PNOC-EC mulls talks with First Gas on equity sharing for gas pipeline project

PNOC-Exploration Corp. (EC) is looking at the possibility of negotiating the equity structure of the Batangas-to-Manila natural gas pipeline project with the Lopez-owned First Gas Power Corp. (FGPC).

"We are willing to talk with them but nothing has been formalized. If this is the only way for the project to take off then we are willing to talk things over with them. Right now, the structure is being worked on," PNOC president Thelmo Cunanan said.

Cunanan, however, did not specify what will be the particular participation of FGPC in the $100-million pipeline project.

But Cunanan said the government needs the backing of the private sector. The project, dubbed Batman I, is expected to be completed in 2007.

"Secretary Vincent Perez of the Department of Energy (DOE) had earlier mandated PNOC-Exploration Corp. to take the lead in developing Batman I while maximizing the private sector participation. What needs to be resolved is the ownership issue since FGPC also wants to apply for a permit. That is why we are willing to talk things over with the other party," Cunanan said.

Recently, the DOE granted a permit for EC to construct the proposed gas pipeline project.

Just like EC, FGPC has expressed keen interest to undertake the construction of the project. Although already armed with a congressional franchise, FGPC has yet to apply for a permit with the DOE.

FGPC, meanwhile, is seeking strategic partners that would be willing to share with the company a 60 percent loan and 40 percent equity partnership scheme for the gas pipeline project.

Other firms that have signified interest to construct and operate the proposed gas pipeline are Japan Gas Corp., Korean Gas Corp., Petroliam Nasional Berhad (Petronas) of Malaysia, British Petroleum Plc., Korean Electric Power Co. (Kepco)," Mashhor of Brunei, Chevron Texaco and Shell Philippines Exploration B.V.

The Lopez firm has been studying this project for about three to four years now being the first power firm to get a franchise to build a gas pipeline. FGPC owns and operates two gas-fired power plants- Sta. Rita and San Lorenzo- in Batangas which in turn will sell power to Manila Electric Co. (Meralco).