As the Philippines turns to liquefied natural gas (LNG) for power, BMI Research reports that the market shows positive signs.

The outlook for liquefied natural gas (LNG) is positive in the short term, reports BMI Research, a Fitch Solutions company. As power producers seek to expand the LNG import infrastructure for their existing gas-fired power plants, investments in LNG import terminals are growing. And while power producers have no long-term contracts for importation, short-term purchases from spot LNG markets are likewise set to grow.

Currently, power producer FirstGen operates four gas-fired power plants with a combined capacity of 2,017 megawatts (MW). San Miguel Global Power (SMCGP) also has a 1,313-MW LNG power plant at Ilijan in Batangas.

The Philippines began importing LNG upon completion of the PHLNG terminal in May 2023. Since then, both FirstGen and SMCGP have imported LNG on the spot market. Additional imports from other power producers, according to BMI, are unlikely until more LNG import terminals are completed. Thus, the research firm expects LNG imports to remain “subdued” until then.

Why LNG for Power?

Liquefied natural gas (LNG) is touted as a cleaner and more sustainable alternative to other fossil fuels. When used in power generation, LNG emits 45 to 55% less greenhouse gas emissions compared to coal. 

Natural gas can be cooled to form LNG for ease of transport and storage. Worldwide, LNG is used in power generation, in the transport industry, and for domestic use (heating and cooking).

Critics maintain that LNG still produces significant amounts of greenhouse gas emissions. LNG also poses other risks; when LNG leaks, it releases methane, a greenhouse gas, into the atmosphere. Critics also question policies that employ LNG imports as a transition to renewable sources of energy, when renewable energy has never been cheaper.

Malampaya Gas Project

The Philippines is a producer of natural gas, thanks to the Malampaya gas project. Potentially, this could reduce the need for power producers to import LNG. However, gas production from the facility is in decline. Production shrank by 21% year-on-year in the first quarter of 2024.

Prime Infrastructure Capital Inc., which has a 45% interest in the Malampaya gas project, plans to drill new wells in 2026. Any increase in domestic gas production thus hinges upon the discovery of additional gas reserves in the Malampaya gas field.

Steady Growth Forward

Growth in LNG-to-power is projected to rise on several fronts.

LNG imports are set to rise. BMI notes that none of the LNG importers have secured long-term purchase agreements. As such, First Gen has imported LNG from spot markets while SMCGP, through its subsidiary South Premiere Power Corp, has supply agreements with Vitol, Trafigura and Shell Eastern Trading.

Investments in LNG import infrastructure projects are also expected to rise. While two LNG import terminals have been completed, five more have been approved, according to the Department of Energy (DOE). Total LNG import capacity could increase to 22 mtpa once all five projects are completed. With this capacity in place, the LNG import market is primed for growth.