LNG power plant, import terminal feasible in Phl

MANILA, Philippines - Building a liquefied natural gas (LNG) power plant and an LNG import terminal is feasible in the country’s energy market, according to a report of the Department of Energy.

“We have identified that there is a reasonably robust economic case for a modest 600 to 800 megawatts of LNG combined cycle-fired power plant that can economically dispatch at mid-merit capacity factors but still underpin investment of about $300 million in an LNG import terminal somewhere in Luzon. If non-power use of the LNG can ultimately defray some of the initial investment costs, then that would permit capacity to be economically built,” according to the Energy department’s First Report of the Natural Gas prepared by the Hong Kong-based Lantau Group consultancy firm.

However, the report noted that it would be more cost effective and more practical for project proponents to build power stations near their LNG terminals rather than transport the gas itself.

“It is more cost effective and more practically effective to transmit electricity rather than gas, meaning that power stations located near the LNG terminals make sense in the first instance,” it said.

LNG is natural gas that has been converted into liquid for ease of storage or transport.

The LNG master plan is an offshoot of the DOE’s goal to incorporate LNG in the country’s energy mix in case supply tightens on growing demand and also if the existing natural gas pipelines from the Malampaya oil field are suddenly damaged.

Underscoring the need for alternative power source is the looming depletion of natural gas from the Malampaya oil field in 2022, Energy Secretary Jericho Petilla has said.

“LNG is where we should take this country,” Petilla said in a speech in October.

“What will happen if there is a problem with the (Malampaya) pipelines. I’m not talking about depletion, because depletion is about 2022 but at some point we need to plan out what we are going to do with the plants. It can run on oil but Meralco rates will go up by 100 percent if that happens. So I’ve always posed a question, what will actually happen if the pipelines are damaged for some reason? How long will take you (for repairs)? Six months down time is going to kill the economy. That’s why I’m really worried we don’t have any alternative to the Malampaya gas pipelines if something a bit long term happens to these pipelines,” Petilla has said.

“The answer is LNG,” he said.

Thus, the DOE has been crafting an LNG master plan to assess the viability and identify opportunities.

The World Bank Group tapped the Lantau Group to develop a Gas Master Plan for the Philippines in conjunction with with DOE.

The report noted that annual demand for LNG is potentially very high if LNG prices turn out to be favorable. At the same time, it noted that unfavorable LNG prices mean that less LNG can be economically dispatched in the market and are therefore compounded by the fixed costs of an LNG import terminal.