Only 29% of natural gas projects in PH viable, says IEEFA

The use of liquefied natural gas (LNG) is considered a cheap, reliable “bridge” to help countries transition to cleaner sources of energy and reduce coal consumption, but according to an international institute, only 29 percent of the proposed LNG investments in the Philippines may be viable while the rest may “never be built.”

The Institute for Energy Economics and Financial Analysis’ (IEEFA) latest report described the Philippines’ proposed pipeline of LNG-to-power projects as “overpromising and underdelivering” as there is no solid legal framework and enough incentives to encourage investments in the industry.

The increasing dependence on imported LNG, it added, comes with several risks that include higher power tariffs for end-users, limited project financing available for fossil gas assets, limited utilization of LNG-to-power assets, and the growing interest in investing in renewables.

All these have made LNG investments less and less attractive.

“Energy sector planners in emerging Asia face an unenviable multitude of competing goals, including national energy security, affordability, self-sufficiency and environmental sustainability,” said report coauthor Sam Reynolds.

“The reality is that LNG does not contribute to any of these goals, despite the LNG industry’s insistence that imported gas is a be-all-end-all solution. Global LNG markets are highly volatile and LNG-to-power projects will be subjected to a suite of risks, including major financial market constraints,” he added.

Reynolds noted that countries looking to grow their energy sources “must determine the most sustainable, reliable funding pathway for infrastructure growth.”

The study comes just as the Philippine government is looking to replace the Malampaya gas field’s production with LNG as the project life nears its end. Malampaya provides power to about 30 percent of Luzon.

To do this, IEEFA said plants may require up to 5 million tons per annum (mtpa) to continue operating which may be handled by one or two import projects.

To justify the government’s proposed LNG import capacity of 18.5 mtpa, new downstream sources of demand will have to come from somewhere.