Shell bent on pursuing LNG program of gov’t

MANILA, Philippines—Royal Dutch Shell Plc is looking to further increase its investments in the Philippines as it plans to participate in the liquefied natural gas (LNG) program of the government.

Despite the legal tussles and difficulties now affecting its local downstream and upstream units, the oil company is still interested in becoming a supplier of LNG as well as in putting up the necessary infrastructure, including a regasification facility and pipelines, all of which will require millions of dollars in fresh investments, said Edgar Chua, country chairman for Shell Companies in the Philippines.

Chua did not say if Shell would be interested in bidding for the proposed 100-kilometer Batangas-Manila natural gas pipeline. That facility alone will require as much as $1.3 billion in investments, $500 million of which will go to the construction of the pipeline alone. Up to $800 million more will be needed for the regasification and receiving terminal.

Chua only said that Shell would likely look for potential partners for its planned foray into the Philippine LNG industry.

Should Shell proceed with its plans, it could source LNG from Australia. Last Friday, the board of Royal Dutch Shell plc announced that it would pursue its Floating Liquefied Natural Gas (FLNG) Project in Australia.

Shell said it was ready to start drawing up plans for the construction of what would be the world’s largest offshore facility.

The FLNG facility will produce gas from fields in Australia and liquefy it on board by cooling.

“Our innovative FLNG technology will allow us to develop offshore gas fields that otherwise would be too costly to develop,” said Malcolm Brinded, Shell’s executive director for upstream international. “Our decision to go ahead with this project is a true breakthrough for the LNG industry, giving it a significant boost to help meet the world’s growing demand for the cleanest-burning fossil fuel.”

Brinded added that beyond the Australia project, “our ambition is to develop more FLNG projects globally.”

Also, Chua revealed that Shell’s local upstream oil unit, Shell Philippines Exploration BV, has already earmarked $1.1 billion over the next three years to pursue the Malampaya phase 2 project.

Royal Dutch Shell CFO Simon P. Henry said such an investment would help extend the life of the Malampaya wells, which currently provide natural gas to the 1,200-MW Ilijan plant of Korea Electric Power Corp.; and 1,000-MW Sta. Rita and 500-MW San Lorenzo plants, both in Batangas.