DOE backs Prime Infra gas aggregation framework

THE proposed gas aggregation strategy of Razon-led Prime Infrastructure Capital Inc. (Prime Infra) and Lopez-led First Gen Corp. won the support of the Department of Energy (DOE).

Energy Secretary Raphael Lotilla said the proposal could help cushion the impact of a surge in prices of liquefied natural gas (LNG) because of the Ukraine-Russia war.

To cushion the war’s impact on the Philippine power sector, which has seen two LNG facilities already completed, Lotilla said supply from the Malampaya gas field can be aggregated with imported LNG.

“That’s what we are trying to prevent from happening in terms of spikes in the price of imported LNG and the plan is to blend the lower price of Malampaya natural gas with imported LNG so that we can soften the impact or the volatilities of imported LNG,” Lotilla said in an interview with One News.

He said supply of LNG was expected to rise by 2025 so “the expectation is that prices of LNG will soften as well.”

Prime Infra and First Gen are already in discussions to develop a gas aggregation framework meant to aggregate declining supply from Malampaya with imported LNG.

The framework would provide the lowest cost possible for consumers and also bring these benefits:

• Enhanced energy security and competitive market for power generation.
• Complement ongoing commercial development of new indigenous natural gas fields.

First Gen is developing an integrated LNG and regasification terminal at its complex in Batanags City.

Prime Infra, through subsidiary Prime Energy Resources Development B.V., heads the Malampaya consortium. It holds a 45% operating stake in the Malampaya gas-to-power project.

President Ferdinand “Bongbong” Marcos Jr. has extended the consortium’s service contract for 15 years, ensuring continued production at the Malampaya gas field, which delivers around 20 percent of the country’s electricity requirements.

Under the terms of the extended contract, the consortium is required to develop additional supply around the Malampaya reservoir.

Lotilla said it was necessary to extend the service contract so that the consortium would be encouraged to drill new wells near the Malampaya field.

“Towards 2024, we are going to see the actual drilling in the near fields,” Lotilla said.

“The next step to that, since the drilling facilities will already be here, is it will actually be cheaper for drilling and other exploratory activities to be conducted in nearby areas of the country as well,” said Lotilla, referring to Sulu Sea and areas in the West Philippine Sea.

Imported LNG would fill any gap “because the gestation period for the full development of all the other alternative gas fields will take some time,” he said.

“The importation of LNG will therefore secure the gas supply for the Ilijan and the First Gas plants in the meantime that we don’t have sufficient natural gas supply from Malampaya,” said the energy chief.

Prime Infra had said that the proposed framework would also tap the Malampaya consortium’s expertise in the natural gas market and would lead to reliable and lower cost of clean gas for the country’s power plants.

The gas aggregator framework “establishes a resilient and efficient natural gas supply chain,” Prime Infra president and CEO Guillaume Lucci earlier said.

The proposal, he added, “would ensure a stable and sustainable baseload power supply.”

TSB