DOE firm on proposed $2-billion LNG project despite ‘tepid’ investor interest

The Department of Energy (DOE) assured on Wednesday that the government is capable of taking the lead in the development of the proposed $2-billion liquefied natural gas (LNG) import facility in Batangas, even if no other company would endeavor to invest in it.

“They [investors] all expressed interest, but at the end of the day we can’t force them to invest. We have no choice then but to find a way to do it,” DOE  Assistant Secretary Leonido Pulido said. “The perception is that the government is incapable of doing it. But we have to put this together because it is for capacity building.”

The DOE official issued the statement after Senate Energy Committee Head Sherwin T. Gatchalian cautioned the government about pushing through with the project.

“Personally, I am not confident if the government can operate it properly. We have [had] a bad history of operating [such facility] if you look at [the] MRT [Metro Railway Transit 3], LRT [Light Railway Transit 1 and 2] and airport[s]. As an observation, the government is not a good operator. Do we have the technical capability? That’s one thing to consider.”

Gatchalian had also said that this could result in a monopoly since the government will construct the LNG facility and supply the gas.

“Inadvertently, we are creating a monopoly because we’re only allowing one entity to construct and to supply. In effect, he [the government] will now control the terminal. He will now control supply,” the senator commented.

Energy  Undersecretary Felix William Fuentebella earlier said that two units of the Philippine National Oil Co. (PNOC) could be tapped to actually construct and operate the proposed LNG facility, even as 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 the government cannot totally come in under the Epira [Electric Power Industry Reform Act], but there’s also that school of thought that in the Epira, it only talks about Napocor [National Power Corp.] not going into power generation,” he said.

Fuentebella added: “A Department of Justice opinion, however, said that Philippine National Corp.-Renewable Corp. can come in because it is a renewable-energy corporation and a corporate arm of the DOE, and that the PNOC-Exploration Corp. can have that capability for power generation.…In 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,” Fuentebella said.

But officials said this remains an option in the event that none of the interested firms pursue to invest in putting up an LNG hub in the country.

Pulido said the DOE is currently evaluating 13 to 14 applications from local and foreign firms that have expressed interest to put up and operate the LNG facility.

“We are waiting for them to actually file their applications. We’re confident that one to two entities will invest. This thought that the government will do it is just an option. It is better to be sure because we need the capacity,” 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 on the construction, expansion, rehabilitation, modification, operation and maintenance of Downstream Natural Gas Facility.

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 megawatts (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.

 

 

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