First Gen weighing option for long-term LNG contracting
At A Glance
- First Gen's gas-fired power fleets include the 1,000-megawatt Santa Rita, 500MW San Lorenzo, 414MW San Gabriel and 97MW Avion facilities that have been utilizing both LNG and indigenous gas from the Malampaya field.
Following series of spot purchases, listed firm First Gen Corporation indicated that it is seriously weighing long-term contracting for liquefied natural gas (LNG) that it will be feeding for the electricity generation of its gas plants in Batangas.
According to First Gen Chairman and CEO Federico R. Lopez, the next delivery of imported LNG for the company will be coming from Shell, which will be another batch of shipment in its series of purchases since the full commercial operation of its LNG import facility last year.
“We just awarded one the other day to Shell, this latest one,” Lopez noted, specifying that the company still has leaning on spot purchases at this time.
First Gen’s gas-fired power fleets include the 1,000-megawatt Santa Rita, 500MW San Lorenzo, 414MW San Gabriel and 97MW Avion facilities that have been utilizing both LNG and indigenous gas from the Malampaya field.
He, nevertheless, qualified that “at some point, the country really wants to get the best benefit of LNG long-term contracting,” specifying that the market often presents better tenders for such type of gas procurements.
Lopez hinted they are studying prospects whether to consider tenders that are of five years duration; or even the longer ones which could go up to 10 years or even longer.
As gas buyer, he explained that First Gen can go to the market and seek offers from suppliers based on the volume as well as the terms that it would prefer for targeted LNG offtakes.
“You get better terms, and the country will get better terms and prices if you do it that way. I think that's really where we really need to head,” the First Gen top executive emphasized.
Conversely, he expounded that LPG spot purchases would not typically yield better terms for the buyer; but that had been resorted to by the company in the past months because of the deferred cost recovery on its LNG purchases.
“Right now, we're just all buying on spot…but you know, it's not the most efficient cost for the country. The country can do better if we all work together,” Lopez added.
To recall, the aggregate under-recoveries on its LNG purchases accrued to more than P2.0 billion because of the regulator-mandated deferment of its cost pass-on in the capacities that it had delivered to Manila Electric Company (Meralco) in recent months.