DOE taps IFC in evaluating LNG projects

By Myrna M. Velasco – November 2, 2018, 10:00 PM
from Manila Bulletin

SINGAPORE – As the Department of Energy (DOE) had already firmed up the shortlist of the investor-groups it has been considering to set up the country’s liquefied natural gas (LNG) terminal, Energy Secretary Alfonso G. Cusi disclosed that they will be tapping the International Finance Corporation (IFC) to prospectively evaluate the project proposals.

Energy Secretary Alfonso G. Cusi

Energy Secretary Alfonso G. Cusi

In an interview on the sidelines of the 36th ASEAN Ministers on Energy Meeting (AMEM) here, Cusi noted that the engagement of the IFC is a matter that they will be finalizing soon – at least among key officials first of the DOE.

“We will be engaging IFC as consultant to ensure that the evaluation process will be transparent,” the energy chief said.

Cusi named three investing parties this week in the roll of their choices for the planned LNG import facility – the leads are state-run Philippine National Oil Company (PNOC), First Gen Corporation of the Lopez group and Phoenix Petroleum Philippines, Inc. of Davao-rooted businessman Dennis Uy.

“I’m already pushing for the selection of the investor to do the LNG terminal within this year because we’ve already been delayed in our timeline,” he said.

The energy chief emphasized that the investor-choice will be “limited to just one party… we will just be putting up one LNG terminal so it becomes economically viable for the consumers… because if we would have more than one, I don’t think investors will do it even on their own, because the cost may no longer turn out viable.”

The evaluation parameters, according to Cusi, shall be three-pronged: technical, commercial and financial criteria on the submitted proposals.

On commercial sphere, he explained that this shall be anchored largely on the planned capacity of the LNG terminal (either at 3.0 or 5.0 million tons per annum) – if it will be enough to meet the country’s gas requirements and the anticipated market expansion plus the need for it to underpin the country’s aspiration of eventually having its gas hub.

When it comes to the financial aspect, he indicated that this be assessed on the resulting per-kilowatt-hour cost to the consumers – and not just on how soon the project proponent could achieve financial closing on the venture.

“If we will just say that the parameter is financial closing, they might just be thinking about it as a race, so the rate of the project may turn out very expensive and that will defeat our purpose of making the rates affordable for the consumers,” Cusi stressed.

Technology-wise, he noted that it shall be scrutinized whether a floating storage regasification unit (FSRU) or an onshore terminal shall be viable for the long-term gas needs of the country.

“That is one important component we shall be evaluating… the issue of affordability must not be separated from the issue of energy security – they should always go hand in hand. You cannot sacrifice one over the other, and we should also employ risk management assessments on both fronts,” he said.