Shell Bags LNG Order from Philippines

A Philippine power supplier has placed an order for about 5.46 million cubic feet of liquefied natural gas (LNG) from Shell PLC for commissioning activities.

Shell Eastern Trading Pte. Ltd., a Singapore-based unit of the British giant, will deliver the cargo contracted by First Gen Corp. (FGEN) by September, FGEN said this week in a filing with the Philippine Stock Exchange.

FGEN said its floating storage and regasification unit had last week been successfully moored and secured at the company’s LNG import terminal in Batangas province, one of the first among seven Philippine LNG terminal projects to be completed.

FGEN has four gas-fueled power plants with a combined capacity of 2,017 megawatts, according to the company. The facilities depend on the Malampaya field, the only active of just two commercial natural gas discoveries in the country, but the field has been depleting.

Output from Malampaya, offshore Palawan island, has consistently fallen since 2019 from 155.49 billion standard cubic feet (Bscf) that year to 113.61 Bscf in 2022, according to an update by the Philippine Department of Energy (DOE) published February 15. Shell on November 1, 2022 announced the completion of the sale of its entire 45 percent operating stake to local company Prime Infrastructure Capital Inc. 

To help bridge the fuel supply gap amid growing energy demand, the DOE has approved seven projects to build LNG import facilities. On June 2 it announced the completion of two of these, one of which is FGEN’s.

“The FGEN LNG Terminal will accelerate the ability to introduce LNG to the Philippines, to serve the natural gas requirements of existing and future gas-fired power plants of third parties and FGEN’s affiliates”, FGEN said in the announcement for the Shell delivery. “FGEN believes the FGEN LNG Terminal will play a critical role in ensuring the energy security of the Luzon Grid and the Philippines”.

On April 27 AG&P International Pte. Ltd., owner of the other completed terminal, announced the arrival of the Southeast Asian nation’s first-ever LNG supply from abroad. The Singapore-based AG&P signed 2022 a 15-year deal with the Abu Dhabi National Oil Co. to supply the former with LNG, as announced by AG&P February 23, 2022.

The maiden cargo was used to restart the Ilijan combined cycle plant in Batangas province, the DOE said in its June 2 announcement. The 1,200-MW mill, owned by a Philippine subsidiary of Korea Electric Power Corp. and operated by Filipino conglomerate San Miguel Corp., ceased operation June 2022 after the fuel supply from Malampaya stopped.

The entry of LNG diversifies the Philippines’ energy mix, providing “flexibility” in meeting demand, the DOE said.

The DOE projects an annual growth rate in peak power demand of about seven percent from 2020 to 2040. To meet this, the country of around 110 million people must raise installed capacity by over five times from 22,317 MW in 2019 to 114,601 MW in 2040, according to the agency’s “Power Development Plan 2020-2040”.

Coal has long been the Philippines’ biggest power source, accounting for 62,052 gigawatt hours (GWh) of the national gross power generation of 106,115 GWh in 2021, based on the department’s latest available data, released June 20, 2022. Natural gas contribution that year at 18,675 GWh was ahead of oil at 1,616 GWh but behind renewables at 23,771 GWh.

However the government has imposed a moratorium effective October 2020 on the issuance of licenses for coal-fired plants. In 2021 the government joined the COP26 global pledge to phase out coal power by the 2040s.

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