Meralco, Aboitiz, SMC sign $3.3-billion deal to develop Batangas LNG hub

Three Philippine power companies—Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. and San Miguel Global Power Holdings Corp. (SMGP) - signed a $3.3-billion agreement on March 3 to jointly develop the country's "first and most expansive" liquefied natural gas (LNG) facility in Batangas province.

The project aims to boost energy security and promote cleaner energy sources.

"For the first time, three leading power companies are working together to secure the country's energy needs while transitioning toward cleaner power sources," SMGP president Ramon Ang said in a statement.

The agreement involves a joint investment by MGen and AboitizPower in SMGP's existing 1,278-megawatt (MW) Ilijan gas-fired power plant and a new 1,320-MW facility expected to be completed by year's end.

The companies will also acquire nearly 100% of the LNG import and regasification terminal owned by Linseed Field Power Corp., a subsidiary of global infrastructure firm Atlantic, Gulf & Pacific Co. This terminal received the country's first LNG cargo in April 2023.

The LNG facility will be used to receive, store, and process fuel for the two power plants, which supply electricity to the main island of Luzon.

"This is a pathbreaking venture," said MGen chairman Manuel Pangilinan. "Apart from transforming the energy landscape, it symbolizes a significant alliance among industry players toward a more sustainable future."

The project aligns with the Marcos administration's support for LNG as a transitional fuel during the country's shift toward renewable energy sources. While environmentalists argue LNG emits nearly as much carbon dioxide as coal, proponents believe it offers a cleaner alternative in the near term.

Once operational, the LNG facility is expected to add over 2,500 MW of generation capacity to the national grid.

"Both LNG and renewables are needed for a balanced energy mix and well-planned transition," said AboitizPower chairman Sabin Aboitiz. "This is a win for the Philippines and its people."

Power demand in the Philippines is expected to grow by 6.6% from 2023's 17,000 MW. As of August 2023, natural gas accounted for 13% of the country's installed capacity, with coal still dominant at nearly half.

The Department of Energy aims to increase the share of renewables in the energy mix from 22% to 35% by 2030 and 50% by 2040. The National Economic and Development Authority estimates the country needs P5.8 trillion in renewable energy projects to achieve the 2040 target.