PNOC set to conclude talks with Italian firm for gas pipeline project

MANILA, Philippines - Government-run Philippine National Oil Co. (PNOC) expects to wrap up talks with a consortium led by a unit of Italian multinational oil and gas company Eni SpA for the construction of an integrated natural gas project from Batangas to Manila.

PNOC president Antonio Cailao said they hope to finish the discussion with the group before the end of May. “The negotiation period is still going on. We hope to finish in 30 to 45 days,” he said.

Last month, PNOC said it would challenge the offer of the Italian-led group for the construction of the country’s first natural gas pipeline.

A Swiss challenge is a form of public procurement in some (usually lesser developed) jurisdictions which requires a public authority (usually an agency of government) which has received an unsolicited bid for a public project (such as a port, road or railway) or services to be provided to government, to publish the bid and invite third parties to match or exceed it.

It’s an offer made by the original proponent to the government, ensuring the process to be best by its initiative (as a result of its own innovative approach) or on the demand of the government to perform certain task.

Some Swiss challenges also allow the entity which submitted the unsolicited bid itself to match or better the best bid which comes out of the Swiss challenge process. It is a form of regulating public procurement.

A source from PNOC said the company will review the terms offered by the members of the consortium, namely Abu Dhabi-based Sultan International Holdings, local firm Abacus Consolidated Resources Holdings Inc. and Saipem SpA.

Saipem is the engineering and construction unit of Eni, Italy’s largest industrial company with a market capitalization of at least $138 billion.  Abacus Consolidated is a local firm whose shares are listed and traded at the Philippine Stock Exchange.

The group earlier signified intention to build a $1.2-billion natural gas integrated project in February.

According to the PNOC official, it would also be possible that PNOC might form a joint venture with the Eni consortium.

Aside from the Lopez group, PNOC also holds a franchise for the gas pipeline project.

Specifically, the consortium is eyeing to build the 100-kilometer Batangas-Manila natural gas pipeline, a liquefied natural gas (LNG) terminal and a 600-megawatt power plant using the excess capacity of the Malampaya gas project.

“The gas supply would justify the setting up of an anchor load or power plant, which in turn will make the construction of the pipeline feasible,” Abacus said.