Shell putting up LNG facility

Screen grab from the Shell Philippines website.

MANILA, Philippines–The Shell Group is investing in a liquefied natural gas (LNG) terminal in the country even as it awaits the government’s fuel mix policy, which is supposed to signal support for developing a market for non-coal energy sources.

Country chair Edgar O. Chua said the facility could initially serve fuel requirements for 2,000 megawatts of power generating capacity but this might be expanded to as much as 5,000 MW.

Shell has so far undertaken a technical feasibility study as well as engineering and design work on the LNG terminal.

While Shell undertakes its LNG project, it is also working on getting the government to finally commit to an energy mix policy that would encourage non-coal investments.

Noting that dispatch in the energy spot market is based on the lowest generating cost, Chua said “commercial off-takers will only sign up if there’s a policy that guarantees that there is a market for power produced from LNG.”

LNG is presently more expensive than coal but industry observers note that the price is seen to decline over time.

The pace of price stabilization depends on how fast LNG development would be since having more LNG terminals would encourage increased competition, making developers improve efficiency—which will result in price drops over time.

As to how the energy mix policy could be prescriptive, Chua said, “In other counties, there’s a cap on coal. As for renewables, it’s prescriptive in a sense because there is a guarantee, there is FIT (Feed-In-Tariff, covering guaranteed rates for R.E. developers).”

He said the government could also serve as a catalyst by partly investing in LNG facilities but it might be more cost-effective to offer incentives instead of direct government investment in projects.

Shell itself is not building a power plant, Chua said, because power generation is not its core competency. “We don’t want to compete with those in the business,” Chua said.

The state, however, has remained non-committal on mandating increased use of LNG through its energy mix policy.

Energy Secretary Carlos Jericho L. Petilla said the current policy was “non-firm” but the Department of Energy (DOE) was considering a 30-30-40 mix of natural gas, coal, and the rest from other sources such as renewable energy (R.E.).

At present, the Philippines is heavily reliant on coal, geothermal, and hydroelectric power plants, with some diesel, renewable energy and natural gas power thrown in.