DOE mulls use of Malampaya banked gas by 2012

The Department of Energy (DOE) is studying the possibility of utilizing some 110 trillion cubic feet (TCF) of banked gas from the Malampaya project by 2012.

DOE director Mario Marasigan said a portion of the banked gas will likely used to support the government’s natural gas development in the transport sector.

He said another chunk of the banked gas will also be utilized for residential and industrial use.

Marasigan noted that the discussions on the 110-TCF banked gas will come on top of the 300-megawatt (MW) excess capacity in the Malampaya deep water gas-to-power project that needs to be utilized.

“We have been doing a lot of consultations lately with parties involved such as the National Power Corp. (Napocor), Power Sector Assets and Liabilities Management Corp., Malampaya consortium and all units of DOE that are involved in natural gas development,” he said.

The DOE official admitted that there are a lot of legal issues that need to be threshed out before the banked gas is used.

Banked gas is the value of inventory held due to ‘take or pay’ contractual arrangements. A ‘take or pay’ contract is an arrangement whereby the purchaser pays for gas at an agreed minimum quantity each year. If at the end of the year, the minimum amount of gas has not been taken, the company has the right in future periods to take the shortfall.

The value of banked gas is lower than the prevailing natural gas costs. If the government will be able to draw up or be allowed to sell the banked gas, it could help reduce prices of electricity if it will be used in the industrial and residential sector.

The DOE’s review of the proposed withdrawal of banked gas is one of the ways being looked at to reduce power costs in the country.

“We need to look at issues closely. We have to determine if Napocor/PSALM/DOE could sell the banked gas or can it be allowed to get a private entity to sell, distribute it in its behalf,” Marasigan said.

If the private sector will be allowed to come in to the picture, this is where the likes of Callandra and Synergy, two firms that have signified interest to help the government in its natural gas development efforts, could participate,” he noted.

He said since the 300-MW contracted gas of Napocor but has not yet been used is already set aside for use in 2012, the government should be able to come up with a concrete scheme for the 110-TCF banked gas.

Marasigan said all the industrial parks in the northern and southern corridors of Luzon could benefit from this.

The DOE official said they expect to come up with the result of the consultation by the end of this year.

“We may be able to reach a pronouncement before the year ends,” he said.