construction cost is P6.387 billion ($125 million).
Meanwhile, First Gen’s interim Floating Storage Regassification Unit (FSRU) LNG terminal would be able to deliver imported natural gas as early as third quarter of 2022, but DOE data stated it would be able to deliver it in the second quarter of the same year.
With a total project cost of P13.284 billion ($260 million), the LNG project consists of modifying its existing jetty and building into an interim offshore LNG terminal located in the First Gen Clean Energy Complex in Batangas City.
EWC’s LNG project, which will consist of a 650-megawatt (MW) power station, was originally targeted to be completed in 2017. The DOE data said it would be ready by first quarter of 2021 although the latest company announcement indicated that COD is 2024.
Construction cost for the LNG project in Pagbilao, Quezon, is estimated to reach P7.408 billion ($145 million).
The LNG terminals of EWC and Batangas Energy can hold an initial volume of 3 million tons per annum (MTPA), 1.5MTPA for Excelerate and 5.26 MTPA for First Gen, the data showed.
A statement from Execelerate, however, showed that its import terminal will have a capacity of about 5 million tons of LNG per annum.
Among the four, the LNG projects of First Gen and EWC were declared by the Energy Investment Coordinating Council through the DOE as an “Energy Project of National Significance” under Executive Order No. 30.
If it is on track with its target COD, Excelerate would be the country’s first LNG import facility.
DOE Undersecretary Leonido Pulido III said the first always has its advantage over the others.
“The competitive advantage in being the first to market would be the potential of being the source of natural gas as fuel for greenfield plants, considering that no new natural gas plants could be established before due to a lack of source,” he said when sought for comment.
The four LNG players said their facilities would serve the natural gas requirements of existing and future gas-fired power plants.
“The advantage becomes more apparent considering that the DOE will be pushing for more flexible, mid-merit generation,” added Pulido.
The interest in LNG has increased over the past few years in anticipation of the depleting Malampaya gas field, the country’s only commercially-producing gas field. Operating since 2001 under Service Contract 38, the Malampaya gas project supplies fuel to around 40 percent of gas-fired plants in Luzon with over 3,000 MW in capacity.
However, DOE officials previously told a congressional hearing that by 2024, Malampaya’s gas output would fall to just one-third of current capacity. By 2027, supply from the gas field is projected to be fully depleted.
As promoted by the DOE, Excelerate’s LNG project follows a Third Party Access (TPA) model, whereby LNG import capacity is marketed to multiple gas users in the region on an open and transparent basis.
“One distinguishing feature of the TPA model is that it allows all gas users in the region unfettered access to the global LNG marketplace by signing up for regas capacity at the terminal,” explained Wangdi.
This is in contrast to the “Own Use” model where separate LNG terminals are being built for each independent power plant. This open-access model, which is successfully adopted in major LNG markets around the world, allows for substantial economies of scale—the cost savings for which are ultimately enjoyed by the electricity consumers of Luzon.
Offshore floating LNG solutions are well known for their substantially lower cost and speed to market, but what is often overlooked is the inherent flexibility these facilities provide to markets around the world that are new to LNG.
“Energy markets in the Philippines are dynamic and will change over time. Unlike comparative ‘Own Use’ solutions, ‘TPA’ open access floating facilities allow gas users to enter into shorter-term contracts for quantities which meet their specific requirements. This method is highly efficient as there is less ‘wasted’ capacity due to underutilization,” Wangdi added.
Fifth LNG player
Conglomerate San Miguel Corp. (SMC) has jumped on the LNG bandwagon.
“In 24 months, you will see the LNG plant running. The first line is 850 megawatts. There will be three lines. If there is no demand yet, let’s start at 850MW. It is easy and cheap nowadays to put up an LNG plant,” SMC President and Chief Operating Officer Ramon Ang said.
SMC’s power unit has yet to secure a permit from the DOE but the company is already seeking the DOE’s endorsement for its LNG project that will be located in Batangas where its 1,200MW Ilijan gas plant is located.
The first phase of the planned LNG of SMC Global Power Holdings Corp. would have a capacity of 2,550MW, with a capacity of 850MW per unit.
While the LNG industry is still in its infancy, DOE Secretary Alfonso Cusi said imports of LNG remain the best option to secure the country’s future energy requirements.
“They say that the Malampaya supply can go as far as 2027, but it does not have enough gas for the further expansion needed to provide future natural gas requirements particularly with the plan to expand application of LNG in the industrial, commercial, residential, and transport sectors,” Cusi said.
Luzon will initially require 3.5 MTPA of LNG to feed existing gas-fired power plants. Cusi said it could import more for the other potential downstream merchants such as the industrial and transport sectors.
Importing LNG requires capital-intensive investments in large-scale terminals with regasification facilities. This, Cusi said, may initially push the challenge due to the limited market of LNG in the country at this time.
Cusi’s dream is to transform the country into a regional LNG hub. To do this, the agency issued an LNG investors’ guide meant to entice more investors in the country’s downstream LNG industry.