Shell allots $1.2B for 2 big projects

By Neil Jerome C. Morales, The Philippine Star

Posted at Jun 20 2012 08:11 AM | Updated as of Jun 20 2012 09:18 PM

MANILA, Philippines - The local unit of global petroleum giant Royal Dutch Shell Plc. is investing close to $1.2 billion for two big-ticket projects in the Philippines.

The planned upstream and downstream oil projects are votes of confidence on the country’s good business climate and continuous economic expansion, a top executive said.

Shell country chairman Edgar Chua said the company is looking at spending around $1 billion for a liquefied natural gas (LNG) import and regasification terminal in Batangas.

“For the next three to four years, this will be the highest investment of Shell,” Chua said, adding that it will be one of their biggest investments in the Philippines.

Early this month, Shell signed a deal with the Philippine government for a joint technical feasibility study for an LNG terminal adjacent to Shell’s existing refinery.

Chua said Shell is looking to import LNG from Brunei, Indonesia and Australia.

“We have a system that enables us to source from a number of sources,” he said.

Potential customers of the LNG facility are natural gas-fired power plants and even small firms that want to shift to LNG from the more expensive diesel, Chua said.

The Philippine government has a $2.1-billion natural gas master plan, which includes the construction of an integrated Bataan LNG terminal and several LNG-fired power plants.

With the creation of the LNG import and regasification terminal, Chua said the Philippines will be at par in LNG technology and facilities compared with its Southeast Asian neighbors.

“The Philippines has always been a major market for Shell. With the developments in good governance and level playing field, we are putting in more money,” Chua said.

Furthermore, Shell is investing $100 to $150 million to upgrade its refinery in Batangas.

“We are upgrading so that we can produce products that will [comply with] more stringent specifications specially on lower sulphur,” Chua said.

While the upgrade will not increase the capacity of Shell’s refinery, the upgrade is a step closer to increasing output in the future, Chua said.

Shell is studying the necessary changes in the refinery that will allow Shell to meet the new Philippine National Standards for Euro IV grade diesel and gasoline set to take effect in 2016.

To date, Shell operates a refinery in Tabangao, Batangas with a capacity of 110,000 barrels per day.

Meanwhile, Shell is also looking new projects in the upstream oil industry.

“We continually look for service contracts where we may be able to add value... I think in the last round, we looked at some of the areas at that time but we are looking for additional areas,” Chua said.

The opening for bids in Areas 3, 4 and 5, which are adjacent to the resource-rich Spratlys Islands is also being claimed by China, is scheduled in July.

In July last year, the Department of Energy launched the Philippine Energy Contracting Round 4, offering 15 new gas exploration areas nationwide that will require around $7.5 billion in investments.

To date, Shell leads the consortium Shell Philippines Exploration B.V., which operates the Malampaya gas-to-power project in Northwest Palawan.

Chua said the company is also approached by holders of service contracts for a possible farm-in agreement.

“I think we are very lucky to be considered a partner of choice because we already have operations,” Chua said.