PNOC hopeful on finding partner for LNG terminal within 6 months

MANILA, Philippines — State-run Philippine National Oil Co. (PNOC) is hoping to lock in a partner to build the planned liquefied natural gas (LNG) terminal—where it plans to take a minority stake in the project—six months after it launches the tendering process this month.

The construction of an LNG terminal as new sustainable source of gas is a national priority, PNOC head of technical working group Glenda Martinez said in a press briefing yesterday.

Because of this, the state-run firm has decided to run solicited, competitive tender to select a joint venture partner to develop the LNG terminal.

“PNOC will take a minority equity interest in the project. This process will ensure the widest possible competition and achieve the lowest price for the country. It will also ensure that the construction is on time, on the right specifications and at the right price for the country,” Martinez said.

As to how big or small the minority stake PNOC will be taking in, the government-run firm is still drawing up studies.

“We are still sharpening our pencils on how small or max the minority stake is but definitely, PNOC will be a minority,” Martinez said.

Being a state-run company, it would be covered under Republic Act 9184 or the Government Procurement Reform Act should it take a majority interest in the project.

Moreover, government intervention in the project through PNOC would “allow transparent, competitive, and fairly-priced equal access to gas supply to all current and future market participants,” Martinez said.

“Necessary policies and controls must be put in place to ensure that it will not simply be profit-driven to the advantage of a few and to the disadvantage of the entire nation,” she said.

The project is targeted to reach commercial operation before the end of Service Contract (SC) 38 for the Malampaya gas exploitation in 2024.

To get the ball rolling, PNOC is launching the pre-qualification tender within the month.

“PNOC will be opening the tender to international and Filipino market participants, subject to relevant laws. Interested participants will be expected to satisfy legal, technical and financial capabilities that PNOC has developed together with its advisors, the Asian Development Bank (ADB), who will be assisting PNOC in the tendering process, till the project reaches financial close,” Martinez said.

As the transaction advisor, ADB is confident that PNOC will be able to meet the government’s timeline to have a LNG terminal running ahead of the Malampaya depletion.

“We’ll meet those timelines…But the objective is within six months, we hope to be able to complete the process…,” said Siddhartha Shah, the PPP Transaction advisory services unit head of ADB’s Office of Public-Private Partnership (OPPP).

The Department of Energy is looking to start constructing the country’s LNG hub by mid-2019 to safeguard against the anticipated contract expiration of the Malampaya gas facility by 2024.

The facility is also targeted to become an LNG hub for Asia, complementing those in Japan and Singapore.

Located in PNOC’s property in Batangas, the proposed LNG terminal will be done in phases, initially with a floating storage and regassification unit and a minimum capacity of three metric tons per annum to be able to cover the requirements of existing gas-fired power plants in Luzon.

Since the project will be done in phases, the initial part of the terminal is estimated to cost around $600 million to $1.4 billion, compared to the previous estimate of $2 billion which included the 200-megawatt gas-fired power plant, PNOC president Reuben Lista said.

These cost estimates, however, will still be fine-tuned through studies, he said.