LNG players want more incentives, but MERALCO thinks otherwise

Companies involved in the up and coming liquefied natural gas (LNG) industry are seeking more incentives to help develop and sustain the country’s natural gas sector.

LNG industry players raised their incentive proposals during the recent joint hearing of the Senate energy and finance committees on Senate Bill No. 1819 or the proposed Midstream Natural Gas Industry Development Act.

First Gen Corporation Vice President Jerome Cainglet said his company submitted in June 2020 the proposed industry stimuli, which were not reflected in the draft bill. Based on Senate records, Sen. Sherwin Gatchalian, chairman of the energy committee the bill’s author, filed the proposed measure on September 8.

Cainglet hopes that the Senate would reconsider First Gen’s incentive proposal, which he strongly believes would stimulate the development of the LNG industry.

He pointed out that offtake agreements were put in place when the Malampaya gas project was being developed back in the 1990s. That way, power plants would be able to sell the electricity to meet commitments for the development of the country’s first and only indigenous gas source.

The Manila Electric Company (MERALCO), however, thinks otherwise.

MERALCO utility economics head Lawrence Fernandez said that there are more cost effective options available and that long term take or pay schemes could prevent the power industry from pursuing more efficient options. He added that the power giant is also extremely concerned with mandates like fuel mixes, as it overrules market forces.

Fernandez likewise stressed that the bill, if enacted into law, should also delineate the powers of involved agencies to prevent overlaps and gaps. It would also help, he said, if a separate agency for natural gas resources be created since LNG players are expected to be added over time.

The Department of Energy (DOE) is currently reviewing the notice to proceed applications of Shell Energy Philippines, Atlantic Gulf & Pacific, and Vires Energy. Meanwhile, Lopez-led First Gen, Lucio Tan’s Batangas Clean Energy, and two other firms were given the green light to proceed with their respective LNG ventures.

Photo from First Gen website.