An industry expert said the Philippines should make natural gas-fired power plants its preferred fuel source to support the strong interest of the private sector in building liquefied natural gas (LNG) terminals in the country.
Jose Layug Jr., former undersecretary of the Department of Energy and currently senior partner at Puno Law handling energy related issues, said despite the strong appetite of investors for LNG-related investments, there are only few opportunities for securing power supply agreements using the energy source.
Layug in a virtual briefing hosted by the Norwegian Embassy in Manila on Wednesday said the current import capacity of all planned LNG terminals in the country is 18 metric tons per annum, equivalent to 10,900 megawatts (MW) of electricity.
There are seven parties developing LNG terminals in the country: FGEN LNG and partner Tokyo Gas; Excelerate Energy with Topline Energy and Power Development Corp.; Batangas Clean Energy Inc. with LCT Energy and Resources Inc.; Energy World Gas Operations Philippines Inc.; AG&P Co. of Manila Inc. with Osaka Gas Co. Ltd.; Shell Energy Philippines Inc.; and Vires Energy Corp.
All proposed projects are located in Batangas except for Energy World’s which is being developed in Quezon Province.
Layug said under the Manila Electric Co.’s current procurement plan, only 1,600 MW of electricity in the next two to three years will be available for natural gas power plants.
“We don’t want the market to have stranded assets. In other words, we can encourage building gas- fired power plants but we need the market or the demand to come in. The only way to do that is to convince government to select LNG as preferred fuel for purposes of building a power plant,” Layug said.
He added under current procurement rules, distribution utilities are not allowed to conduct supply tenders for specific sources of energy which prevents them to outright choose electricity from renewable technologies apart from issues experienced from the number of permits needed to build power plants.
“Hopefully with the (planned) amendment of the CSP (competitive selection process) rules, that can be addressed …where an unsolicited proposal for a specific technology can be submitted by an LNG player to a distribution utility and if accepted, can be subjected to a price challenge. That procedure is also acceptable under Philippine law, it is a form of public bidding that has been recognized by the Supreme Court,” Layug added.
In the same event, Jonathan Russell, First Gen Corp. chief commercial officer, said the DOE has been successful in “stimulating interest in the LNG space.”
“There is now a serious consideration of LNG and gas as an alternative to coal for new projects because for a while, it seemed like there was a lot of doubt about whether LNG would happen,” Russell said.
He added if all seven LNG terminals are pursued, the Philippines would become the fifth largest importer of LNG behind India.
“I don’t think it’s going to happen overnight. We don’t need all that capacity all at once.. but it will not be a bad result if more LNG terminals are needed because there is demand for LNG as an alternative to coal and to displace coal and to support renewables,’ he said.
First Gen through its subsidiary FGEN LNG is one those aggressive in building a LNG terminal as the company currently sources all of its natural gas plants’ fuel from the Malampaya gas project whose contract with the government is set to expire by 2024 and expected to be depleted by 2027.
