Industry Trend Analysis - Project Risks, Coal To Cap Stronger Gas Growth - FEB 2018

BMI View: The Philippines ' natural gas consumption will grow at an average rate of 5.0% over 2018-2026, as the start of LNG imports via Energy World ' s LNG import terminal allows consumption to surpass production for the first time, driving stronger growth across the power, transportation and residential sectors. Stronger growth will be capped by regulatory and infrastructural headwinds to LNG projects and competition from cheap coal.

The rapid depletion of output from the flagship Malampaya gas field represents a significant concern for the Philippines, as the mature field, which provides nearly all of its annual gas production, will be nearly depleted by the end of our 10-year forecast period. The lack of any significant new projects in the pipeline has led the Philippines to seek LNG imports for the first time to compensate for Malampaya's fall, and to ensure adequate supply for the domestic power, transportation and residential sectors.

First LNG imports will be conducted through Energy World Corporation's USD550.0mn Pagbilao LNG hub in Quezon, though start-up of the project, which will include a 4.1bcm regasification unit and a 650.0MW LNG-fired power plant, is now anticipated by 2018, instead of end-2016 as previously targeted. Despite ample funding from both the Development Bank of Philippines (DBP) and a consortium of local banks, the project has struggled to take off over the past few quarters, due to difficulty obtaining access to existing local transmission infrastructure, most of which is dominated by coal-fired power generators.

Malampaya Fall To Necessitate LNG Imports
Philippines - Natural Gas Production, Consumption & Net LNG Exports, bcm
Negative implies imports. f = BMI forecast. Source: JODI, BMI

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