Ayala group pushes PPP mode for gas infrastructure projects

by Myrna Velasco – January 15, 2016

from Manila Bulletin

The Ayala group is adding to industry voice as to how to frame the future of the gas industry, with it proposing that both the liquefied natural gas (LNG) terminal and a linked high-pressure gas pipeline be established on a public-private participation (PPP) mode.

According to Eric Francia, managing director and chief executive officer of the energy arm of Ayala Corporation, there is no more escaping that the future of the country’s gas industry will certainly be anchored on LNG importation.

But he stressed government policy must set the direction on how the infrastructure shall be set-up or how the propounded overall energy mix shall be determined.

“At least, the government control one thing, the infrastructure, apart from the policy,” Francia said.

On the proposed PPP arrangement which may be done on a build-operate-transfer (BOT) approach, the Ayala Group executive has propounded that it can be started with the tangible infrastructure such as LNG terminal or pipeline.

“I don’t see economic rationale or basis from where we sit, in terms of making LNG and natural gas plant investment competitive and economically feasible,” Francia said.

He emphasized that without the government extending some form of subsidy – even on the investment side, the cost impact of gas-underpinned technology for power plant projects to consumers would still be comparatively expensive.

“On the gas, the challenge frankly is hard to overcome the hurdle of liquefying and transportation issue regardless where the gas is coming from,” Francia explained.

Nevertheless, he asserted that the differentiating factor is “if the government puts in the infrastructure, takes the lead,” stressing that one scheme “could be PPP like LNG terminal and pipeline.”

Francia explained in particular “the pipeline could be an enabler for the gas industry (i.e. the Batangas-Manila pipeline)… if you strategically align, you could do a lot of things.”

The government – via the Department of Energy (DOE) – has long held in blueprint the proposed Batangas-Manila pipeline, but even after more than a decade that passed, it is still not nearing implementation phase.

Nevertheless, with the anticipated depletion of gas resource from the Malampaya field at the lapse of its service contract in 2024, the government is now preparing for gas fuel sourcing beyond that period.