Japanese firms eye investments in local LNG, ethanol industries

Four major Japanese conglomerates are looking into the possibility of investing in the Philippines’ liquefied natural gas (LNG) industry, a ranking energy official said.

"During a recent roadshow in Japan, we talked to Marubeni, Mitsubishi, Sumitomo, and Toyota Tsoshu. They are very upbeat on LNG and other oil and gas exploration opportunities in the Philippines," said Philippine National Oil Co. (PNOC) president Eduardo Mañalac.

Aside from LNG, Mañalac said some of the Japanese companies are also interested in the ethanol business for the transport sector.

During the roadshow, Mañalac said they have talked with other Japanese government agencies to update them on the Philippine power reforms.

Mañalac said PNOC will continue to take the lead in the development of the LNG industry in the Philippines.

"As far as hydrocarbon fuel is concerned, natural gas would be the fuel of choice, being cleaner and abundant. So we need to make sure we have sufficient supply of gas from now to the future, if we would convert the Limay, Sucat gasturbines. So the plan for an LNG receiving terminal and re-gasification plant is always there," he said.

He said they have been encouraging future partners to join PNOC in this endeavor.

"PNOC is prepared to go into and enjoin interested parties, as long as an interested party is willing to convert or build the power plants and build it as a merchant plant," he said.

According to the PNOC official, many companies have expressed interest to put up an LNG plant in the country but some have reservations due to the possible lack of potential market.

"Most of them are asking for an off-taker, but we told them that the situation is different now. There are a lot that have expressed interest. What we are saying is that any investor would need to believe that by that time, since there is a four to five-year lead time to build a plant. So we decide today to build LNG and convert or build new gas plants would take five years," he said.

He said with the wholesale electricity spot market (WESM) to be in place this month, the market for electricity would be there.

"The plant would be up either by 2010 or 2011. By then, we assume that the WESM would be operational, we already have open access, and the power demand would have caught up. What we’re saying to investors is, if you look at the story, we should build now, provided the electricity to be produced out of gas would be competitive, therefore you don’t need an off-taker, and since if you can offer it cheap in an open access environment, the market would get to you," he said.

Putting up an LNG terminal, probably in the Bataan area, is one of the critical developments for the country’s onshore natural gas transmission pipeline project.

Earlier, GN Power together with BP Asia Pacific Pte. Ltd. had signed a memorandum of understanding with PNOC-Exploration Corp. (EC) for the development of an LNG terminal in Bataan.

The proposed LNG import terminal is located about 15 kilometers from the Napocor-owned Limay power plant. The pipeline from the terminal could be easily extended to serve customers in the Pampanga area, particularly the Subic-Clark development corridor, and Cavite.