7 May 2019
BRI-Backed Projects on Course to Tackle Philippines Energy Shortfall
State visit by Chinese President proves catalyst for raft of mainland-funded Philippines' oil and gas initiatives.
Following Chinese President Xi Jinping's visit to the Philippines in late November last year, there are clear signs new vigour has been breathed into the country's oil and gas sector. In particular, this official visit seems to have acted as a catalyst for a number of Philippines-based projects backed by China within the wider framework of the Belt and Road Initiative (BRI), both within and beyond the energy sector.
Among the many investment memoranda signed during the visit was a Memorandum of Understanding (MoU) with regard to joint maritime oil and gas exploration by China and the Philippines. This key agreement is seen as providing a roadmap for both countries to ultimately work together with regard to the exploration and development of the South China Sea's oil and gas reserves via their respective representative companies – in China's case, the China National Offshore Oil Corporation (CNOOC). To date, its Philippine counterpart has yet to be appointed.
Prior to Xi's visit, the signing of the MoU seemed far from certain, primarily due to concerns over its impact on the dispute surrounding the South China Sea islands, over which both countries claim sovereignty. Despite such concerns, the Philippines government ultimately agreed the MoU, largely because it paves the way to a solution to the country's long-term liquefied natural gas (LNG) supply problem.
Just one gas field currently supplies the country – the Malampaya gas field in Palawan. This is expected to be approaching exhaustion within three years, leaving the country's gas-powered energy sector, set to the south of Luzon island, with a major supply shortfall.
One new gas-fired plant – in the Pagbilao, Quezon province – is, however, expected to come online within the next 12 months. Work on the project by the Australia-listed Energy World Corp has only recently resumed, following a six month-delay triggered by several funding concerns, which are now said to have been resolved. Once in operation, its ongoing demand for LNG will be met via an adjacent processing hub, which is also being constructed by Energy World.
In a further move, the Philippines government is also looking to construct an additional LNG hub near Batangas City in Southern Luzon, which will act as the key conduit for the offshore gas required to run the region's power-generation facilities. This project, too, now seems to be suddenly back on track.
The first sign that that project was to go ahead came at the beginning of December when First Gen Corp – a major local player in the Philippine power-generation sector – signed a joint development agreement with Japan's Tokyo Gas Company with regard to the construction of the Batangas LNG terminal. Under the terms of the agreement, Tokyo Gas will take a 20% participating interest in the LNG project and will continue to provide support throughout the various stages of its development.
A few weeks later, again in the wake of Xi's visit, the Philippines Department of Energy gave the go-ahead for a second LNG terminal to be built at Batangas. This time, the appointed lead developer is the Tanglawan Group, a joint venture between Davao-based tycoon Dennis Uy's Phoenix Petroleum Corp and CNOOC. Uy is rapidly becoming the go-to guy for BRI projects in the country. Just last month, the Mislatel Consortium, a joint venture between his Udenna Corp and China Telecommunications Corp, won the contract to become the Philippines' third national telecom company.
Marilyn Balcita, Special Correspondent, Manila