A former energy official asked the government to declare liquefied natural gas as fuel of choice for power generation to promote the development of the emerging LNG industry.
"We can encourage building LNG or gas-fired power plants, but we need market or demand to come in, and only way to do that is perhaps to convince government to select LNG as a preferred fuel for purposes of building a power plant," said Jose Layug Jr., a senior partner at Puno & Puno Law Offices and a former undersecretary of the Department of Energy.
Layug made the comment during the LNG Opportunities in the Philippines 2021 webinar presented in cooperation with the Norwegian Embassy in Manila.
"So we’re hoping for that declaration of policy stating that LNG as preferred fuel, together with renewables of course, because both technologies have become much cheaper," Layug said.
He cited the recent successful bid of San Miguel Corp.'s Excellent Energy Resources Inc. to supply Manila Electric Co. 1,200 megawatts from its planned LNG power plant in Batangas at P4.10 per kilowatt-hour.
"In terms of total import capacity, there’s about 18 million tons per annum of LNG supposed to be built and that’s equivalent to about 10,900 MW," Layug said.
Seven companies expressed interest to build LNG import terminals. The first import terminal is seen to be completed next year. With more terminals to be built, fuel can be made available to LNG power plants, he said.
Layug said the challenge for the LNG market is that Meralco was planning to procure only 1,600 MW of baseload and mid-merit capacity in the next three years.
"There is a proposal of about 10,900 MW equivalent of LNG projects, but in next two to three years only 1,600 MW will be offered for PSA [power supply agreements]. We don’t want the market to have stranded assets at end of the day," he said.
Layug said the CSP rules for offtake agreements which are supposedly technology-neutral, are also rigid.
"In other words, if I am a distribution utility, I cannot go out for public tender and choose my technology. I would have wanted a cleaner fuel or natural gas or LNG but currently I am prevented from ding that," Layug said.
"Hopefully, than can be addressed where an unsolicited proposal for a specific technology can be submitted by an LNG player to a distribution utility and if accepted, can be subjected to a price challenge. That procedure is also a form of public bidding that has been recognized by the Supreme Court," he said.