LNG to Boost Philippine Energy Security

Liquefied natural gas will boost the Philippines’ energy security.

That is the view of Bruce Macfarlane, ING Groep NV’s head of natural resources advisory for Asia.

The Philippines relies solely on the Malampaya gas field, off the western island of Palawan, for gas that’s used as fuel by power plants that account for about a fifth of the country’s generating capacity. The nation has yet to build a terminal to receive, store and regassify LNG imports. The Department of Energy said in May that about six companies were interested to bid for LNG terminal and pipeline projects.

On speaking about why an LNG facility is important in the Philippines, Macfarlane said

“In a market that already has gas, what it offers is supply security. For the Philippines, it’s an advantage that you got the Malampaya gas, which is a fantastic source. But it’s also a disadvantage since it’s the sole source.

“If something happens to that supply, you lose the feedstock that goes into power plants that produce 40 percent of power for Luzon. You can’t afford that situation.

“Once you’ve built the LNG import infrastructure, you can import LNG from Indonesia, Brunei, Russia, Australia, the Middle East. You’ve got many options and you’re not exposed to that single source.

“Gas is also important in your power mix. Hydropower is cheap but it’s not reliable, while coal will always provide the baseload. When you’ve got fluctuating demand, you turn to oil and gas. Gas is the ideal substitute for oil. It’s considerably cheaper than oil for providing that peak demand.”

He said that government involvement would be required, either through ownership or regulation.

“There’s a very huge upfront investment. Depending on the configuration, the terminal may cost $300 million to $450 million. LNG is loaded on specialized ships that cost about $250 million. There are ways to reduce that, such as a floating facility where you store and regassify on board the ship.”

Source: Bloomberg