Cheap Coal Threatens LNG's Toehold in Fast Expanding Philippines
MANILA, Nov 25 (Reuters) - The Philippines is set to import liquefied natural gas (LNG) for the first time next year as it bids to replace fast-fading local gas supplies, but cheap coal is blowing off course Manila's vow to lift the use of cleaner fuels.
With 100 million people and one of the world's fastest growing economies, the country aims to double its power generation capacity by 2030, hoping to put an end to daily blackouts that crippled its economy in the 1990s.
But despite government support for gas, a rash of approvals for coal-fired plants is already set to push coal's share of power generation up sharply to over 50 percent by that time, while gas' share may fade slightly to 15 percent.
A Philippines lawmaker conceded it is too early to say when legislators will call time on new coal plants.
"It presents a great challenge, especially for us in Congress," said Reynaldo Umali, who heads the committee on energy at the House of Representatives.
This type of dilemma is echoed throughout Asia, where more than 500 coal-fired plants are on the drawing board, spurred by coal's low cost and availability, while LNG needs billions of dollars for infrastructure to receive and store imported gas.
"Many countries in Asia will remain reliant on coal for power generation over the coming decade," said Georgina Hayden, senior energy and infrastructure analyst at BMI Research.
Gas Field Decline
The Philippines wants to roughly double the share of natural gas in its power generation mix to up to a third by 2030, evenly balanced with coal and renewables.
Adding impetus to its plan is the expected depletion by 2024 of the Malampaya gas field, which accounts for all of the country's gas supplies. Despite efforts to find reserves elsewhere, buying LNG overseas is the immediate option.
Australia-listed Energy World Corp Ltd expects to switch on the Philippines' first power plant fired by imported LNG some time next year, after delays to the original December 2014 start-up.
The power plant is part of an $800 million LNG hub the company is building in Quezon province in the main Luzon island, the Philippines' first such facility. It plans to ship gas from its Sengkang LNG field in Indonesia or buy from the spot market.
Others are also looking to LNG.
Philippine power distributor Manila Electric Co, also known as Meralco, is in talks with Osaka Gas Co Ltd to build gas facilities worth about $2 billion and power firm First Gen Corp may start building a $1 billion LNG terminal next year to sustain its Malampaya-based gas-fired power plants.
The operator of Malampaya, a unit of Royal Dutch Shell Plc , has also been looking to set up a floating regasification facility to sell LNG locally, company officials have said.
But the Philippines accepts that rejecting cheap coal is not an option as its economy develops, with more than 40 new power plants in the pipeline, including projects still seeking financing.
"The Philippine electricity market is very competitive, so to be able to make sure that we can sell the power capacity to be generated by our power plants, it has to be cheap," said Lito Lantin, senior vice president at Meralco Power Gen Corp, which plans to build three coal-fired plants over five years.
Congressman Umali said he is keen on legislation aimed at giving more incentives, such as tax exemptions, to investors in LNG infrastructure to make the fuel competitive with coal.
President Benigno Aquino, who is due to step down next June, has passed the baton of boosting gas use to his successor, arguing last week that the government was hampered by a lack of infrastructure.
"It limits our ability ... it won't happen under my watch," he told the Asia Pacific Economic Cooperation CEO summit.
(Reporting by Manolo Serapio Jr. and Enrico dela Cruz; Editing by Richard Pullin)
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds