AG&P aims to commission the Philippines’ first liquefied natural gas (LNG) import terminal this December as part of the company’s strategy to operate five LNG regasification facilities across Asia by 2025.
The import facility being developed in the Philippines was scheduled to start operating in September, but commissioning has been delayed to December 2022, Karthik Sathyamoorthy, president, AG&P LNG Terminals & Logistics, told Energy Voice. “Like other mega projects, we had supply chain issues from China, due to the lockdowns. However, we are still very much on track for this year’s start,” he said.
AG&P, whose LNG business is headquartered in Singapore, is backed by several major shareholders, the largest being a Kuwaiti fund called Asiya, followed by Japan’s Osaka gas and Japan Bank for International Cooperation (JBIC). However, from an operational perspective, AG&P has over 8,000 employees in the Philippines and Manilla remains its largest operational location.
It is currently building a 3 million tonnes per year (t/y) capacity LNG import terminal in the Philippines that will eventually be expanded to handle 5 million t/y.
“The onshore site for the terminal is pretty much done and offshore jetty works are in the final stages. We should be finished by October. Then we can start testing and commissioning with actual commissioning in December,” said Sathyamoorthy.
“The capacity will be up to 5 million t/y. We have started construction for two onshore tanks that will be integrated as part of the main terminal in 2024. Until then the floating storage unit (FSU) acts as the only storage, during that period it will be a 3 million t/y terminal,” he added.
The Philippines, which is facing a looming gas supply crunch, as domestic production from Malampaya – the country’s sole field – is forecast to decline rapidly in the coming years, desperately needs LNG import capacity to improve its energy security.
The AG&P-led terminal is a tolling facility and the initial capacity will supply its anchor customer San Miguel Corporation that operates the 1200MW Ilijan power plant. San Miguel is also adding another 1200MW generation capacity. The combined 2400MW at peak would use almost all the 3 million t/y LNG terminal capacity, said Sathyamoorthy.
According to Sathyamoorthy, San Miguel has secured a short-term LNG supply contract and a medium-term contract from a portfolio player starting 2023. To make LNG more affordable for the Philippines, the import prices of LNG will be blended with the price of domestic gas.
The extra 2 million t/y terminal capacity will be used by AG&P to aggregate downstream demand from industrial, residential, transport and city-gas customers.
The terminal can be expanded further as the market evolves, both by adding additional storage and regasification capacity.
Ilijan Power Plant and Falling Gas Supplies
The Ilijan combined-cycle power plant is a dual-fuel power station in Ilijan, Batangas City. It is primarily a natural gas plant and uses distillate oil as a secondary back-up fuel source. Its main fuel source is gas from Malampaya, but its long-term contract ends this year. Although Malampaya production is declining, Ilijan will still receive gas supplies under a more flexible contract arrangement.
In future, the power plant will use a combination of domestic gas and LNG. “It has not reached the point where supply has zeroed out and without LNG there will be blackouts. We are not there yet,” said Sathyamoorthy.
“The good thing is there was a decision to build the terminal. Ilijan as a customer allowed this to happen because we all know at some point the domestic gas is going to stop. In that forecast, an LNG terminal is needed, and you cannot time it to point that everything falls in place that the terminal starts the day when gas stops. So, we now have a terminal this year that will be live. It’s always going to be case there will be a period when more LNG is used in the power plant and less domestic gas. Over next two years, the curve will smooth out, where LNG takes main stage and domestic gas goes down,” he added.
Asia LNG Expansion Plans
AG&P aims to have five operating LNG import terminals across the broader Asia region by 2025. Its first terminal in the Philippines is fast becoming a reality and it is close to developing a second facility in India.
“We are targeting having a terminal up and running in India by end-2023. We are actively working on an import terminal on the southeast coast and another in a port on the west coast. Over the next three months we will pick one of the two sites and run fast with it,” said Sathyamoorthy.
“In India, one of the key attractions is that AG&P already has a strong downstream infrastructure business. It will have 1 million t/y of LNG demand of its own over the next five years. This will act as an anchor customer to bring the tolling terminal to life,” he added.
Pakistan is also an attractive market, despite its complexities and current price shocks, AG&P still believe in the growth of the country and the outlook for the energy supply business. “We are actively looking at developing a floating storage and regasification unit (FSRU) in the next couple of years,” said Sathyamoorthy.
Indeed, there is strong lobbying for the government to deregulate Pakistan’s LNG imports so that the private sector can buy LNG on their own and access existing and new FSRUs. The centralised approach of having state-controlled FSRUs and government procurement is creating challenges for the market.
Meanwhile, “like anyone else looking into Southeast Asia, you cannot ignore Indonesia and Vietnam. In both places, we are actively working on several opportunities, linked to government running tenders. Both are challenging markets, but with real big opportunities. You must be there really. You cannot ignore them just because of the challenges,” he added.
“In terms of capacity they are very behind on the gas business, so we must be there working on it. Again, compared to all the big boys who are out there. We believe we could have a shot at it because we can develop terminals more cost effectively and make them work, which is probably the most important key requirement now. I don’t think these markets can be pushed through to use the multi-billion-dollar mega terminal projects, as they take a lot of effort to finance. Hence, we are looking at making terminals effective,” he said.