First Gen commits to deliver LNG by 2024

MANILA, Philippines — Lopez-led First Gen Corp. has committed to deliver liquefied natural gas (LNG) in the country earlier than 2024 even as it expects business as usual from the Malampaya gas project despite a change in ownership.

First Gen president and COO Giles Puno said the company, as the biggest customer of Malampaya gas, expects no disruption in the delivery of gas to its power projects in Batangas.

This even as Udenna Corp., the holding company of Dennis Uy, announced that it acquired Chevron Philippines Ltd.’s 45 percent stake in the $4.5 billion Malampaya deep water-gas-to-power project.

“I think it would continue to be business as usual as far as I am concerned. We are the biggest customer of Malampaya gas and so we expect to continue that delivery,” Puno said.

“We asked for clarification on the news, but there is nothing official yet from the Department of Energy (DOE) and the stakeholders of SPEX (Shell Philippines Exploration BV),” he said.

First Gen expects steady reduction in the gas supply from the Malampaya field up to the expiration of the contracts in 2024.

Thus, it has committed to bring LNG in the country ahead of the Malampaya contract expiry due to favorable world prices.

“We are working with JGC (JGC Corp. of Japan) in completing the requirement of potentially shifting to FSRU in the interim.

“Main reason for that is to enable us to deliver gas earlier,” he said.

First Gen is now scouting for providers to bring in a floating storage and regassification unit (FSRU) by 2021. An FSRU is an LNG storage ship that has an onboard regasification plant capable of returning LNG back into a gaseous state. This can then be supplied directly to some or all of First Gen’s existing power plants, should Malampaya be unavailable for any reason.

“Main reason why that is advantageous to us is that the price of LNG today is quite attractive and even cheaper than Malampaya. If we can bring in gas lower than Malampaya, it is really good for consumers,” the company official said.

For First Gen, a lower LNG price compared to Malampaya’s price means gas-fired power projects are really competitive with coal fired power plants, which is currently considered as the cheapest fuel source.

“Right now, current Malampaya prices is at $9 per million BTU (British thermal unit) . India for example has auctioned LNG, as estimated by Bloomberg, will range from $6.30 to $6.70 per million BTU. That is already cheaper than Malampaya and we can compete with coal even in a baseload basis at that price,” Puno said.

First Gen is projecting to spend $300 million to bring in an FSRU, compared with the $1.3 billion tag price of an onshore LNG terminal, Puno said.

“We should be clear to our stakeholders what the plan is by the first quarter of next year. We should take advantage of the market opportunity to deliver very cost competitive gas from the market,” he said.

The company decided to bring in an FSRU by 2021 to be able to start importing gas supply within the remaining term of the Duterte administration, way ahead of the expiration of the Malampaya service contract in 2024. An on-shore LNG terminal will then be built for the long term.

It is currently working on a feasibility study to modify the jetty in its First Gen Clean Energy Complex (FGCEC) in Batangas to be able to accommodate an FSRU, which would have a capacity of around 170,000 cu.m.

First Gen recently selected JGC Corp. of Japan for the engineering, procurement and construction (EPC) of its FGEN Batangas LNG Terminal Project.

JGC has constructed LNG plants that account for approximately 30 percent of global LNG production.

First Gen’s LNG terminal was declared as an Energy Project of National Significance (EPNS) in accordance with Executive Order No. 30 on the basis that the project will require the development of significant infrastructure and capital investment involving complex technical processes and engineering designs that will result in a substantial positive impact on the environment.