Energy mix, pricing hamper Meralco’s entry into LNG

MANILA, Philippines - Manila Electric Co.’s entry in the liquefied natural gas (LNG) space as well as its partnership with Japan’s second largest natural gas supplier Osaka Gas Co. Ltd. could be pushed back to as far as 2020 pending a firm energy mix policy, demand and favorable pricing levels, Meralco’s top official said.

LNG remains one of the power investment thrusts of Meralco but timing would be critical in the realization of the project, Meralco president and CEO Oscar Reyes said in a recent interview.

“The earliest LNG can come in, given the time to go through corporate and regulatory approval processes plus time to build, I think we’re talking of 2020 or further out,” he said.

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

The timing, Reyes said, is closer to the projected depletion of the Malampaya deep water gas-to-power project by 2022 or 2024. “It reduces the gap, it’s closer. So it’s 2020 or later,” he said.

For its partnership with Osaka Gas, Reyes said both companies continue to do due diligence while doing their respective studies for LNG.

“We and Osaka, as far as we’re concerned, we’re doing our own studies,” he said. “I think we discussed with them both parties need to look at future demand-supply scenario. LNG will require very significant amount of investments in infrastructure and that infrastructure will require not an insignificant amount of capacity.”

Currently, the country has 2,750 megawatts in generating capacity from gas-fired power plants, from the Sta. Rita and San Lorenzo gas plants of the Lopez Group and Ilijan plant under San Miguel Group.

New LNG generating capacities will come from the Lopez Group’s 100-MW Avion plant and the 414-MW San Gabriel plant, both in Batangas, and two more 414 MW plants.

Reyes said an LNG receiving terminal will require at least 1,000 MW in demand capacity.

In February 2015, Meralco chairman Manuel V. Pangilinan announced the company is in talks with Osaka Gas for a possible development of a LNG facility, including a regasification facility or LNG terminal which would convert imported LNG to natural gas for delivery to the power plant.

Another issue stalling the further development of LNG in the country is the lack of clear energy policy and the high costs, Meralco SVP and head for customer retail services and corporate communications Alfredo Panlilio said.

“The projects are being reviewed. I think all parties are reviewing. First, we don’t have an energy policy, second you if look at cost, the price levels of LNG are still a bit challenging,” he said.