State-owned Philippine National Oil Co. said it is finalizing an agreement with International Finance Corp., a member of the World Bank Group, to study the optimization of the banked gas and liquefied natural gas terminal project.
PNOC said in a report IFC would assist in forging the most appropriate business arrangement that was legally, technically and financially feasible for the planned floating, storage and regassification unit-power plant project.
“Concurrently, a detailed feasibility study will be conducted for the establishment of Phase 2: the LNG hub, to include studies on grid and systems impact in relation to the connection with the Batangas Bay sub-station,” PNOC documents stated.
The Energy Department and PNOC were pushing for the Philippines to become an LNG hub of Southeast Asia because of its strategic location.
PNOC said the proposed Batangas LNG hub which would include onshore facilities such as a 5-million-ton-per annum storage units and regassfication, power plant and distribution/redistribution units.
It said the second phase might be located at the 60-hectare property of National Development Corp. in San Pascual, Batangas. It is expected to provide for the requirements of the five existing Malampaya-dependent natural gas power plants in Batangas during the Malampaya natural gas field maintenance shut down.
“On a larger scale, the hub will address the gap in energy capacity once the Malampaya gas field is depleted and the service contract expires in 2024. It will assure the sustained supply of the gas requirements of the five Malampaya-dependent power plants,” it said.
PNOC raised two options to raise financing for the planned LNG hub, including trading the banked gas in the international market and extracting and burning the gas then selling it in the form of electricity.
The unused Malampaya natural gas, or banked gas is stored in the Malampaya reservoir and owned by PNOC. It was contracted, paid for by the government and reserved for future use. The banked gas, however, has accumulated in the past several years.
PNOC owns the remaining banked gas equivalent to 97.67 Petajoules valued at around P11.9 billion which was unsold to date.
“The first option of trading the banked gas outside of the country is an offshoot of a realization that a domestic sale of the banked gas may pose some difficulty,” the company said.
It said that with the impending depletion of the Malampaya gas field by 2024, “it becomes imperative that PNOC extract and fully recover the remaining purchase cost as well as optimize its potential value at the earliest time possible which should be before the end of 2024.”
PNOC was tasked to develop an integrated LNG facility but had not found an acceptable offer on a government to government basis while a joint venture agreement raised concerns from lawmakers.
PNOC, however, said that international trading could be challenging as the physical transport of gas was not viable unless it was converted to liquid state through liquefaction.
PNOC said extracting and burning the gas then selling it in the form of electricity “can be more viable by adopting the floating storage and regasification unit with gas-fired power plant technology.”
“With the technology already existing in the market, burning the gas and selling it as electricity may start as early as next year,” the company said.
PNOC said modular floating power plants would be much faster to construct and could be considered a good solution in the monetization of the banked gas.
“There are several companies that can deliver a floating power plant within a 90-day period. Having a power plant with an initial capacity of 200MW scalable up to 800 MW will create the much needed off-taker of the banked gas while at the same time provide added value to the gas when sold in the form of power on a per kWh basis,” it said.