INTEGRATING LNG INFRASTRUCTURES FOR POWER GENERATION IN THE PHILIPPINES

Raymundo B. Savella

• INTRODUCTION

• PHILIPPINE ENERGY REQUIREMENTS

• PHILIPPINE NATURAL GAS SCENE

• PHILIPPINE POWER INDUSTRY

• LNG CHALLENGES

• CONCLUSIONS

OUTLINE

Location Map

Table of Organization

PHILIPPINE NATIONAL OIL COMPANY

Antonio M. Cailao President & CEO

DEPARTMENT OF ENERGY

Carlos Jericho Petilla

Secretary

PNOC EXPLORATION CORPORATION Pedro A. Aquino, Jr President & CEO

Petroleum E & P; natural gas development; coal exploration, production & marketing; port operation

PNOC ALTERNATIVE FUELS CORPORATION Dante B. Canlas President & CEO

Explore, develop and accelerate the utilization of alternative fuels

PNOC SHIPPING AND TRANSPORT CORPORATION Rogelio M. Guadalquiver President & CEO

Shipping, barging and tankering

PNOC DEVELOPMENT AND MANAGEMENT CORPORATION Herminio M. Alcasid President & CEO

Industrial estate development and management

PNOC RENEWABLES CORPORATION Carlos Gatmaitan President & CEO

Promote the development of renewable energy

PNOC EC is the upstream oil, gas and coal subsidiary of

the state-owned Philippine National Oil Company

(“PNOC”)

Involved in eight Petroleum Service Contracts and six Coal

Operating Contracts

Pioneered the use of natural gas for power generation –

operated the San Antonio Gas Plant, the country’s 1st gas-

fired power plant

PNOC EXPLORATION CORPORATION (PNOC EC) Who we are?

• Population is 100 million - Still growing at 2% per year (2 million/year)

• Growth projected to be 7.5% - ASEAN average is 5.5%

• Need a lot of energy to sustain growth

• No replacement for Malampaya

• Otherwise – power outages in the country

Philippines : At a Glance

2011 Philippine Energy Mix

39 % of the Philippines’ energy requirement comes from oil & gas

2011 Philippine Power Mix

47% comes from fossil fuels – more than half from coal

Biomass 0.2%

Wind 0.0%

Biodiesel 0.0%

Solar 0.0%

Fuel Oil 3.0 %

Diesel 0.9 %

Philippine Gas Scene

• 450 MMSCFD gas and 12,000 barrels condensate produced from the Malampaya Gas Field

• Transported to Luzon by a 500-km pipeline – the only pipeline infrastructure

• Gas generates 2,700 MW of electricity

• Supplies 40% - 50% of power requirement of Luzon where 50% of Filipinos reside

Philippines’ Only Gas Field

Malampaya Platform

Photos courtesy of SPEX

Malampaya Pipeline

Source: SPEX

Power Plants

1,000 MW Sta. Rita & 500 MW San Lorenzo

1,200 MW Ilijan Photos courtesy of SPEX

• Governed by Philippine Power Industry Reform Act

2001

– Free market competition

– Removal of subsidies; except for small island grids

– No policy on fuel mix for power generation

– No cap on coal-fired power plants

• The Law does not promote energy security

PHILIPPINE POWER INDUSTRY

• By law, 10% of demand should be traded in the spot market in

Luzon & Visayas

• 90% of demand under bilateral agreements (long term contract)

with private entities

• Efforts to amend the Power Industry Reform Act to ensure

energy security (more Government intervention)

PHILIPPINE POWER INDUSTRY

• Power rates are 2nd highest in Asia - next to Japan

• Coal is the default fuel - expected to reach 60% by 2016

• No subsidy on fuels except for the CNG for transport

• Expected power deficit in Luzon by 2015

PHILIPPINE POWER INDUSTRY - Consequences

Luzon Grid Supply-Demand Outlook (DOE Luzon Power Development Plan, 2012 - 2030)

Source: DOE, May 2013 ! Increase in coal capacity; flat for natgas

Current Industry Structure

Source: DOE, May 2013

• Philippines has been a gas producer since 1994

– San Antonio (1994-2008)

– Malampaya (2001 – 2024)

• Presently 100% of gas production from Malampaya

– 98% of production for 3 power stations

– 2% for industrial customer and CNG vehicle program

• Expected depletion in 2024

• Clamor for natural gas from the industrial sector

Demand exceeds supply

PHILIPPINE NATURAL GAS INDUSTRY

• No gas discoveries yet

• Several on-going LNG studies

• No regional gas pipeline network - only existing pipeline is from Malampaya

Onshore Gas Plant to customers

• 100 km Batangas to Manila (BatMan) gas pipeline by PNOC still a pipe dream

• No policy and regulatory framework for LNG – but there is a proposed bill

(“Natgas Bill”) to include imported gas (to filed soon)

• On-going Philippine LNG Master Plan by the DOE/PNOC

PHILIPPINE NATURAL GAS INDUSTRY

BATANGAS – MANILA

NATURAL GAS

PIPELINE ROUTE

South Luzon Expressway (14.6 km)

Southern Tagalog Arterial Road Extension (42.8 km)

SL Expressway Extension(7.2 km)

Sto. Tomas Interchange

Sambat Interchange

Bulihan Interchange

Tambo Interchange

Malainen Interchange

Batangas Interchange

Batangas Seaport

ZONE 2

ZONE 3

DPWH Diversion Road (4.2 km)

Tabangao – Sta. Rita Pipeline (6.3 km)

MALAMPAYA ONSHORE GAS PLANT

LNG will play an important role in securing the country’s future energy needs

• Low initial demand and long ramp-up period

• Competing with coal in the power sector

• Developing the market of the industrial sector

• Uncertainties on future policy and regulatory framework

• Developing the LNG infrastructure – pipeline network,

terminals

LNG CHALLENGES - Commercial

• Long lead-time in securing permits (Government bureaucracy)

– Over 2,000 permits needed for Malampaya gas project

• Need support and endorsement of:

– National government agencies

– Local government units

– NGOs

Solution : Create a one-stop shop agency

LNG CHALLENGES – Permitting

The Realities: • Gas is an essential component of our power sector -

responsible for supplying 30%-40% of Luzon’s power needs – where 50% of Filipinos live

• Production only from one field and no replacement

• Coal is not acceptable – gas is!

• If exploration efforts unsuccessful – need to import

• No government direct investment

• Make it easy for private parties to come in

• Malampaya will be depleted by 2024 – 10 years from now

• It took 10 years to develop and produce Malampaya

• Finalizing the LNG master plan

Start planning the LNG infrastructure now!

SC 38 (Malampaya) Project Timeline Against Socio-Economic Landscape

Global Financial Crisis

• Philippines will be importing natural gas soon

No replacement for Malampaya gas

Coal as default fuel - Environmental issues

Strong demand from industrial and power sectors

• Development of an LNG infrastructure is critical for a

successful LNG program

• Private-sector will take the lead - no direct investment from the

government

• There will be government incentives

• Government to integrate these projects based on LNG master

plan

CONCLUSIONS

Thank you