LNG to help meet rising energy demand

Throughout his presidential campaign, Ferdinand Marcos Jr. was already pushing to increase and further develop the country’s renewable energy sources in response to climate change.

He has also cited the country’s precarious power supply as a reason to push for the use of more sustainable and renewable energy sources. According to him, the current demand for energy in the country exceeds the available and reliable supply and so to increase the level of energy production, the country should lean toward renewable energy.

Marcos said the search for new power sources should always be with an eye to improving the mix of the energy supply between traditional and renewable sources, especially since the technology on renewable energy is progressing rapidly and many of these technologies are appropriate for the Philippines.

In 2021, coal accounted for 47.6 percent, with other fossil fuels accounting for 18 percent. Gas accounted for 10.7 percent, followed by hydro with 9.7 percent, other renewables 9.4 percent, bioenergy 2.1 percent, solar 1.3 percent, and wind 1.2 percent, according to statista.com.

In 2011, the country adopted an ambitious plan aiming for 15.3 gigawatts of renewable power capacity by 2030 and over 20 GW by 2040 via the National Energy Renewable Program.

As of end of 2021, the Philippines has an installed capacity of 26.8 GW, with 41 percent coal, 17 percent from oil, 14 percent from hydro, and 13 percent from gas.

In his first State of the Nation Address, President Marcos said the Philippines must build new power plants to meet rising demand for electricity, even as he said he is keen on pushing forward with decarbonizing the energy sector while keeping electricity prices low.

As the government looks for renewable energy sources and new capacity, liquified natural gas or LNG is expected to play a critical role to ensure energy security in the country, especially as it aims for economic growth rates of 6.5 to eight percent every year from 2023 to 2028.

According to one news report, as the Malampaya gas field is inching closer to its run-out phase and as the country transitions into renewables, the President has cited the critical role that the LNG investment deal of Lopez-led First Gen Corp. and Japanese utility Tokyo Gas Co. Ltd. will bring in plugging capacity gap when the main power grid of Luzon suffers from continuing tight supply problems.

During his recent state visit to Japan, Marcos met with First Gen and Tokyo Gas executives where he recognized the paramount contribution of the LNG venture in the continuing diversification of the country’s energy mix.

Tokyo Gas has a 20 percent stake in the LNG facility development being spearheaded by First Gen at its existing energy complex in Batangas. The initial phase of the project consists of a floating storage and regasification unit (FSRU) while the longer-term plan includes setting up an onshore LNG terminal. Commissioning of the LNG facility is expected April this year while commercial operation will start by June.

The report said that in the energy transition agenda being advanced by the current administration, Marcos has indicated that having a bridge fuel like LNG is the most critical part of the country’s plans for the future.

The Department of Energy has earlier revealed that the country would need to import LNG to fuel gas-fired power plants with a combined capacity of more than 3,000 megawatts as output from the Malampaya gas field is expected to start declining from 2022 and to be depleted by 2027.

This as the government has determined that LNG represents vital national infrastructure that is needed to maintain and enhance the country’s energy security when the Malampaya gas field is eventually depleted.

Tokyo Gas, headquartered in Tokyo, Japan, is a leading LNG player with 130 years of experience and more than 50 years of experience in the LNG business. It is also one of the largest purchasers of LNG in the world with an annual volume of 14 millions tons per annum. It has over 63,000 kilometers of gas pipelines serving more than 11 million customers.

On the other hand, First Gen is one of the biggest independent power producers in the country and the leading gas power generation company in the Philippines with approximately 2,000 MW in operating gas assets composed of four gas-fired power plants. These are the 1,000 MW Santa Rita Power Plant, the 500 MW San Lorenzo Power Plant, the 414 MW San Gabriel Power Plant and the 97 MW Avion Power Plant.

The President met with Tokyo Gas officials, led by its president and CEO Takashi Uchida, and First Gen chairman and CEO Federico “Piki” Lopez

Marcos said the Philippines has been looking into a mix of renewable energy and traditional sources of energy to meet the growing demands of industries and households in the country.

He added that this project is a vote of confidence in the future of the Philippine economy, the future especially of energy supply from LNG, as he noted that LNG has been playing a large role in the country’s energy mix since 2017.

Earlier, DOE Oil Industry Management Bureau director Rino Abad said that First Gen’s partnership with Tokyo Gas is very strategic since that sets certainty that First Gen will have guaranteed source for its gas supply.

Unfortunately, he noted that the price of imported LNG may still be problematic, given the lingering crisis affecting the supply-demand dynamics of this commodity due to the Russia-Ukraine conflict.

LNG is produced by purifying natural gas and super cooling it to turn it into liquid. During the process of liquefaction, natural gas is cooled below its boiling point, removing most of the extraneous compounds found in the fuel, according to afdc.energy.gov. LNG supposedly uses 40 percent less carbon dioxide.

It has also been reported that Singapore-based Atlantic, Gulf & Pacific International Holdings (AG&P) will bring to the country LNG with the opening of a terminal by the first quarter of 2023. With the opening of its Philippine LNG Regasificational Terminal, LNG will be brought in for the first time to the Philippines, according to AG&P chair and CEO Joseph Sigelman.

It has just completed the conversion of an LNG carrier into a floating storage unit (FSU) or vessel which it described as a central component of its P14.6-billion LNG import terminal in Batangas. The FSU forms part of a combined offshore-onshore import hub with an initial capacity of five million tons per annum.

Meanwhile, also according to statista.com’s January 2023 report, Australia is still has the biggest LNG export capacity of any country worldwide as of 2022. Australia and Qatar are currently the major exporting countries of LNG, followed by the US.

In terms of export capacity, Australia has 87.6 million metric tons per year, followed by Qatar with 77.4 million, the US with 73.9 million, Malaysia with 31.5 million, Algeria with 29.3 million, Russia with 28.9 million, Nigeria with 23 million, Indonesia with 19.5 million, Egypt with 12.2 million, and Trinidad and Tobago with 12 million.

The Philippines is turning to LNG imports to compensate for declining production from the Malampaya gas field, the country’s only source of indigenous gas.

A report from Global Oil & Gas Exit List revealed that in 2021, the Philippines did not have a single operating LNG facility but gas and power companies and the Philippine government want to make LNG a central energy source and that plans to build at least six LNG terminals and 27 gas-fired power plants are already on the table. Most of the LNG projects will be in the Batangas area.

As mentioned by President Marcos, it may take several years before the country benefits from all these investments in LNG and other renewables. But what is more important is that the country is taking an important right step toward cleaner energy and hopefully a cheaper energy source at that.

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