Foreign groups in talks with local power firms

Several foreign investors are starting to hold initial talks with local power-generation companies and industrial players for the possible supply of natural gas, making more concrete their intentions to invest in the Philippine natural gas industry.

“Contracting for liquefied natural gas (LNG) supply is on a long-term basis. They want to start talking to potential buyers even as early as now. In fact, [some] suppliers are already talking to some of the local players,” said Energy Undersecretary Jose M. Layug Jr.

In particular, the interested foreign firms would have to talk with members of the value chain, including distribution utilities like Manila Electric Co., the owners of power-generation companies and even industrial customers, whose demand alone was initially estimated to reach 600 megawatts, Layug said.

Layug explained that this was a timing strategy on the part of the foreign companies, which recently sought clearer directions from the Department of Energy as to whether or not the government would still push through with the proposed $2.1-billion Batangas-Manila (BatMan 1) natural gas pipeline project.

The energy official identified the big-ticket players as Mitsubishi and Mitsui Co. Ltd., both from Japan; AXI LNG Gas of Canada; Australia’s First Pacific Capital and Energy World; China’s ENN Energy Holdings; Hong Kong-based Synergy International, as well as SK Engineering and Construction Co. Ltd., Korean Western Power, BW Ventures and Hyundai Merchant Marine, all from Korea.

According to Layug, the foreign firms have also sought a clearer timetable as to when the government planned to bid out the necessary contracts, specifically under the Phase II development of the BatMan 1 project. Under this phase, the foreign companies are expected to put up a receiving terminal for liquefied natural gas—whether a floating storage receiving unit (FSRU) or an onshore terminal—and then supply the market.

The BatMan 1 project, which is expected to boost the use of natural gas for power generation and transport, is targeted to be implemented in three phases.

Phase I, which will likely be undertaken by the government, will involve the construction of the 100-kilometer pipeline, while the second and third phases will involve the construction of the receiving terminal and power plant, respectively.

Apart from the foreign firms, several local companies earlier expressed interest to participate in the local natural gas industry. Among them were the state-run Philippine National Oil Co., GN Power, First Gen Corp. and Abacus Consolidated Resources.

Layug earlier disclosed that PNOC was being considered to spearhead the BatMan 1 gas project through a subsidiary it was planning to put up—PNOC Pipeline Corp. (PNOC-PC).

PNOC PC will then be tasked to undertake the first phase of the project and is expected to bid out the engineering, procurement and construction contract, as well as the technical and maintenance agreement within the first quarter of 2013. It will take about three years to finish the construction.

The Philippine government is bent on pursuing the massive use of alternative fuels such as natural gas given the current global oil price volatility, to which the Philippines is highly vulnerable as it sources more than 90 percent of its fuel requirements abroad. Natural gas has been deemed to be among the more feasible alternatives that will allow the country to diversify its energy and transport fuel sources.