First Gen unit to supply natural gas to Meralco from San Gabriel plant

MANILA, Philippines — A unit of Lopez-led First Gen Corp. has struck a deal with Manila Electric Co. (Meralco) to provide baseload power supply from its San Gabriel power plant in Batangas.

In a disclosure to the Philippine Stock Exchange, First Gen said its wholly-owned subsidiary First NatGas Power Corp. entered into a power supply agreement (PSA) with Meralco for the sale and purchase of approximately 414 megawatts (MW) of baseload capacity.

“With this PSA, Meralco secures competitively priced baseload electricity since San Gabriel’s all-in tariff at an 80 percent capacity factor is P3.77 per kilowatt-hour,” the company said.

The Lopez firm said supply would be sourced from the already constructed and currently operational 414-MW San Gabriel combined cycle natural gas-fired power plant located within the First Gen Clean Energy Complex in Batangas City.

Under the terms of the PSA, power from San Gabriel is actually available for purchase by Meralco immediately. However, the sale of electricity to Meralco will only commence upon its approval by the Energy Regulatory Commission (ERC).

The PSA will have a term of six years, or until Feb. 23, 2024, using gas from the Malampaya field, unless otherwise extended by the parties.

First NatGas and Meralco could extend the PSA upon mutual agreement “in the event that liquefied natural gas (LNG) becomes available.”

The contract for the Malampaya gas-to-power project offshore Palawan expires in 2024.

However, Shell Philippines Exploration B.V. (SPEX) – the operator of Malampaya with a 45 percent interest – said the project could still provide gas supply beyond the 2024 expiry of its contract, or until 2027 to 2029. But it needs to resolve its tax issue with the Commission on Audit, which said the project has a tax deficiency amounting to P53.14-billion.

Meanwhile, the Department of Energy (DOE) is pushing for the development of a liquefied natural gas (LNG) integrated terminal to develop the country as trading and trans-shipment hub in the Asia-Pacific region.

It has issued the Philippine Downstream Natural Gas Regulation (PDNGR), which details the rules and regulations governing the downstream natural gas industry to develop a market and gain energy security and sustainability.

The DOE has received interests from four groups including local firm Cleanway and UK-based Resiro, Japanese firm Tokyo Gas, Lopez-led First Gen Corp. and China National Offshore Oil Co. (CNOOC).

Meanwhile, state-run Philippine National Oil Co. (PNOC) was also tasked to put up an integrated LNG hub with storage, liquefaction, regassification and distribution facility, as well as a reserve initial power plant capacity of 200 MW.

First NatGas said the PSA “offers a number of benefits that will enhance the quality of Meralco’s power generation portfolio.”

Among these are competitive dependable baseload capacity, an immediate source of replacement power during outages of other baseload plants, and the option for mid-merit supply matched with Meralco’s ramping requirement since San Gabriel has the ability to rapidly ramp up and down upon notice.