Philippines LNG projects face headwinds, says IEEFA

MANILA, Philippines — Liquefied natural gas (LNG)- related infrastructure projects in the Philippines could face underutilization or cancellation should LNG volumes remain unaffordable and challenging to procure, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

In a report, IEEFA said the unaffordability of LNG and fuel supply insecurity may cause new import terminals to go unused, potentially costing billions of dollars in stranded assets.

IEEFA said $96.7 billion worth of proposed LNG-related infrastructure developments in the Philippines, Pakistan, Bangladesh, and Vietnam face a heightened risk of underutilization or cancellation as long as unaffordable LNG prices and procurement challenges persist.

In Southeast Asia, which is viewed as one of the world’s largest sources of long-term demand growth, IEEFA said prospective markets like the Philippines and Vietnam have large proposed pipelines of LNG terminals and LNG-to-power projects.

However, it said both countries have faced multi-year difficulties in getting new LNG projects built.

It said an inability to secure LNG volumes at competitive prices is likely to delay projects further.

“Without a viable procurement strategy for competitively priced LNG in the Philippines or Vietnam, both countries will likely face a choice between paying exorbitant prices for LNG or going without LNG altogether,” IEEFA energy analyst and author of the report Sam Reynolds said.

“The latter option would force the countries’ new regasification terminals and LNG-fired power plants to go unused and stranded,” he said.

In the Philippines, IEEFA said a terminal project led by First Gen Corp. was targeted to come online in the third quarter, but has been pushed back until at least the third quarter of 2023 due to unspecified events and circumstances beyond its control.

“LNG terminal projects have been repeatedly delayed in the Philippines since 2003,” Reynolds said.

Singapore-based Atlantic Gulf & Pacific (AG&P), meanwhile, is still eyeing to commission this year its new Philippines LNG import terminal facility, which is targeted to be the first  liquefied natural gas import terminal in the Philippines.

Reynolds, however, said it remains unclear how buyers in the Philippines intend to procure LNG given limited LNG supplies globally.

But as LNG projects in the Philippines face delays and fuel procurement issues, he said renewable energy projects are moving forward.

“In prospective LNG markets like Vietnam and the Philippines, LNG import projects are facing delays, while the deployment of renewables is accelerating. Policymakers increasingly emphasize the need to reduce dependence on imported fuels,” Reynolds said.

It said continuous demand growth at persistently high prices would likely prove fiscally unsustainable for emerging markets, while efforts to reduce LNG dependence and shift toward alternative energy sources in the medium-term could negatively impact longer-term LNG demand growth forecasts.

Overall, the IEEFA report has indicated that high prices and unreliability of supply are undermining industry-driven narratives that LNG is a viable “bridge fuel” from coal.

“These shifts away from LNG are in their early stages. Should high prices and volatility persist for the next several years, the narrative around LNG as a viable, affordable transition fuel is likely to erode further,” Reynolds said.

“Ultimately, high prices now may undermine profits and exacerbate stranded asset risks for LNG projects targeting completion later this decade,” he said.