First Gen in discussions with at least 20 LNG suppliers

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FIRST GEN Corp. is in talks with at least 20 suppliers of liquefied natural gas (LNG) and may consider among the options Tokyo Gas Co., Ltd., one of the oldest companies in the business, with which it is jointly building a receiving terminal for the imported fuel, a company official said.

“There may be some additional areas where we might cooperate with them. I think supply could be an option, but we haven’t made any decisions in that regard. And in order to work with them obviously, they would have to be able to demonstrate a competitive supply as compared to other alternatives,” Jonathan C. Russell, First Gen executive vice-president and chief commercial officer, told reporters on Tuesday on the sidelines of an event highlighting the turbines of Siemens Pte Ltd.

“Tokyo Gas is one of the oldest buyers of LNG in the world. I think they’re coming up to their 50th anniversary,” he said.

Tokyo Gas in December last year signed an agreement with First Gen to pursue the joint development of an LNG terminal within the Lopez-led company’s power generation complex in Batangas City.

“Tokyo Gas is involved with us as a partner in the development of the terminal, so they have a 20% stake in the terminal,” Mr. Russell said.


He said First Gen is talking to different suppliers “in excess of 20” and that the decision to choose one or more entity is not immediate.

“We are getting a good understanding on what they can do,” he said.

Mr. Russell said First Gen had separated the discussions with suppliers into long term, or from 2024 onwards, and short term or in time for the completion of a floating storage regasification unit (FSRU), a smaller scale facility that turns LNG back to its gas form. The liquefaction process allows natural gas to be condensed into liquid form and reduced in volume to ease its shipping.

He said if the company executes its plan to bring in an FSRU, it might look at bringing LNG earlier, by 2021 to 2024.

“The terms of supply for that period may be entirely different. So, we’re just working through the issues with different suppliers and we’re not ready to make any announcement or any decision on choosing a supplier,” he said.

“In the short term, I think that we will definitely look at both buying from spot from time to time and maybe a short-term contract with one or more suppliers but that is not decided yet,” he said.

The need for imported LNG comes as Malampaya gas, which fuels First Gen’s gas plants, is projected to run dry.

“The physical capability of Malampaya to supply gas is pretty much at the maximum. So in order to develop new additional capacity, we can’t rely on Malampaya anymore,” Mr. Russell said.

Earlier this month, Sempra LNG, LLC, a company that is pursuing five natural gas liquefaction facilities in the US, showed its facilities in Louisiana to reporters from Asia and Europe. The company has signed on companies with businesses in Asia as partners as well buyers of the LNG.

J.C. Thomas, director for external affairs at Sempra, said the group’s Cameron LNG joint venture facility in Louisiana features three liquefaction trains capable of producing 12 million tons per annum. The first train began producing LNG in 2019. The second and third trains are expected to begin producing LNG in 2020.

Outside the Lousiana project, Sempra LNG and a unit of Sempra Energy are developing a liquefaction project adjacent to the Energia Costa Azul (ECA) regasification terminal in Mexico.

Mr. Thomas said Sempra LNG has “preliminary agreements” with Total S.A., Mitsui & Co., Ltd. and Tokyo Gas partners and offtakers for the ECA project.

“We expect to make our final investment decision toward the end of this year, and then we’ll have our first LNG by 2023,” he said.

Asked whether the distance of the LNG source is factor in reaching a decision on a supply agreement, Mr. Russell said: “There’s now a wider range of sources than ever there was before. Whether or not LNG comes from the US, the fact that LNG from the US is in the market has changed the way LNG is priced.”

“The question for a company like us is do we buy from a seller that has a single source, for example the Gulf of Mexico, or do we buy from a portfolio player, which has a range of sources and then they will be the one to decide where the LNG physically comes from, but it can be against an agreed formula,” he said, adding that the options did not exist before.

“That’s exactly what we are trying to do — talk to each of the individual supplier and figure out what they can offer and how it can best fit what we are planning to do … and what the Philippine market needs,” he said. — Victor V. Saulon