British power giant, First Gas eye LNG terminal in Batangas

British power giant BG Group and Lopez-owned First Gas Holdings will look into the prospects of putting up an LNG (liquefied natural gas) terminal in Batangas.

A P23 million study, which will establish the feasibility and optimal timing of an LNG facility, focusing on a Batangas location will be conducted by BG Group. The study is expected to be completed by the end of this year.

The study will also determine the feasibility of LNG importation to fuel future power generation requirements in the Philippines.

First Gas is the joint venture company of First Generation Holdings and BG Group plc, which has developed the 1,000-megawatt Santa Rita and the 500-megawatt San Lorenzo power plants that have provided the anchor load for the Malampaya gas field located in Northwest Palawan.

So far, only First Gas has been granted a legislative franchise to provide transmission and distribution facilities for natural gas in Luzon. Last May 18, 2004 the Department of Environment and Natural Resources granted an environment compliance certificate to First Gas for the pipeline project.

First Gas continues to work towards obtaining permits and approvals of other stakeholders so that the pipeline from Batangas to Sucat could be constructed.

BG Group Philippines general manager Anthony Barker said "there has been considerable development in the LNG sector since we last examined LNG for the Philippines and a number of importation schemes are currently under consideration."

Barker said LNG has the potential to provide competitively priced gas to proposed power generation projects such as the Sucat project that First Gas intends to bid for.

He said such a facility will also provide greater security of supply to the Philippines.

He pointed out though that the Santa Rita and San Lorenzo generators will remain as long-term contracted customers for Malampaya but LNG will be required to fuel future power generation expansion in the Philippines.

"The study will consider positive developments in the LNG sector and how these might impact on site-specific alternatives in Batangas," he said

BG has built a strong LNG position in the Atlantic Basin and is looking to enhance its existing portfolio by delivering competitively priced gas to high value markets such as the Philippines.

For his part, First Generation Holdings vice chairman and CEO Peter Garrucho Jr. said the joint venture looked into LNG as an alternative way back in 1995 when the initial offers for the price of gas from Malampaya were clearly uncompetitive.

"Various LNG sellers largely from the region indicated serious interest in selling to the Philippines and we visited their facilities. But, we switched back to Malampaya after some bargaining but also because we wanted to support indigenous sources. The fuel cost element is the largest component in our delivered electricity cost and at present, price from Malampaya continues to be a major issue, especially in a deregulated electricity market,"Garrucho said.

At present, BG has four business segments – Exploration and Production, Liquefied Natural Gas, Transmission and Distribution and Power Generation.

Active in some 20 countries on five continents, its core geographical areas are the UK, Kazakhstan, Egypt, Trinidad and Tobago, South America and India.