Shell considers taking part in $2.1B BatMan project

SEPANG, Malaysia—Royal Dutch Shell is going over its prospects whether it needs to take part in the planned $2.1-billion Batangas-Manila (BatMan 1) natural gas pipeline project of the Philippine government, since it can help support its proposed liquefied natural gas (LNG) project in the country.

In an interview at the sidelines of the Shell Eco-Marathon Asia 2012 here, Royal Dutch Shell chief financial officer Simon Henry noted that this consideration was part of a feasibility study being conducted for the company’s proposed $1-billion LNG regasification terminal in Tabangao, Batangas.

“We would certainly like to see [BatMan 1 pipeline] built because that would create markets. Part of the feasibility work we’re doing is whether we need to take part in that, or whether customers or the government will take it up,” Henry said.

“I think it is right that the Batangas-Manila pipeline is built because, for many decades, it’ll be part of the Philippines’ energy infrastructure.”

Currently, Shell, through its Philippine unit Pilipinas Shell Petroleum Corp., is conducting feasibility studies for the LNG regasification terminal, which, if proven viable, would allow Shell to import and start providing gas for Philippine companies starting 2016.

Henry noted that at present the prospect of putting up this LNG terminal “looks attractive.”

According to him, one of the main factors that may encourage Shell to proceed with the LNG regasification terminal project is the availability of long-term customer demand.

He explained that, for power generation players in the Philippines, which operate plants that run on expensive fuel, having readily available natural gas within the country would allow them to have access to cleaner, more affordable and more secure supply of energy.

“And because [some of them are] our customers today, it will help extend our relationship [with them]. So, as long as we can see long-term customer demand at a price that is acceptable to the customer and which enables us to get a return wherever we get our gas from, that will drive the project, which we see as quite attractive,” Henry said.

“We think, eventually, that LNG will come to the Philippines. For us, we’d like to be first. But we need to be competitive, we have to get the cost right. Power stations will become [our] major customers, and to invest in power stations is necessary, not for Shell, but for our customers, and that will drive the long-term demand,” he added.

Henry said that for the project to be economic, the regasification facility must also have a capacity of at least “three to five million tons per year of LNG.”

The proposed LNG regasification terminal project was announced last month after Royal Dutch Shell and the Philippine government signed a memorandum of understanding during the two-day visit of President Aquino in the United Kingdom. This additional investment in the Philippines was considered to be a sign of renewed investor confidence in the Aquino administration.

The proposed BatMan 1 gas project will be implemented in three phases.

Under phase 1, which will be spearheaded by a new entity to be called PNOC Pipeline Corp., the government will construct a $200-million 105-kilometer gas pipeline. The second and third phases will involve the construction of a receiving terminal and a 600-megawatt power plant to serve as anchor load.

The last two phases will be auctioned off to interested private sector parties.