Aboitiz asks govt to help develop LNG terminal in PHL

by Lenie Lectura – January 11, 2016

from Business Mirror

ABOITIZ Power Corp. strongly urged the government to assist the private sector in the development of a liquefied natural gas (LNG) terminal in the country to keep investors upbeat.

“To do it alone and put up your own facility by yourself, it cannot be done,” Aboitiz Power CEO Erramon Aboitiz said.

LNG is a 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.

The terminal could cost at least $1 billion.

“It’s massive. It’s something very difficult for one party to do alone. Maybe that’s something government should do,” Aboitiz said.

Asked to elaborate, he said, “Coming in, facilitating this terminal so that power producers can just buy the LNG. I think by doing that alone, without even mandating a certain percentage of LNG, that by itself will bring up the consumption of LNG.”

Aside from Aboitiz Power, there are three more players very much interested in LNG projects. These include Meralco Powergen Corp., the power arm of distribution utility firm Manila Electric Co. (Meralco); First Gen Corp. of the Lopez group; and Pilipinas Shell Petroleum Corp.

“Several groups in the power industry have been actually looking at LNG. We know that the First Gen group is very big on LNG and Meralco is also looking at it, but I believe all of us face the same problem, which is the cost of building a terminal of a certain size,” Aboitiz said.

First Gen is planning to develop an LNG receiving, storage and regasification terminal using LNG imported from abroad, in order to address the expected depletion of Malampaya gas starting as early as 2022.

First Gen is currently the biggest gas-fired power producer in the country. It is the holding firm of the Lopez group’s power business. It has an installed capacity of close to 3,000 megawatts, half of which is renewable, and the other half of which is natural gas.

First Gen continues to invest in gas “because right now there is no other choice except coal,” First Gen President Francis Giles Puno said. “In a local community, for instance, what choices can the community opt for if there is no gas available? That’s why we are bringing in LNG to provide the community that kind of choice.”

Shell, meanwhile, has been pushing for an energy- mix policy to ensure that there is market, or off-takers, for imported LNG. It has also been batting for the grant of incentives to the private sector that will be involved in the development of an LNG facility, because such investment is capital intensive.

“We’ve been pushing for an energy mix. If you don’t have that, the default of independent power producers is to build coal-fired power plants,” Shell Country Chairman Edgar Chua earlier said, adding that off-takers would only sign up if there’s a policy that guarantees there’s a market for power produced from LNG.

Meralco Chairman Manuel Pangilinan earlier stressed the need for government to provide a well-crafted study on LNG, particularly on a plan to bid out the construction of a 105-kilometer gas pipeline that will run from Batangas to Manila.

The project, more known as “Bat-Man” gas pipeline, had been proposed in previous administrations but failed to kick off primarily on concerns regarding supply of gas and sufficient demand.

One concern that government should focus on is off-takers of LNG, said Pangilinan.

“Who will be the consumers? Why will you build it when there is no sure market? It could be the industrial customers and the power plants but then you have got to import the gas eventually,” said Pangilinan when asked if his group is interested to joint the auction should it push through this year.

“You have to build a re-gas facility somewhere -Bataan, Batangas, Cavite. You will import LNG so you have to re-gas it and push it to the pipeline and then of course, who buys the gas? It could be industrial customers, but then eventually, when you satisfy the demand, who else? Also, you have to pipe the gas. That’sexpensive.”

All these factors, Pangilinan said, must be thoroughly planned.

“So, we really need to plan everything. Why build something in the first place if there is no market? Importation of gas is also another factor. The regas facility and the pipeline are also needed,” Panigilinan said.