House leader calls out delayed SMC project

September 12, 2022

Congress has called on the Energy Regulatory Commission and the Department of Energy to be proactive in ensuring energy security after a major liquefied natural gas facility project in Batangas encountered delays.

While keeping quiet on the culprit, House Committee on Energy vice chairperson Rodante Marcoleta said that the missed commitment may endanger natural gas plants amid the fast depleting Malampaya reserves.

Five power plants that run from natural gas — Avion, Ilijan, San Gabriel, San Lorenzo and Sta. Rita — provides 30 percent of the power supply in Luzon.

These facilities are shifting to imported liquefied natural gas that would need terminals to reconvert LNG into natural gas before these are supplied as fuel to the power plants.

Marcoleta said that the company which he did not name reneged on the agreement that it will put up an LNG terminal that will reprocess the imported fuel.

Marcoleta was likely referring to the delayed project of infrastructure giant Atlantic, Gulf and Pacific Company in a tie-up with San Miguel Corp. energy arm SMC Global Power.

The Department of Energy had directed the proponents to explain the deferred commercial operation date of the LNG terminal project.

The LNG complex had targeted commercial operations to start last August but it moved its opening to the end of the year.

Gas bottlenecks

It cited bottlenecks in the international gas market as a result of the lingering Eastern European conflict and the pandemic for the project’s delay.

The DoE is now requiring AG&P and SMC Global Power to submit a detailed list of “pending activities with timeline and justification as the basis for review and approval of the requested extension.”

The LNG project involves two phases starting with an offshore import facility with an initial capacity of 5 million metric tons a year. The next phase will be a longer-term development for an onshore terminal.

The LNG facility will supply the 1,200 MW Ilijan gas plant, the ownership of which was assumed by South Premiere Power Corp., and another 1,200 MW greenfield power plant that is targeting to start operations in 2024.

Both power facilities have long-term PSAs with distributor Manila Electric Company — with the existing Ilijan plant having a 10-year power supply contract; while the new Ilijan-2 plant has a 20-year off-take contract.

Ilijan, however, had ended a supply deal with the Malampaya consortium but it recently bought the government’s banked gas for $1.2 billion.

Malampaya, however, had committed all its banked gas production to the Lopez group’s natural gas plants for this year.

Marcoleta said the delay in the LNG terminal project may affect energy supply and prices.

“At the moment we don’t have a terminal but the plan has turned into buying a floating storage regasification vessel which is entirely different from putting up a terminal,” Marcoleta said.

“This will create a huge problem, with Malampaya which supplies about 20 percent of the country’s energy needs about to run out,” he added.

SMC Global Power plans to use LNG for its power plants to generate 20,550 megawatts of electricity.

It plans to transition its old coal plants with LNG-fed generating facilities.

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