POSTSCRIPT / August 13, 2009 / Thursday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Who’ll inherit PNOC gas-fired power plant?

WARNING: To northbound motorists on the North Luzon Expressway — Do not exit at Sta. Ines in Mabalacat. You will just get caught in horrendous traffic. Actually it is not traffic (which implies movement), but standing still while valuable time ticks by.

Two months ago, crews dug up the MacArthur Hiway-Sta. Ines intersection near the market. Then work stopped, leaving the torn-up intersection impassable. Commuters and residents at that vital crossroad are back to Mt. Pinatubo days when traffic stopped.

Talk has it that the money for the project had disappeared. As in the ambitious Subic-Clark-Tarlac expressway whose provisions for Clark exits had mysteriously vanished, the usual commissions must have eaten up part of the Sta. Ines funds.

Mad motorists and residents should call down the officials advertised on the tarpaulins claiming credit for the Sta. Ines project: President Arroyo, Secretary Hermogenes Ebdane, Rep. Carmelo Lazatin and Mayor Boking Morales. Macarine cayu!

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NG POWER PLANT: It puzzles many observers why publicly-listed Philippine National Oil Corp.-Exploration Corp., a government-owned firm, is poised to bid for the 300-megawatt excess capacity from the Malampaya deep-water gas-to-power project.

The PNOC-EC chairman, Jacinto Paras, has been quoted as saying they plan to buy the 600-mw banked gas from the government through the Department of Energy/National Power Corp. He said the gas supply would support the company’s gas pipeline projects.

The company has disclosed to the Philippine Stock Exchange that it was studying the feasibility of constructing a new power plant to serve as anchor load for the Batangas-Manila (Batman 1) and the Bataan-Manila (Batman 2) gas pipelines.

Based on its disclosure, PNOC-EC is eyeing sites in Batangas, Laguna and Cavite for the new natural gas power facility.

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REVERSE GEAR: While the government is selling off its power plants through public auctions in consonance with the Electric Power Industry Reform Act (Epira), PNOC-EC is going in the opposite direction.

The plan is not only in contravention of government policy spelled out in the Epira, but entails huge state borrowings that could worsen the budget deficit, now placed at more than P4.2 trillion, and add to other fiscal woes.

The government, through Napocor, has been selling its power assets to create an atmosphere of competition and level the playing field in the power sector. This makes energy experts suspicious of PNOC-EC going into power generation.

Proponents of Epira are saying that PNOC-EC’s entry into generation could impact on consumers’ electric bills, because of the ill effects of an inept government moving to dictate the cost of electricity.

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$450M TOO HEAVY: While there is need for government to look for alternative power sources, it should leave to the private sector the putting up of the new plant, preferably by open bidding.

Before he finally steps out of the National Economic and Development Authority, soon-to-go NEDA Director General Ralph Recto may want to review and explain the PNOC-EC plan together with Finance Secretary Margarito Teves.

Based on the rule of thumb that building a new power plant using natural gas requires $1.5 million for every megawatt capacity, the PNOC-EC plant whose potential could go as high as 300 mw could cost some $450 million, which looks too big for the debt-ridden nation to carry.

A Korean company studying a similar project used a factor of $2 million per megawatt, making a 300-mw natural gas plant cost $600 million. But equipment prices have gone down lately, making the $1.5 million/mw estimate more realistic.

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FAT PROFITS: Industry observers are watching closely, because after the government sticks its financial neck out to build the plant, it might then deliver the new money-maker to the usual crony, lock stock and barrel with a government guarantee to boot.

This calls to mind the bulk-water dam in Laiban, Rizal, that the Manila Waterworks and Sewerage System had been told to build in partnership with a private firm which had been guaranteed fat profits for 25 years after the Arroyo administration has bowed out.

Preparation of the terms of reference for the power project has started with the engagement of consultant services for a feasibility study on a “greenfield” power plant. (“Greenfield” means building from scratch as opposed to upgrading or rehabilitating an existing facility.)

Some power observers are suggesting, however, that PNOC-EC consider other options that limit government exposure — such as bidding it out to draw more interested parties and secure the most favorable business conditions.

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MALAMPAYA: The Batangas-Manila (Batman 1) gas pipeline mentioned earlier covers 100-kilometers. It drew interest from such investors as PTT of Thailand, Marubeni Corp. of Japan, Gazprom of Russia and Petrochina.

The Bataan-Manila (Batman 2) line involves also setting up a liquefied natural gas receiving terminal, conversion of the 620-mw Limay combined-cycle plant to gas-fired, the development of a greenfield gas-fired plant, and the laying and operation of a 140-km pipeline.

PNOC-EC has reported conducting survey/inspection of proposed sites for an LNG terminal and greenfield power plant, the Limay power plant and potential gas markets in Bataan, Zambales and Pampanga.

The company is in the consortium operating the Malampaya project with a 10 percent stake, along with Shell Philippines Exploration B.V. (45 percent) and Chevron-Texaco (45 percent).

Currently, the Malampaya project provides fuel for three natural gas power facilities in Batangas — Ilijan, Sta. Rita and San Lorenzo — with a combined capacity of 2,700 mw.

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(First published in the Philippine STAR of August 13, 2009)

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