Conversion of Limay plant to LNG-fired facility faces hurdle

Government should first sell the 620-megawatt (MW) combined cycle power plant in Limay, Bataan before it can be converted into a natural gas-fired plant, according to its present operators.

Alstom Philippines Inc. operates the Limay plant, an independent power producer (IPP) of the National Power Corp. (Napocor).

"The PSALM (Power Sector Assets and Liabilities Management Corp.) should find a new owner," said Alstom Phils. president Gilles David. "We are prepared to assist PSALM find one that can also convert the plant to natural gas-fired as well as guarantee a decent off-take."

The cost of converting from a fossil fuel-fired plant to natural gas is costly and best offered to the private sector to invest and operate. The cost of upgrading will depend on the complexity of the conversion process and the forecast off-take and supply factors.

Likewise, sourcing of natural gas is another cost factor that may be prohibitive for government to dip its fingers into especially at a time when privatization is a prime target with the passage of the Electricity Power Industry Reform Act (EPIRA).

Also to be considered by its new owners is the establishment of a LNG (liquefied natural gas) plant and depot, a technology that is relatively new to the Philippines’ energy sector.

The country has a huge supply of natural gas from the Malampaya gas fields in Palawan. However, majority of its supply has been contracted out to three power plants in Batangas leaving just a fraction still available.

The Alstom executive said that natural gas purchased from Indonesia or Malaysia is competitively priced. However, the problem maybe the cost of shipping it from the Asian nations to the Philippines.

Shipping executives interviewed by The STAR said the country has never received LNG vessels in Philippine ports. To transport natural gas, it must first be liquefied for transport and storage purposes.

That specialized technology makes use of natural gas which is initially expensive.

"The volume must be huge enough for the foreign shipping companies to see its viability and economics," one local shipping agent said. "Or else, it is not viable and a waste of time."

One alternative is to be able to put in place a gas pipeline from Batangas to Bataan. That in fact is already in the drawing board although there are still no concrete details.

David said that it will take a year or two for someone to acquire the contract to operate Limay, and it will take at least three years for the combined cycle to be converted on natural gas.

"The new owners could possibly synchronize the development of Limay with the development of the gas pipeline from Malampaya," he suggested.

However, other power executives suggested the development of imported LNG avenues for the Philippines other than Malampaya.

They said Malampaya’s fuel is still untested and in the immediate future, it is already contracted out.

"It would be advisable for the Philippine energy officials to ensure that there would be other sources of natural gas other than Malampaya. Competition should be encouraged to ensure the reasonable prices of natural gas either locally produced or imported from our Asian neighbors," they said.

Recently, ASEAN countries signed an accord committing their resources to the development of the Trans-ASEAN pipeline for natural gas. The principal sources of natgas would be Indonesia and Malaysia while Japan remains the biggest user.

Energy Secretary Vicente S. Perez said two weeks ago that he favors the conversion of the existing fossil fuel-fired plants to natural gas. He urged industry players to, directly or indirectly, get involved in the production and distribution of natural gas.

"I am urging all players to consider Limay as their foothold and toehold for the introduction of imported energy," Perez was quoted to have said.