PNOC-EC to push gas pipeline projects

MANILA, Philippines - PNOC-Exploration Corp. (PNOC-EC), the gas and oil exploration arm of state-owned Philippine National Oil Co. (PNOC), is pushing through with its planned gas pipeline projects.

In a disclosure to the Philippine Stock Exchange (PSE), PNOC-EC said it is now in the process of preparing for the conduct of a feasibility study for the construction of a new power plant that will serve as an anchor load for the Batangas-Manila (Batman 1) and Bataan-Manila (Batman 2) gas pipelines.

Based on the disclosure, PNOC-EC is considering various sites such as Batangas, Laguna or Cavite to construct the new power natural gas facility.

“Preparation of the terms of reference has started for the engagement of consultant services to conduct a feasibility study to put up a greenfield power plant,” it said.

According to the company, it had drafted a memorandum of agreement (MOA) with its parent firm PNOC, to undertake downstream natural gas development projects. The draft MOA is now being studied by PNOC-EC’s legal department.

The agreement states that PNOC owns Batman 1 and 2 projects and PNOC assigned the implementation of the projects to PNOC- Exploration. PNOC will still review the agreement.

“Accordingly, the information memorandum for the joint venture partnering was finalized by the technical working group and forwarded to the legal department for review,” the company said.

The Batman 1 gas pipeline covers 100-kilometers while the Batman 2 gas pipeline covers 140 kilometers.

The Batman 1 project has attracted the interest of foreign investors like PTT of Thailand, Japanese power firm Marubeni Corp., Russian power firm Gazprom and Petrochina.

The Batman 2 project also involves the setting up of an liquefied natural gas receiving terminal, conversion of the 620 megawatt Limay combined cycle plant to gas fired, the development of a greenfield gas-fired power plant and construction and operation of a Batman 2 pipeline.

PNOC-EC conducted survey/inspection of proposed sites for LNG terminal and greenfield power plant, Limay power plant and potential gas markets in Bataan, Zambales and Pampanga.

The government has already auctioned the Limay power plant and results of the bidding are expected to be known tomorrow.

But it should be noted that the implementation of the gas pipeline projects hinge on the availability of natural gas from the Service Contract 38 or the Malampaya deep water gas to power project.

PNOC-EC is one of the members of the consortium that operates the Malampaya project with a 10-percent stake along with Shell Philippines Exploration B.V. and Chevron-Texaco, with 45-percent equity share each..

Earlier, the Malampaya proponents indicated their willingness to bid out additional natural gas of about 300 MW to 500 MW from the project.

Currently,  the Malampaya project provides the gas supply of three natural gas power facilities in Batangas-Ilijan, Sta. Rita, San Lorenzo, with a combined capacity of 2,700 MW

Up to now, the Malampaya consortium has yet to determine whom to sell the excess natural gas production.

There are some companies eyeing the excess gas like Korea Electric Power Co. and First Gen Corp. which have plans of expanding their natural gas facilities and/or build new power facility, respectively.

As this developed, PNOC-EC reported that it posted a net income of P506.66 million for the first quarter 2009, 18 percent lower than the P621.42 million recorded in the same period in 2008.

The company attributed the decline to a drop in gas and condensate sales, coal trading and sale of fuel and lubes.

“However the full payment of the SC 38 Malampaya related loan at the end of 2008, which resulted to a zero financing cost in 2009 and a reversal of foreign exchange loss in the previous year partly cushioned the decrease in net income for the first quarter as compared to the same quarter last year,” it said.