Compared to many of its neighbors within the Southeast Asian region, the Philippines is relatively a latecomer when it comes to investments in facilities in the liquefied natural gas (LNG) space, but this solution is finally tugging its way into the country’s energy mix with the US$1.0 billion LNG import facility finally taking off from the project blueprint of First Gen Corporation and partner Tokyo Gas Company Ltd. 

“The Philippines is probably unique in the sense that we’re almost the last one to have LNG terminal in the region– it’s not a good story, but at least we’re finally moving ahead,” First Gen President and COO Francis Giles B. Puno said, as he highlighted that neighbor-countries like Thailand, Singapore, Vietnam and Malaysia have already been way ahead on their respective LNG investments.  

The joint venture firm-developer FGEN LNG Corp is targeting to complete the LNG import terminal around 2023, a year prior to the expiration of the service contract and the well-anticipated production decline at the Malampaya field, the only commercially-producing gas reservoir in the country to-date. 

The proposed LNG facility broke ground on May 28, and the project sponsors are targeting to advance to final investment decision (FID) and construction phase first quarter of next year. The LNG terminal will have initial capacity of 5.0 million tons per annum (mtpa) and to be scaled up to 7.0 mtpa as gas demand picks up through the years. 

Within the six-month window, First Gen qualified that it will be scouting for additional partners and will also be engaging its engineering, procurement and construction (EPC) contractor - in its shortlist are global firms Fluor and JGC Corporation; and then move subsequently to financial closing. 

“We are in discussion with a number of entities, so in the near future it is possible that we will announce additional partners that will be coming on board,” First Gen EVP and Chief Commercial Officer Jon Russell qualified. 

The strategy, he said, “is we’re trying to find a coalition of the willing, the best grouping of entities that could make this project a success. We just don’t know what will be the final combination, but there’s a great deal of interests being shown.” 

FGEN LNG indicated that it has a room for one or two more partners – in addition to Tokyo Gas that the Philippine firm developer had signed up in December last year.  

“We realized the size of the investment is big enough for many people to get involved in and sometimes if you have partners, it also assures success. We have willing partners, so First Gen will not need to underwrite that whole US$1.0 billion check for the project,” Mr Puno said.  

He further explained that the technology choice for land-based terminal was well thought out and strategic given the typhoon and calamity vulnerabilities of the Philippines.  

“The challenge we had when we mapped out that feasibility study is the reality that we are very prone to typhoons. And so the problem with a floating solution is: when you have a big storm coming, you actually have to disconnect the facility, so I have to put consumers on blackouts. So we’d needed that analysis that if we want the consumers to benefit from improved reliability, what is the right technical arrangement, and so we’ve done all of these analysis to show that land-based solution is our best option,” Mr Puno said.  

Power project tandem 

With the massive scale infrastructure installations that the Philippines is pursuing right now, electricity supply in the country had been growing thin – and that started manifesting extremely this year with the spell of power outages distressing the power system when demand picks up.  

That ushered in a decision point for First Gen to also integrate power plant projects parallel to its LNG import facility development. The company casts its two power plant projects (Santa Maria and Saint Joseph plants) for completion around 2023-2024, which is also the anticipated power supply-demand equilibrium in the country, or that phase when demand growth outstrips available electricity supply.  

Tendering process for the EPC contract of the planned power facilities has also been kicked off  – with the company already advancing discussions with global giants like Siemens, GE and Mitsubishi Heavy Industries. 

The two new generating facilities will add power capacity of 1,200 megawatts for the Philippines – each plant will have nameplate capacity of 600MW. Total investment penciled in for the two projects had been US$1.2 billion.  

The country currently has five gas-fired power facilities with aggregate capacity of 3,200MW. Four of these assets belong to First Gen (the 1,000MW Santa Rita, 500MW San Lorenzo, 414MW San Gabriel and 97MW Avion generating facilities); while the 1,200MW Ilijan gas-fired power fleet is currently administered by South Premiere Power Corporation, a subsidiary of San Miguel Energy Corporation which is currently the country’s biggest power producer.  

For First Gen, gas is the much-needed addition to the Philippine power mix given government-enforced policies requiring higher renewable energy integration into power grids starting next year -- with the implementation of the country’s Renewable Portfolio Standards (RPS) and then the Green Energy Option Program. The flexibility of gas-fired plants is the much-needed complement to the intermittency of RE technologies like wind and solar, according to the company. 

Two LNG import facilities for the Philippines  

For the Department of Energy (DOE), the advancement of the FGEN LNG import facility venture concretizes the rebirth of the country’s gas market – a shift from the utilization of indigenous gas to joining the LNG investors and users of the world. 

It wasn’t exactly an easy journey for the country to reach the LNG investment sphere, according to Energy Secretary Alfonso G. Cusi, who started inviting investors on this facility development way back in 2017.  

He narrated that the DOE envisaged a development landscape pioneered by state-owned Philippine National Oil Company (PNOC), but since it cannot get its grip with the right investor-partner, the agency opted to award the projects to two private investing parties.  

Aside from the First Gen-Tokyo Gas tandem, another LNG import terminal project is also at pre-development stage by the triumvirate of Phoenix Petroleum Philippines Inc. of Duterte-linked businessman Dennis Uy, the China National Offshore Oil Corporation (CNOOC) and PNOC. Mr Cusi expected that project to move ahead, but regrettably, it stalled at site selection. 

The Phoenix-CNOOC-PNOC gas import facility will be of 2.2-2.3 mtpa capacity and is similarly targeted to reach commercial operations in 2023. It will also be coupled with a power project of 800-1,000MW capacity, which according to Mr Cusi, “will be the captive market of the LNG import facility.” 

Mr Cusi added that with the two gas import terminals his department has been pushing to be built, the country could eventually transition into cleaner energy solutions from coal-fired plants domination at present.