Not an update from EWC, butan opinion piece posted on...

Not an update from EWC, butan opinion piece posted on businessmirror.com.ph earlier today

 

EWC’s LNG Pagbilao project back on track

By

Val A. Villanueva

-

February 14, 2019

With the clock ticking fast andbefore the Shell-operated Malampaya gas field runs out of reserves, thegovernment should act with dispatch to find clean energy sources that couldaugment the country’s power needs.

 

The Philippines ought to findposthaste a Malampaya replacement to drive its power plants in Luzon. TheMalampaya field is projected to run dry by around 2023 or 2024. The threegas-fueled power plants of Malampaya supply 40-45 percent of the power needs ofLuzon with its estimated population of 20 million.

 

 

The projected depletion of power,which could pull down economic growth, is alarming. Government records showthat the country’s current dependable power reserve is very low—between 5percent and 10 percent only—when compared with Singapore, which has at least a50-percent reserve. The Department of Energy (DOE) forecasts a need of roughly43,765 megawatts of additional power capacity by 2040, up from the existingcapacity of 13,877 MW, representing a compound annual growth rate of 6 percent.The Luzon grid, which accounts for 70 percent of the current capacity, isexpected to triple from 9,726 MW to 29,852 MW by 2040, a growth rate of 5percent per annum.

Without new gas resources tocompensate for Malampaya’s reserves, the economic outlook is dire. We have tosmolder more coal to generate power, a setback from the country’s avowedenvironmental conservation program. Just like in past administrations, thePhilippines is not casting a critical eye on the expansion of gas-fired powergeneration, favoring instead “dirty” coal to augment the country’s mountingexigence for cheap power sources. This is largely due to the government’s lackof comprehension on what liquefied natural gas (LNG) can contribute to theenergy synthesis.

 

But the depleting Malampaya reservehas also paved the way for President Rodrigo Duterte to appease his Chinesepatrons by seeking joint gas exploration with China, with whom the Philippineshas been at odds due to competing maritime claims in the West Philippine Sea.

 

In a committee hearing on energythat the Senate held on June 18, 2018, the DOE showed that LNG is the mosteconomically inexpensive among renewable energy sources. I’m not sure if EnergySecretary Alfonso Cusi has finally acknowledged the important role that gas hasin filling the country’s yawning energy gap, but if last year’s Senate energycommittee hearing is an indication, the DOE could have finally recognized thataccelerating gas production and distribution is the way to go. Gas, indeed,could easily meet mid-merit and peaking power generation, a huge boost to meetthe country’s rapidly growing power demand.

 

Just recently, the DOE approvedbillionaire-businessman Dennis Uy’s Phoenix Petroleum and China NationalOffshore Oil Corp. LNG terminal project in Batangas. Uy’s Mislatel has also wonthe bid to be the country’s third telco provider. Uy is a close associate of PresidentDuterte and one of his major contributors in the last election. Phoenix andCNOOC Gas & Power Group formed a joint venture called Tanglawan PhilippinesLNG. But the terminal’s size is too minuscule, leaving room for other projectsto fill Luzon’s gas requirement. There is roughly 3.2 gigawatts of gas-firedcapacity in Batangas City, and the 2.2-metric-ton-per-annum capacity of theTanglawan terminal is just not sufficient to meet power-sector demand.

 

Industry players are at a loss onwhy the government seems to have forgotten that Energy World Corp. (EWC), anAustralia-based publicly listed company, has an LNG project in Pagbilao,Quezon, that is almost 100-percent complete. The only roadblock for it to swinginto high gear is the refusal of the DOE, the National Grid Corp. of thePhilippines (NGCP), the National Transmission Corp., the Grid ManagementCommittee and powerful lobby groups to allow the company to piggyback on theexisting transmission grid.

 

In the same Senate energy committeemeeting last year, the DOE, the Energy Regulatory Commission  and NGCPwere all asked to assist EWC to ensure that its power plant could startoperations as soon as possible. The request fell on deaf ears, despite EWC’sfull compliance with all government regulations and requirements.

 

Former Quezon Gov. EduardoRodriguez, on whose property the LNG Pagbilao project partly nestles, toldBusinessWise that EWC will no longer push for the connection of the project tothe existing grid. Instead, the company will pursue building its own. EWC isnow finalizing loan arrangements with various banks to build a 14-kilometergrid. He also said that, while the grid is being constructed, the company wouldhopefully be able to finish the first LNG Hub Terminal within the year.

 

EWC is developing the first LNG HubTerminal with full containment and onshore LNG tanks with pumpable capacity of130,000 cubic meters of LNG each. The plant also consists of a dedicated jettyand marine infrastructure for the loading and unloading of LNG ships, as wellas regasification, control center and workshops, and other ancillaryfacilities. Adjacent to the Hub Terminal facility, EWC is also constructing thefirst LNG Fired Combined Cycle Gas Turbine Power Station with a capacity of 650MW aimed at providing clean electricity, which will be sold through WholeElectricity Spot Market to the Luzon Grid in line with the DOE’s vision forclean energy in the future.

 

Rodriguez explained that once theLNG-fired power plant and the hub terminal become operational, the produced gascan also be converted from LNG to CNG (compressed natural gas) that can be usedby the transport sector.

 

“Cheaper fuel would mean cheapercosts of basic commodities. Second, the amount of a CNG tank will be 20 percentcheaper than an LPG tank commonly used by households,” said Rodriguez, addingthat this domino effect would be favorable to the consuming public.

 

It will be interesting to see if EWCwould be able to fully operate given the short-sighted decision of the DOE toallow only one LNG company to operate in the country. Cusi earlier revealedthat, out of 18 groups, his agency had short-listed two other companies asidefrom the partnership between CNOOC and Phoenix Petroleum: state-ownedPhilippines National Oil Co., which is seeking a partner for the project; andTokyo Gas, which is partnering with the
Philippines’s First Gen Corp.

 

While these companies have yet tobuild a single facility, EWC’s LNG Pagbilao project has been locked and loaded.It has generated a sizeable employment for the townsfolk, and its multipliereffect is not to be scoffed at. The terminals it has built are all there tosee, and it would be foolish and irresponsible for the government to change therules midstream should it deny EWC’s project to fully operate. EWC has alreadysunk in around $750 million of direct investment it has committed to thePhilippines, and has created employment opportunities during the constructionperiod. It’s Cusi’s call if he’s prepared to face the ire of foreign investors.

 

For comments and suggestions, e-mailme at [email protected].