First Gen picks Japanese firm as EPC contractor for LNG terminal

By Victor V. Saulon, Sub-Editor

FIRST GEN Corp. has chosen Japan’s JGC Corp. to handle the engineering, procurement and construction (EPC) of its liquefied natural gas (LNG) terminal project in Batangas City, the Lopez-led company said on Monday.

“This marks the conclusion of an extensive EPC tendering phase which commenced in 2014, during which around 22 companies were invited and 18 expressed an interest to participate in the tender process and work on the [FGEN Batangas LNG Terminal] Project,” it told the stock exchange.

First Gen is developing the project through its subsidiary FGEN LNG Corp., which completed pre-development work to make the site construction-ready. The unit held a groundbreaking ceremony in May this year at the First Gen Clean Energy Complex in barangays Sta. Clara, Sta. Rita Aplaya and Bolbok, Batangas City.

Jonathan C. Russell, First Gen executive vice-president and chief commercial officer, said the group was looking forward to working with JGC on the project, which the Department of Energy (DoE) certified last month as an “Energy Project of National Significance.” The certificate allows a faster permitting process, among other perks.

Mr. Russell said the LNG terminal is crucial to ensure the continued operations of the country’s 3.2-gigawatt existing natural gas-fired plants “given the expected and continuing reduction in gas supply from the Malampaya field up to the expiration of the contracts by 2024.”

Ahead of 2024, First Gen said its immediate focus, along with JGC, is to complete a detailed study on modifications that can be made to the group’s existing jetty that would allow the facility to receive large- and small-scale LNG vessels, and to continue to receive liquid fuel.

First Gen will then look to start building the modified jetty “as soon as possible.” The early completion of this work will allow bringing in a floating storage regasification unit (FSRU) on an interim basis during the Duterte administration.

“This would reduce the strain on Malampaya as its reliability continues to decline up to 2024, increasing the energy security of the Philippines and reducing the number of times that FGEN will be requested to run on liquid fuel when Malampaya gas is unavailable,” Mr. Russell said.

The FSRU will allow First Gen to receive LNG as early as 2021, or before the expiration of the Malampaya gas contracts. The LNG storage ship has an onboard regasification plant capable of returning the liquefied fuel back into a gaseous state. The gas can then be supplied directly to some or all of the company’s existing power plants.

Mr. Russell said the early completion of the facility would also enable LNG “to immediately become a fuel choice for any developer that is considering the building of new gas-fired power plants with a lower carbon footprint.”

The move will support the entry of more intermittent renewables as an alternative to building new coal-fired power plants and also offer a potential means for the Ilijan project to receive gas after its contract with Malampaya ends in 2022, he added.

First Gen described the project as possibly “the most significant energy infrastructure project to be undertaken in the Philippines in more than two decades.”

In March 2019, FGEN LNG received the formal approval of its application for a “notice to proceed” (NTP) from the DoE as defined in and required by the Philippine downstream natural gas regulation. The unit has requested the agency to extend its NTP by a further six months.

The entry of JGC comes after First Gen in December 2018 signed a joint development agreement with Tokyo Gas Co., Ltd., which is taking a 20% participating interest in the project. The signing is a preliminary agreement between the parties to jointly pursue development of the LNG terminal.

First Gen described JGC, as focusing on consulting, planning, basic and detailed design, materials and equipment procurement, construction, commissioning, operation and maintenance services for various process plant and facilities, as well as power generation investment and operation, and technology development services.

Established in 1928 in Yokohama, Japan, JGC is listed on the Tokyo Stock Exchange and has built more than 20,000 projects in more than 80 countries, it added.

“These projects have centered on the oil and gas sector, including oil, natural gas, petrochemicals, and gas chemicals, as well as a variety of other business sectors including energy infrastructure,” First Gen said.

On Monday, shares in First Gen rose by 1.14% to P26.70 each.