The proposed gas aggregation strategy of Prime Infrastructure Capital Inc. of businessman Enrique Razon Jr. and First Gen Corp. of the Lopez family won the support of the Department of Energy.
Energy Secretary Raphael Lotilla said in a TV interview the proposal could help cushion the impact of a surge in prices of liquefied natural gas brought about by the Ukraine-Russia war.
Lotilla said natural gas from the Malampaya gas field could be aggregated with imported LNG to help address the war’s impact on the Philippine power sector which already saw the completion of two LNG facilities.
“That’s what we are trying to prevent from happening in terms of spikes in the price of imported LNG and the plan is to blend the lower price of Malampaya natural gas with the imported LNG so that we can soften the impact or the volatilities of imported LNG,” Lotilla said in his One News interview.
“By 2026 or 2025, if we are lucky, there will be more LNG supply coming on stream globally and therefore the expectation is that prices of LNG will soften as well,” he said.
Prime Infra and First Gen are in talks to develop a gas aggregation framework to make it possible to blend declining volumes of indigenous Malampaya gas with imported LNG.
The framework would provide the lowest cost possible for consumers and bring these benefits, namely enhanced energy security and competitive market for power generation and complement ongoing commercial development of new indigenous natural gas fields.
First Gen is developing an integrated LNG and regasification terminal at its complex in Batangas City.
Prime Infra, through subsidiary Prime Energy Resources Development B.V., is the operator and member of the Malampaya gas-to-power consortium. It holds a 45-percent operating stake in the Malampaya deepawater gas-to-power project.
President Ferdinand Marcos Jr. extended the consortium’s service contract for 15 years or until Feb. 22, 2039, ensuring continued production at the Malampaya gas field, which delivers around 20 percent of the country’s electricity requirements.
Under the terms of the extended contract, the consortium is required to develop additional supply around the Malampaya reservoir.
“One of the things that the President did was to extend the service contract of the Malampaya consortium for another 15 years and that’s because the present production from Malampaya has been on the decline as anticipated because it is finite or limited resource,” Lotilla said.
He said it was necessary to extend the service contract so that the consortium would be encouraged to drill new wells near the Malampaya field.
“Towards 2024, we are going to see the actual drilling in the near fields,” Lotilla said.
“The next step to that, since the drilling facilities will already be here, is it will actually be cheaper for drilling and other exploratory activities to be conducted in nearby areas of the country as well,” said Lotilla, referring to Sulu Sea and areas in the West Philippine Sea.
“So, the coming in of LNG complements this because the gestation period for the full development of all the other alternative gas fields will take some time,” he said.
Lotilla said LNG importation would secure the gas supply for the the Ilijan and the First Gas plants “in the meantime that we don’t have sufficient natural gas supply from Malampaya.”
Prime Infra said the proposed framework would also tap the Malampaya consortium’s expertise in the natural gas market and would lead to reliable and lower cost of clean gas for the country’s power plants.
The gas aggregator framework “establishes a resilient and efficient natural gas supply chain,” Prime Infra president and chief executive Guillaume Lucci earlier said.
He said the proposal “would ensure a stable and sustainable baseload power supply.”
