Philippines Courts China, Japan for $135 Billion Power Push

Philippines Courts China, Japan for $135 Billion Power Push

The Philippines is seeking investment from China and Japan for $135 billion
worth of power projects that President Rodrigo Duterte's government is ready
to fast-track.

The Southeast Asian nation has held discussions with China, Japan, Russia
and other countries about helping it boost generation capacity by 43
gigawatts in the coming decades to stabilize its power supply as the economy
expands, according to Energy Secretary Alfonso Cusi. Projects endorsed by
his office will be approved within 30 days under an order recently signed by
Duterte, instead of the months or even years it had taken proponents in the
past, he said.

"There's a lot of expressions of interest to invest in the Philippines, and
we're going to make it easy for investors," Cusi said in an interview
Wednesday in Taguig City. "We are open to all parties, all countries. In all
the trips we had, we made the sales pitch."

The world's two biggest economies after the U.S. have poured billions into
the region's energy development. Japan has either sponsored or financed 21
projects with a combined value of $23.7 billion that are currently under
construction or planned in Southeast Asia, while China has backed 21
projects worth $32.8 billion, according to BMI Research.

Duterte has tried to develop closer ties with China since taking power last
year as he seeks both new power plants and offshore gas resources,
particularly for the island of Luzon that accounts for about two-thirds of
the economy but has precarious electricity supplies. The forecast power
needed through 2040 -- roughly three times the generation capacity of
Singapore -- will support economic growth encouraged by airports, railways
and bridges that the president has promised to build, Cusi said.

The Philippines also plans to start building by next year a 100 billion-peso
($1.95 billion) liquefied natural gas terminal to supply plants that
generate a combined 3.5 gigawatts of power. The facilities now rely on the
Malampaya gas field off Palawan province, which is expected to be depleted
by 2024.

LNG Imports

The LNG terminal project, to be built in Batangas province south of the
capital Manila, will have an initial annual capacity of 5 million metric
tons when it starts by 2021 and will include a power plant with a capacity
of between 200 megawatts and 800 megawatts, Cusi said. It will later be
expanded to 10 million tons, as the nation has ambitions to be a LNG trading
hub for Asia, Cusi said.

Tokyo Gas Co., Osaka Gas Co. and Mitsui & Co. have been "nominated" by the
Japanese government for the LNG project, which will be developed by a
consortium headed by state-run Philippine National Oil Co., Cusi said.
Private Philippine companies are welcome to join, he added.

Tokyo Gas and Osaka Gas don't have firm plans to join Philippine power
projects, but are looking at the opportunity, spokesmen from both companies
said Thursday. The two firms, along with Mitsui, signed an agreement in June
to consider joining the LNG project, the spokesmen said. A spokesman for
Mitsui didn't respond to a request for comment.

China has committed to a $6 billion investment in the Philippine energy
sector. Building fossil fuel-fired power plants and renewable energy
projects were "extensively" discussed with Chinese companies, which were
also invited to take part in the LNG project, Cusi said.

The Philippines will decide on its LNG terminal partner this year. "I think
we can only marry one," Cusi said, when asked if both Japanese and Chinese
investors can be part of the consortium.

The Southeast Asian nation's total installed capacity rose 14 percent to
about 21.4 gigawatts last year, with Mindanao posting the highest growth at
31 percent, according to Department of Energy data.

That's left the southern island with a 33 percent power-reserve margin,
which measures the amount of maximum capacity available above peak demand.
Visayas has 22 percent, while Luzon only has 7 percent. The government is
planning to spend 52 billion pesos to link the three island regions so they
can share power, Cusi said.

South China Sea

"We are at that level where we have a very thin reserve," he said about
Luzon.

In the South China Sea, the Philippines wants to soon lift a moratorium on
oil and gas exploration as part of a "strategic, win-win" solution with
China.

Cusi said his office is seeking to allow a consortium led by PXP Energy
Corp. to resume drilling at Service Contract 72, which contains the
Sampaguita gas discovery that holds an estimated 11.4 trillion cubic feet of
reserves. The exploration area also includes the Reed Bank, claimed in part
by both countries.

"We would really like to be pragmatic in our approach" to joint exploration,
Cusi said. "Now, the pathway is becoming clearer."

The Philippines plans to sign a contract with China National Offshore Oil
Corp., which was never completed, for joint exploration in uncontested
areas, Cusi said. A spokesman for the Chinese company didn't respond to
requests for comment Thursday.

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Link to Original Article:
https://www.bloomberg.com/news/articles/2017-08-17/philippines-courts-china-
japan-for-135-billion-power-push

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com