THREE terminal hubs will finally flash their signal to world suppliers to have their supply tankers set sail and dock their cargo of liquified natural gas (LNG) in the Philippines. This development would then increase the participation of natural gas in the utilization of this energy source for power and transportation in the country.
Energy World Corp. (EWC), an Australia-listed company, made the first official blast when it announced in September the final phase of the construction of its power station and the LNG terminal hub in Pagbilao, Quezon, after years of waiting for the completion of an interconnection facility being undertaken by a transmission company.
The Department of Energy (DOE), meanwhile, told a foreign news wire agency last week that “two other government-approved LNG import terminal projects in the Philippines are expected to begin commercial operations in early 2023.”
These are the projects of Singapore-based Atlantic, Gulf and Pacific (AG&P) and First Gen Corp (FGEN.PS) of the Lopez group.
The three projects expected to go online to the grid next year may at least help backstop, if not offer a long-shot relief, for Luzon, which faces a feared power shortage in the summer months, a prospect increasingly made dire by the international impact of the energy tussle between Europe and Russia.
Last week, Europe accused Russian President Vladimir Putin of allegedly choking the LNG, coal and fuel energy supply line to Europe, a move supposedly timed for winter when fuel is badly needed to heat homes and fuel the operation of factories.
Summer woes
The weather is also a factor in the Philippine energy projections. Faced with fluctuating electricity supply due to aging power stations and weather-dependent hydroelectric power—and now the steep price of oil and petroleum—Energy Secretary Raphael Lotilla said the delay in LNG projects has added to the strained energy situation in Luzon, especially.
The declining production in the Malampaya wells offshore the contested West Philippine Sea renders more problematic the task of securing more gas supplies.
All these, Lotilla said, would have an impact on the country’s summer energy supply when households and industries use more megawatts of power.
Only recently did the DOE said it may embark on encouraging households and private establishments to consciously observe energy conservation behavior to help stave off a potential shortage in power supply in the summer of 2023.
The DOE assured the public, however, that the country’s power reserve would likely remain sufficient between now and the three months before summer, pointing to the usually cool weather in the weeks past the cool December month.
The cue would be “educating the public on how they can help through their sustainable consumption patterns to reduce the amount of energy that is needed to carry out the same levels of activity or to produce the same amount or volume of goods,” Lotilla told reporters earlier in Manila.
Another stop-gap measure would be to address unutilized capacity or stranded power by fixing transmission constraints.
Russia-Europe tug of war
THUS, the three LNG terminals and hub to come online next year are seen as easing the public’s pain as it often reels from thin power reserves that may lead to frequent brownouts.
The lack of LNG production, or the lack of its extensive use in the Philippines, may be gleaned from the DOE’s tracking. Its last tracking was still in 2014 when it recorded total production of 1,410,142 measured in million standard cubic feet, or mmcsf. This was a far cry from the first recording in 1994, when production was only 195 mmcsf.
Power generation was still the largest user, when in 1994 all the LNG’s produced volume went to power generation. In 2014, power used 1,332,420 mmcsf.
The DOE statement to the news wire outlet said the Philippines would need to import LNG to fuel gas-fired power plants with a combined capacity of more than 3,000 MW, “as output from its Malampaya gas field in the South China Sea is expected to start declining this year and to be depleted by 2027.” Quoted was Laura Saguin, head of the Department of Energy’s natural gas management division, in September.
EWC executive director Graham Elliott, for his part, told the BusinessMirror that the LNG for their Pagbilao hub terminal will be initially sourced from the spot market, and may be supplied from the Middle East, Australia, Indonesia, the US or any other LNG-producing country. (Graham’s father, Stewart, is the chairman, chief executive officer and managing director of EWC.)
“As the terminal operations stabilize, then we will enter into long-term contracts for supply from a range of producers to ensure that we have options to avail [ourselves of] the lowest-cost LNG in the market,” he added.
He said EWC had discussions with LNG traders and producers for many years, and “this dialogue puts us in a unique position to acquire LNG cargoes as and when needed.”
At present, he said, “There is a great demand for LNG to go to Europe, and as a result the price has gone very high.” But, he believes, “This is not going to be the situation for very long, and at the time we require LNG cargoes for Pagbilao the price will be closer to the long-term norm for LNG of around $10 per MMBtu.”
MMBtu stands for metric million British thermal unit, a unit used to measure heat content or energy value. It is widely associated with measurement of natural gas.
Elliott said the first LNG cargo will coincide with the commissioning of its power plant, which he confirmed would take place at the end of April next year.
He disclosed as well EWC’s LNG production under development in Indonesia. Once completed, he said, the facility would produce up to 2 million tonnes of LNG per year, with a possibility to expand the plant.
“This production can be a backstop for LNG to be delivered to the Pagbilao terminal or it can be traded in Indonesia or on the international market. Our Australian operations are being refurbished to provide gas into the existing Australian domestic gas pipeline network.”
