DOE mulls use of FPIC pipelines to promote natural gas usage

MANILA, Philippines - The Department of Energy (DOE) will study the possibility of tapping the existing pipelines of Lopez-owned First Philippine Industrial Corp. (FPIC) to further promote the utilization of natural gas in the country.

“The idea also is to hopefully have a master plan of how to bring gas from wherever it is to Metro Manila. And the plan has to do with retrofitting some of the generating plants, the bunker fuel/diesel plants, to run on gas. But the challenge is the pipes that need to bring it in. There was an offer from FPIC to use their black pipes. That is definitely being studied,” Energy Secretary Jose Rene Almendras said.

Almendras said aside from the utilization of the existing pipelines, the DOE is also threshing out the issues on banked gas which is now estimated at 110 trillion cubic feet.

He admitted there are still some concerns on the sale of the banked gas by National Power Corp. (Napocor) to Philippine National Oil Co. (PNOC).

“The intention is to use that banked gas because it has been paid for. There are a few issues that needs to be ironed out. There’s the tax issue on that that needs to be highlighted so we’re writing to the BIR. The intention really is to move it, to dispose of it because it is an existing asset,” he said.

According to Almendras, this banked gas could also be used by the government as a sweetener to Napocor’s generation assets being envisioned for conversion into natural gas.

FPIC earlier signified willingness to use its pipeline facilities to help spur economic activities in the country.

The company has two pipelines: one being used to transport petroleum and the other for gas.

“Another pipeline may be utilized to deliver Malampaya’s natural gas to Metro Manila at a much lower transport cost in order to make clean fuel available quickly for industrial and vehicle use or for power generation,” the company said.

Earlier, the DOE raised the possibility of converting the Limay and Sucat diesel-fired power plants into a liquefied natural gas (LNG)-run facility.

There is also a plan to put up a gas pipeline loop in Luzon starting with a 100-kilometer Batangas-Manila gas pipeline to support the development of these LNG-run facilities.

But DOE sources have said that the utilization of the existing pipelines of FPIC may be pushed instead of building a new pipeline.

They said aside from the tax issue, there are a lot of legal issues that need to be addressed before banked gas can be used.

Banked gas is the value of inventory held due to ‘take or pay’ contractual arrangements. A ‘take or pay’ contract is an arrangement whereby the purchaser pays for gas at an agreed minimum quantity each year. If at the end of the year, the minimum amount of gas has not been taken, the company has the right in future periods to take the shortfall.

The value of banked gas is lower than the prevailing natural gas costs. If the government will be able to draw up or be allowed to sell the banked gas, it could help reduce the prices of electricity if it will be used in industrial and residential sector.