REUTERSA PROPOSED natural gas terminal in Pagbilao, Quezon is on the brink of a “breakthrough moment” and is likely to launch operations by 2019 if it wins certification as a project of national significance, Fitch Solutions Group Ltd. said.
In its outlook for Philippine oil and gas, Fitch Solutions said a certification granted to Hong Kong’s Energy World Corp. Ltd. (EWC), which is building the LNG import terminal entitles the much-delayed project to expedited government approvals.
EWC has been developing the LNG-to-power project since 2011, comprising a 4.1 billion cubic meter (bcm) import terminal and a 650-megawatt (MW) gas-fired power plant.
“Despite the clear need for more gas and EWC’s repeated commitment to the project, Pagbilao LNG has suffered numerous delays due to issues ranging from volatile LNG prices, funding, regulatory obstacles and confusion over transmission arrangements,” Fitch Solutions said.
“Most recently, EWC cited delays to securing government approval to connect to the local grid as holding up the start of its project, despite it being over 90% complete,” it added.
The DoE earlier clarified that it granted a limited certification confined to EWC’s gas-fired power plant project.
On Wednesday, DoE Undersecretary Donato D. Marcos confirmed that EWC had sought certification for its import terminal project. The department clears LNG hub facilities if these are also meant for third-party customers. He said at the time that the DoE had yet to issue an approval for any of the interested proponents.
Fitch Solutions said a certification paves the way for EWC to benefit from a host of provisions set out under Executive Order 30, which was issued in 2017 to streamline approval processes and provides administrative and technical support for projects deemed critical to the development and security of the Philippines.
“This likely puts the project on track to begin commercial operations within 2019, eight years after it broke ground,” it said.
The research firm also said the outlook for the Philippines’ second LNG project “has considerably improved in recent months, with the introduction of a formidable joint-venture (JV) into the mix.”
It said Manila’s desire for a second LNG project stems from the fact that even at full capacity, EWC’s Pagbilao LNG would be sufficient to meet about 83% or 4.1 bcm out of the 4.9 bcm believed required to support the government’s gas power expansion plans.
Fitch Solutions said in addition to supplying LNG to five existing power plants with a combined generation capacity of 3,200 MW currently supplied by Malampaya’s gas at about 3.8-3.9 bcm per annum, the government plans to develop an additional 1,500 MW of new gas-fired generation capacity.
The new plants are to be built in Pagbilao at 650 MW, Batangas at 415 MW and Bataan at 480 MW by 2021. They will require an additional 1 bcm of gas feedstock.
“After multiple calls for tenders and plenty of expressions of interest from a vast array of domestic and foreign firms, the keys to the Philippines’ second LNG development appears to be held by Tanglawan Philippines LNG Inc.,” the firm said.
It said Tanglawan was reportedly winning the race to be the DoE’s choice to lead the project. The company is a joint venture between China National Offshore Oil Corp. (CNOOC) and independent oil firm Phoenix Petroleum Philippines, Inc. led by businessman Dennis A. Uy.
The partners are looking to develop an integrated LNG-to-power project in Batangas, which would involve the construction of a regasification terminal with a capacity of 5 million tons per annum (MTPA) and gas-fired power generation capacity of 1,000-2,000 MW, costing around $1-2 billion.
Fitch Solutions said Tanglawan’s case for the project “is strong, not least due to ample funding and an assured market for imported gas.”
A third partner being considered for the project is the Philippines’ largest power distribution firm Manila Electric Co., which holds preferential rights to join Mr. Uy in future LNG ventures.
The research firm said the inclusion of CNOOC in the partnership “adds a political element to the mix,” adding further incentive for the DoE to approve the project, “particularly in light of increasing efforts between Beijing and Manila to improve bilateral ties and boost economic and trade cooperation.” — Victor V. Saulon
