‘PHL to rely solely on volatile LNG market’

BY LENIE LECTURA – FEBRUARY 17, 2023
from Business Mirror

The Philippines will face high liquefied natural gas (LNG) prices and infrastructure constraints, the Institute for Energy Economics and Financial Analysis (IEEFA) said on Thursday.

Based on the group’s findings from the new Global LNG Outlook, last year’s LNG market turmoil—characterized by record high prices and unreliable supplies—has undermined long-term LNG demand growth. It said that Southeast Asia’s demand growth faces challenges related to high prices, limited LNG contract availability and infrastructure constraints.

Long-term contracts with deliveries before 2026 are reportedly sold out globally, meaning price-sensitive Southeast Asian buyers risk high exposure to volatile, expensive spot markets. Vietnam and the Philippines do not currently import LNG, although LNG-related projects in both countries have experienced repeated delays, the IEEFA noted.

The Philippines is now aiming to bring two terminals online in early 2023, while the Hai Linh LNG terminal in Vietnam is also expected online next year.

“However, neither Vietnam nor the Philippines had secured a long-term LNG supply contract as of November 2021.  A recent survey of LNG buyers in Japan suggests that there are no long-term contracts available for shipments until 2026. As a result, Vietnam and the Philippines may be forced to rely solely on volatile spot markets for several years,” said IEEFA.

Linseed Field Power Corp., a subsidiary of Singapore-headquartered Atlantic, Gulf and Pacific Company (AG&P), is set to start commercial operation of its P14-billion LNG facility in April this year. The proposed project will supply the 1,200megawatt (MW) Ilijan combined cycle power plant and future projects of SMC Global Power Holdings Corp.

(FGen) and partner Tokyo Gas said earlier the LNG terminal is on track for completion by the first quarter of 2023. FGen LNG’s terminal has a total capacity of 5.26 million tons per annum (MTPA) and an estimated construction cost of P13 billion.

Department of Energy (DOE) Director for Oil Industry Management Bureau (OIMB) Rino Abad said LNG supply is not a problem “given the connections of both.”

“FGen targets to aFirst Gen Corp.ward the LNG supply contract by end of March 2023. Tokyo gas, one of the biggest LNG importer in the world is in joint development agreement with FGen. Hence, this partnership allowed FGen to access the expertise and trade connections of Tokyo Gas,” said Abad.

On LNG prices, Abad said JKM (Japan Korea Marker) LNG price is at $20/million British thermal units (mmbtu), which is now relatively reasonable price compared to $70/mmbtu in September 2022.

“Hence, it would be acceptable for both FGen and SPPC under the circumstances or even lower due to their connections with Vitol and Tokyo Gas,” said Abad.

The DOE recently issued a notice to proceed to Samat LNG Corp, which plans to construct a small-scale LNG terminal in Mariveles, Bataan.

Under its proposal, Samat LNG aims to begin commercial operation by the first half of 2024, with a capacity of 200,000-400,000 tons of LNG annually. It plans to supply gas to fuel small-scale power producers, manufacturing companies, and transport fleets.