Talk of building liquefied natural gas (LNG) receiving terminals in the Philippines has been ongoing for years. However, those talks mostly lead nowhere amid regulatory and financing hurdles, as well as companies trying to appease not only officials in Manila but provincial officials who often scared away international business with their under the table demands and rampant corruption. Now, however, changes are finally taking place that will alter these dynamics.

Earlier this month,  First Gen Corp. (First Gen), a leading clean and renewable energy company in the Philippines, said that construction of its $1 billion LNG terminal should begin by next year. The company added that the facility will help insure unhampered operation of its power plants when the country’s Malampaya natural gas fields, located offshore in the South China Sea, run dry in the next decade.

Estimates vary, but most experts claim that gas at Malampaya will be depleted within ten years. Malampaya supplies three gas-fired power plants, providing 40 to 45 percent of power generation requirements for Luzon – the country’s main island, which also includes Manila, the Philippine capital with an estimated population of 20 million people.

First Gen President Francis Giles Puno told reporters after a stockholders’ meeting this month that the company intends to keep a 50 percent stake in the project and give partners the other half, including a foreign investor. “The foreign partner will bring in the expertise in operating and maintaining the facility,” he said, although a final investment decision (FID) has yet to be made. He added that construction should begin by the second half of next year or early 2017 so that it will be ready by 2020 or 2021, before Malampaya is depleted by 2024.

First Gen’s regasification terminal is one of at least four such projects that would open the country’s doors to natural gas imports. In March, media in Manila said that Manila Electric Co. (Meralco), the country’s largest distributor of electricity, announced that it hoped to conclude talks for a joint venture (JV) for an LNG receiving terminal in the Philippines with Osaka Gas, Japan’s second largest natural gas supplier, before the end of the year. The project could cost up to $2 billion for the terminal and associated power plant with a capacity of 1,500 megawatts (MW) or more. The JV would include a regasification facility that would convert imported LNG to gas for delivery to the power plant.

Meanwhile, the country’s first LNG terminal is already nearing completion. Australian Stock Exchange listed Energy World Corp. (EWC) is looking to bring its LNG import hub and power plant on stream in Quezon province, just south of Manila, later this year. Shell Philippines, a subsidiary of oil major Royal Dutch Shell and operator of Malampaya, is also looking to set up a floating regasification facility near its Tabangao oil refinery in the Philippines.

However, several industry analysts both abroad and within the country are doubtful that other LNG projects can get off the ground. Chief among their concerns is the fact that coal-fired power is still much cheaper than LNG, therefore LNG is not competitive on a price basis in the Philippines. Also, the larger Marcelo-Osaka Gas plant may have trouble being built without massive government intervention in the market to make it happen since a $2 billion facility would mean that a lot of LNG needs to be imported, which also means that a large power plant is needed (maybe greater than 2,000 MW). This would ultimately need a long-term power purchase agreement (PPA) with a creditworthy offtaker (presumably Meralco).

Even if the larger Marcelo-Osaka Gas LNG project never comes to fruition, the EWC plan will soon come on stream as should the First Gen plant and possibly the floating regasification facility. The EWC plant will reportedly receive LNG from EWC natural gas fields, including those in Indonesia, but will also have to procure supply on the spot market. The First Gen plant will reportedly also secure supply mostly from the spot market.

This is good news for new LNG projects, particularly in Australia, that will be coming on stream soon amid a supply glut and plunging prices. With LNG prices in Asia off from around $20 MMBtu at the beginning of last year to just over $7 MMBtu at current prices, and more supply entering the market over the next several years, new projects will be hard pressured when signing long-term offtake agreements at these repressed prices. Increased spot demand from new LNG importers like the Philippines will offer ready markets for these new projects and help soak up excess supply.