PHL shift to LNG imports under threat from high gas prices
THE Philippines’ plan to import its natural gas needs following the depletion of the Malampaya field is being upended by the rise in natural gas prices, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
“The country is entering the global LNG market at a time of extreme uncertainty. Global LNG supply is constrained due partly to the Russian invasion of Ukraine, and LNG prices continue to hit record highs,” according to Sam Reynolds, an energy finance analyst writing in an IEEFA report.
IEEFA said that risks surrounding limited global LNG supply are expected to continue over the next decade, potentially derailing the Philippines’ growth plans, which are predicated on generating sufficient energy.
The market for gas was disrupted by the Ukraine war, which triggered sanctions on Russia and caused Europe to seek gas elsewhere in order to reduce dependence on Russian gas, sending prices upward.
Several LNG importing countries are protected by long-term purchase contracts, which require sellers to deliver LNG on a predetermined schedule and price formula. The Philippines, however, does not have any long-term contracts according to the International Energy Agency’s gas market update.
“This means that the country will be forced to outbid wealthy buyers in Europe and Northeast Asia for limited LNG supplies, exposing the country to high prices and extreme volatility. Without access to affordable fuel, LNG-to-power proposals in the Philippines could be delayed, canceled, or stranded,” IEEFA added.
IEEFA also said that the window of opportunity for LNG investment is closing quickly. It warned that inability to buy LNG at competitive rates could leave new terminals and LNG-fired power plants idle.
According to the Center for Energy, Ecology, and Development, the Philippines has 36.5 million tons per annum of LNG terminal capacity under development. The Philippines also has 29.9 gigawatts of gas-fired power projects.
San Miguel Corp. accounts for the largest share of the proposed capacity, while First Gen Corp. and Atlantic Gulf & Pacific International Holdings Pte. Ltd. were anticipated to commence commercial operations of LNG projects. — Ashley Erika O. Jose