The Philippines needs to attract major private investors with proven track records and expertise in the competitive liquefied natural gas (LNG) market because of the complicated and challenging nature of the business, says the regional expert on LNG of Dutch financial giant ING Bank.

LNG uses low temperatures to reduce the volumes that need to be transported, which is safer and more economical than using high compression pressures. However, the infrastructure involved in building a terminal to receive, store, regassify LNG imports, and its handling and shipping requires a significant investment because of the very low temperatures (minus 163 degrees Celcius), said Bruce Macfarlane, ING’s head of natural resources for Asia during a recent visit in Manila. The LNG expert worked on a number of ground breaking LNG deals in the Asia-Pacific region, including the first LNG import projects in China and India, and the first private sector import facility in Korea; and big-ticket deals in other areas such as the recently signed USD2.4-billion greenfield aromatics project in Singapore.

“The LNG market is high cost but delivers high value,” he stressed. Mr. Macfarlane estimated that the upfront investment for a single LNG terminal, depending on the configuration, could run up to USD450 million, while the specialized ships needed to transport the highly sensitive product could cost USD250 million each.

However, “there are ways to reduce the cost, such as having a floating facility where you store and regassify on board the ship,” said the Singapore-based Mr. Macfarlane.

Competition in the region’s LNG market is getting feverish. Investors are reportedly competing for approximately 40 additional LNG regasification terminal projects proposed or under construction in the region, including the Philippines.
 
The Department of Energy said the country has natural gas resources estimated at 2.135 trillion cubic feet and would need USD5 billion in fresh investments to fully develop its downstream natural gas industry.

ING’s Mr Macfarlane said having an LNG facility should boost the Philippines’ energy security as this will lessen its reliance on a single source – the Malampaya gas field off Palawan. “Once you’ve built the LNG import infrastructure, you can import LNG from Indonesia, Brunei, Russia, Australia, the Middle East. You’ve got many options and you’re not exposed to that single source,” he said.

He also said government negotiations with prospective investors in the LNG facilities come at the right time. "The Malampaya contract expires in 2024. It sounds like a long way to go, but if you want those facilities onstream in five years, you have to start negotiating today. So it’s the right time to be talking about it," he added.