Total plans to hike investment in LNG biz in PHL

by Lenie Lectura – January 21, 2016

from Business Mirror

FRENCH oil and gas giant Total SA has renewed interest to invest in the liquefied natural gas (LNG) business in the Philippines.

Energy Undersecretary Donato Marcos said Total’s top official assigned in the region visited the office of the Department of Energy early this week to discuss the oil firm’s interest in the nascent LNG sector.

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.

“Total has signified its intention, along with Shell. For Total, it involves LNG importation. Total and Shell have different schemes on how to invest in LNG,” Marcos said. He did not identify the name of the Total official.

Back in 2013, Total LNG Origination Director for Southeast Asia Anton Safronov said the company was eyeing to supply LNG to the Philippines through a direct supply contract or via the development of a regasification terminal. The latter option involves partnering with a Filipino firm.

The lack of a master plan, however, has put this plan on hold. The master plan was supposed to be crafted by the Department of Energy. Up to now, Total and other interested firms are still waiting for the government to take the lead.

The natural-gas master plan, added Safronov, “will give us more conclusion in terms of which potential party we go along with in order to supply LNG.”

He discussed then two ways by which Total can take part in the LNG business. First option involves the supply of LNG from Total’s global portfolio that includes Yemen, Nigeria, Qatar, the US and Australia. “We will be supplying directly to the off-taker,” he said.

The second option was to partner with a local company that will build a regasification terminal. “We are not developing [the terminal] ourselves but partnering. If you partner for a regas terminal, we will participate in building it just like we have done in India, and in Mexico,” Safronov said.

The master plan, he said, would be helpful in deciding “whether we approach it as a supply opportunity or supply opportunity and regas.”

Aside from Total and Shell, other interested firms are Aboitiz Power Corp., Meralco Powergen Corp., the power arm of distribution-utility firm Manila Electric Co. , and First Gen Corp. of the Lopez Group. They all have expressed keen interest in developing LNG projects. Shell is planning to build an LNG terminal, which will consist of a floating storage and regasifying unit. However, this has yet to proceed pending issuance of policies from the government.

Shell 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.

First Gen, currently the biggest gas-fired power producer in the country, is planning to develop an LNG receiving, storage and regasification terminal using LNG imported from abroad.

First Gen continues to invest in gas “because right now there is no other choice except coal.”

Aboitiz Power CEO Erramon Aboitiz said all interested firms face the same apprehension.

“I believe all of us face the same problem, which is the cost of building a terminal of a certain size. It’s massive. It’s something very difficult for one party to do that alone, maybe that’s something the government should do, come in and facilitate this terminal so that power producers can just buy the LNG,” Aboitiz said.

AC Energy Holdings Inc., the power generating arm of conglomerate Ayala Corp., earlier said it was considering to add LNG in its energy portfolio only when it is financially feasible.