Final Report Mindanao Market Assessment

Mlndanao naLural Cas MarkeL uevelopmenL SLraLegy
llnal 8eporL

1he World 8ank

Canadlan Cas Servlces lnLernaLlonal
ulvlslon of ManlLoba Pydro lnLernaLlonal LLd.

211 Commerce urlve
Wlnnlpeg, M8 83 1A3, Canada

uaLe: uecember 2012

1hls reporL was prepared wlLh fundlng supporL from Lhe ubllc-rlvaLe lnfrasLrucLure Advlsory laclllLy (lAl), a mulLl-donor Lechnlcal asslsLance
faclllLy almed aL helplng developlng counLrles lmprove Lhe quallLy of Lhelr lnfrasLrucLure Lhrough prlvaLe secLor lnvolvemenL. lor more lnformaLlon on
Lhe faclllLy see Lhe webslLe: www.pplaf.org

Contents
1.0 Executive Summary .................................................................................................. 4
2.0 Introduction ................................................................................................................ 6
2.1. General ..................................................................................................................... 6
3.0 Competitive Fuel Prices ............................................................................................ 7
3.1. Fuels Potentially Convertible to Natural Gas ............................................................ 7
3.2. LNG Price Forecast .................................................................................................. 8
3.3. Pricing Calculations ................................................................................................ 10
4.0 Demand Assessment .............................................................................................. 11
4.1. Methodology ........................................................................................................... 11
4.2. Load Survey Results by Area ................................................................................. 11
4.2.1. Cagayan de Oro ........................................................................................... 12
4.2.2. PHIVIDEC ..................................................................................................... 12
4.2.3. Iligan ............................................................................................................. 13
4.2.4. Davao City .................................................................................................... 14
4.2.5. General Santos ............................................................................................. 14
4.3. Other Potential Sources of Demand for Natural Gas ............................................. 15
4.3.1. Cooling Load ................................................................................................ 15
4.3.2. Transportation Load ..................................................................................... 16
4.3.3. Other Demand on Mindanao or Elsewhere in the Philippines ...................... 16
4.3.4. Commercial Market Segment ....................................................................... 16
4.3.5. Bottled Compressed Natural Gas (CNG) ..................................................... 16
4.4. Aggregated Demand .............................................................................................. 17
5.0 Distribution Options ................................................................................................ 18
5.1. Introduction ............................................................................................................. 18
5.2. Infrastructure for Distributing Natural Gas .............................................................. 18
5.3. Recommended Distribution Options and Costs Northern Mindanao ................... 19
5.4. Recommended Distribution Options and Costs Southern Mindanao .................. 22
5.5. CAPEX and OPEX Assumptions and Limitations .................................................. 23
5.6. Preliminary Distribution Rate Estimates ................................................................. 23
5.7. Price Comparisons to Competitor Fuels ................................................................. 24
5.8. Financial Analysis Methodology ............................................................................. 26
6.0 Policy and Regulatory Analysis ............................................................................. 28
6.1. Overview ................................................................................................................ 28
6.2. Recommended Regulatory Framework .................................................................. 28
6.3. Project Driven Regulatory Model ............................................................................ 29

6.3.1. Introduction ................................................................................................... 29
6.4. Infrastructure To Be Regulated .............................................................................. 29
6.4.1. Gas Procurement ......................................................................................... 31
6.4.2. Pipeline Distribution System ......................................................................... 31
6.4.3. Marine and Truck Delivery Systems ............................................................. 31
6.4.4. Supply to Bottled CNG Distributors .............................................................. 32
6.5. Customers .............................................................................................................. 32
6.6. Regulation of Distribution Costs ............................................................................. 33
6.7. Regulation of Gas Supply Costs ............................................................................ 34
6.8. Safety Regulation ................................................................................................... 35
6.8.1. Natural Gas Pipeline Systems Standard ...................................................... 35
6.8.2. Gas Pipeline Excavation Regulations ........................................................... 35
6.8.3. Dangerous Goods Handling and Transportation of Petroleum Products ..... 36
6.8.4. Gas Fired Appliance Regulations ................................................................. 36
6.8.5. Workplace Safety and Health ....................................................................... 36
6.9. Role of Government ............................................................................................... 37
6.10. Regulatory First Steps ............................................................................................ 37
7.0 Conclusion ............................................................................................................... 38

APPENDICES
APPENDIX I Mindanao Load Survey Form
APPENDIX II Single Line Diagrams for Pipeline Distribution Systems
APEENDIX III Google Earth Images for Conceptual Pipeline System Routing

Canadlan Cas Servlces lnLernaLlonal - Mlndanao naLural Cas MarkeL uevelopmenL SLraLegy - llnal 8eporL
uecember 2012

1.0 Lxecut|ve Summary
1he World 8ank LasL Asla and aclflc SusLalnable uevelopmenL ueparLmenL engaged Canadlan Cas
Servlces lnLernaLlonal (CCSl") Lo compleLe a naLural Cas MarkeL uevelopmenL SLraLegy for Lhe lsland of
Mlndanao ln Lhe SouLhern hlllpplnes. 1here were Lhree componenLs Lo CCSl's work on Lhls pro[ecL
conslsLlng of a markeL demand assessmenL, ldenLlfylng, analyzlng and recommendlng opLlons for
dlsLrlbuLlng Lhe naLural gas on Lhe lsland, and ldenLlfylng key pollcy and regulaLory framework
requlremenLs Lo enable Lhe lmplemenLaLlon of Lhe pro[ecL. 1hls flnal reporL addresses all componenLs
of Lhls work.

1he World 8ank provlded CCSl a sLarLlng reference polnL ln ldenLlfylng Lhe locaLlon for Lhe LnC lmporL
Lermlnal and anchor load power planL. 8oLh Lhese faclllLles were ldenLlfled as belng locaLed ln or near
Lhe PlvluLC lndusLrlal ark near Cagayan de Cro. A Coogle LarLh map aL Lhe back of Lhls reporL
hlghllghLs Lhe approxlmaLe locaLlon of Lhe LnC lmporL Lermlnal.

CCSl's markeL demand assessmenL efforLs focused on Lhe PlvluLC lndusLrlal ark and clLles of Cagayan
de Cro, lllgan, uavao and Ceneral SanLos. Cver 30 of Lhe largesL cusLomers were assessed and surveyed
Lo deLermlne Lhe llkellhood of Lhem converLlng Lo naLural gas. 1he analysls showed LhaL 22 cusLomers
were llkely candldaLes Lo converL Lo naLural gas lmmedlaLely upon lL becomlng avallable. 1hls LranslaLes
lnLo an aggregaLe annual LnC load of approxlmaLely 110,000 Lonnes. 1he naLural gas dlsLrlbuLlon
sysLem opLlons consldered ln Lhls reporL focus on supplylng gas Lo Lhose 22 cusLomers whlle allowlng for
expanslon and fuLure load growLh. 1he Lable below provldes summary daLa on aggregaLe demand,
caplLal cosLs and operaLlng cosLs for Lhe areas of boLh norLhern and souLhern Mlndanao LargeLed for Lhe
lnLroducLlon of naLural gas Lo Mlndanao.

1ab|e 1. Summary kesu|ts of Market Survey and Infrastructure kecommendat|ons

Area
AggregaLe
Annual
Load (C!)
nC ulsLrlbuLlon Mode CaplLal CosLs
(uSu)
Annual
CperaLlng CosLs
(uSu)
Northern M|ndanao
Cagayan de Cro 2,439,633 lpellne 7,216,380 280,000
lllgan 440,313 lpellne, LnC 1ruck
and 2 saLelllLe LnC
laclllLles
3,463,000 477,000
Southern M|ndanao
uavao & Ceneral
SanLos
3,291,292 LnC 1rucks and
plpellne
11,824,000 6,200,000

1he Lwo ma[or load cenLres, locaLed ln Lhe norLh and souLh furLher lend Lhemselves Lo a Lwo phased
approach for Lhe lnLroducLlon of naLural gas. 1he PlvluLC lndusLrlal ark and Lhe clLles of Cagayan de
Cro and lllgan, glven Lhelr proxlmlLy Lo Lhe LnC lmporL 1ermlnal and proxlmlLy Lo each oLher could
comprlse Lhe scope of a phase 1 lnLroducLlon of naLural gas Lo Lhe lsland of Mlndanao. hase 2 could

uecember 2012

see Lhe expanslon naLural gas Lo Ceneral SanLos and uavao. 1he Lwo separaLe phases are noL
dependenL on each oLher and can elLher occur slmulLaneously or separaLely dependlng on Lhe deslres of
Lhe pro[ecL proponenLs. lL ls Lhe recommendaLlon of CCSl Lo make naLural gas avallable Lo Lhe
cusLomers ln norLhern Mlndanao as soon as pracLlcal followlng Lhe consLrucLlon and commlsslonlng of
Lhe LnC lmporL Lermlnal and LhaL provldlng naLural gas Lo souLhern Mlndanao be consldered as a
separaLe opLlon.

lL ls recommended LhaL Lhe hlllpplne governmenL esLabllsh a ro[ecL urlven 8egulaLory Model LhaL wlll
faclllLaLe Lhe lnLroducLlon of naLural gas Lo Mlndanao. Many aspecLs of Lhe ro[ecL urlven 8egulaLory
Model can be bullL lnLo Lhe lnlLlal conLracLs LhaL are used Lo develop Lhe requlred lnfrasLrucLure. AspecLs
of a formal regulaLory model can Lhen be developed over Llme ln a manner approprlaLe Lo Lhe evolvlng
markeLplace. lL ls nelLher necessary nor pracLlcal Lo Lhlnk LhaL Lhe hlllpplnes should develop a lormal
8egulaLory Model for Lhe dlsLrlbuLlon of naLural gas for elLher Mlndanao or Lhe enLlre counLry ln
advance of movlng forward wlLh such a relaLlvely small dlsLrlbuLlon neLwork as ls envlsloned for
Mlndanao.

uecember 2012

2.0 Introduct|on
!"#" $%&%'()
1he hlllpplne governmenL's ueparLmenL of Lnergy wlLh Lechnlcal asslsLance from 1he World 8ank
Croup and flnanclal asslsLance from 1he ubllc-rlvaLe lnfrasLrucLure Advlsory laclllLy has engaged
Canadlan Cas Servlces lnLernaLlonal (CCSl") Lo compleLe a naLural Cas MarkeL uevelopmenL SLraLegy
for Lhe lsland of Mlndanao ln Lhe souLhern hlllpplnes. 1he lnlLlal focus of Lhls work was a markeL
assessmenL of naLural gas poLenLlal demand ln uavao ClLy, lllgan ClLy, Cagayan de Cro, and Ceneral
SanLos. 1hls markeL assessmenL lncluded a load survey LhaL was conducLed wlLh large lndusLrlal
cusLomers. 1he markeL assessmenL was followed by an assessmenL of Lhe vlable opLlons avallable Lo
dlsLrlbuLe gas from an LnC Lermlnal Lo Lhe varlous cusLomer locaLlons. 1hese efforLs and Lhe ouLcomes
of Lhls work are summarlzed ln Lhls reporL. 1hls reporL also examlnes Lhe pollcy and regulaLory
frameworks LhaL wlll be requlred Lo fosLer lnvesLmenL ln Lhe lnfrasLrucLure LhaL wlll make naLural gas
avallable Lo buslness and lndusLry ln Mlndanao.

uecember 2012

3.0 Compet|t|ve Iue| r|ces
+"#" ,-%). /01%&12())3 40&5%'126)% 10 7(1-'() $(.
1he maln fuels currenLly ln use on Mlndanao LhaL are candldaLes for converslon Lo naLural gas are llghL
fuel oll (dlesel), resldual fuel oll (bunker fuel) and coal. 1he load surveys also lndlcaLed more llmlLed use
of kerosene and llquld propane gas (LC). 8elylng largely on prlce forecasLs by Lhe lnLernaLlonal Lnergy
Agency's (lLA) 2011 World Lnergy CuLlook (WLC), a compeLlLlve fuels prlce forecasL has been developed
for hlllpplne energy prlces from 2012 Lo 2033. 1he purpose of Lhls prlce forecasL ls Lo provlde a
plauslble range of expecLed LnC prlces, landed ln hlllpplnes and some comparable prlces ln Lhe
hlllpplnes of compeLlng fuel olls.

1he prlce ouLlook produced by Lhe lLA ln lLs WLC ls sLrucLured around Lhree prlclng scenarlos:
1he CurrenL ollcles Scenarlo (CS) whlch ls based on perpeLuaLlon, wlLhouL slgnlflcanL change,
of Lhe governmenL pollcles and measures LhaL are ln place ln 2011.
1he new ollcles Scenarlo (nS), whlch ls based on adopLlon of Lhe broad pollcy commlLmenLs
and plans LhaL have been announced by counLrles around Lhe world Lo Lackle energy securlLy,
cllmaLe change and local polluLlon, and oLher presslng energy relaLed challenges.
And, Lhe 430 Scenarlo (430S) whlch ls based on an energy paLhway conslsLenL wlLh a 30
llkellhood of meeLlng Lhe goal of llmlLlng Lhe lncrease ln average global LemperaLure Lo Lwo
degrees Celslus (2C), compared wlLh pre-lndusLrlal levels.

CCSl has based all of Lhe compeLlLlve fuels analysls on Lhe CurrenL ollcles Scenarlo. 1hls ls [udged
approprlaLe for Lwo reasons. llrsL lL reflecLs whaL ls, as opposed Lo whaL may be and second, lL produces
Lhe forecasL wlLh Lhe lowesL prlce spread beLween naLural gas, whlch ls Lhe cleanesL burnlng of all Lhe
fossll fuels, and Lhe peLroleum based fuels whlch produce more greenhouse gases when burned. lor Lhls
reason, Lhe CurrenL ollcles Scenarlo makes for a good base case" for Lhls pro[ecL as Lhe compeLlLlve
poslLlon of naLural gas wlll Lend Lo lmprove lf any pollcy acLlon ls Laken ln relaLlon Lo greenhouse gas
emlsslons.

1he WLC presenLs lLs prlce forecasLs ln $(uS) 2010 and $(uS) nomlnal, buL only provldes dlscreeL
forecasLs ln flve year lnLervals. 1he WLC forecasLs have been converLed from flve-year lnLervals Lo
annual forecasLs by llnear lnLerpolaLlon for Lhe lnLervenlng years. 8ecause Lhe lLA provldes forecasLs ln
real and nomlnal Lerms, Lhe WLC's lnLerpolaLed nomlnal prlce forecasL for 2012 ls Laken as Lhe base
prlce for $2012 prlces, whlch Lhen became Lhe basls for all forecasLs.

WLC provldes prlce forecasLs for naLural gas lmporLs lnLo Lhe uS (whlch would be roughly equlvalenL Lo
uS Penry Pub prlces) and lnLo !apan (based on an unspeclfled formula Lled Lo crude oll prlces). 1he
WLC's uS gas prlce forecasL ls dlrecLly used ln forecasLlng LnC prlces lnLo hlllpplnes, and Lhe WLC's
!apan prlce forecasL ls lndlrecLly used as a comparaLlve check on hlllpplne LnC prlces. ln addlLlon, Lhe
lLA forecasLs an average lmporL prlce for sLeam coal lnLo lLA counLrles. Whlle hlllpplnes may beneflL
from sllghLly lower landed coal prlces due Lo proxlmlLy Lo some ma[or coal exporLlng naLlon, Lhe lLA
forecasL ls used here as such dlfferences are noL expecLed Lo be maLerlal.

uecember 2012

Whlle crude oll prlces are qulLe LransparenL, peLroleum producL prlces are less LransparenL. 8ased on
lnformaLlon obLalned from confldenLlal Canadlan sources a proxy for hlllpplne peLroleum producLs
have been calculaLed as a percenLage of crude oll prlce plus a consLanL for LransporLaLlon Lo Lhe
hlllpplne markeL. 1hese values are 122 of crude oll prlces for llghL fuel oll or dlesel and 94 of crude
oll prlces for resldual fuel oll or bunker fuel.

+"!" 87$ /'29% ,0'%9(.1
8ased on Lhe daLa assumpLlons ouLllned above, Lhe forecasLed prlces are presenLed ln llgure 1, below.
1he LnC prlces ln llgure 1 conslsL of Lwo scenarlos, shown ln $/mmbLu $uS 2012). 1he Lwo scenarlos
are based on Lwo LnC prlclng formulas. 1he LnC rlclng formulas are ln Lhe form of ?=a*x + b, as
follows:

CaLarCas lormula = .134*!CC
1
plus $.60/mmbLu. 1hls ls a Lyplcal conLracL for sale of LnC Lo !apan, and
Lhe formula ls obLalned from a confldenLlal, buL rellable source. lf Lhe a" facLor ln Lhe formula were aL
Lhe energy converslon raLe beLween oll and gas (le, .1724), Lhe prlce of landed LnC ln !apan would
lncrease aL exacLly Lhe same raLe on oll prlce. 1he b" facLor has been reduced by $.26/mmbLu,
reflecLlng Lhe basls dlfferences beLween !apan and hlllpplnes relaLlve Lo CaLar.
2
CaLar ls now Lhe
world's largesL LnC exporLer.

CAlL lormula = 1.17*Penry Pub rlce plus $3.90. 1hls ls a new form of conLracL currenLly under
developmenL based on LnC exporLs from Lhe uSA Lo lndla, and ls obLalned from medla reporLs.
3
1he a"
facLor offers a premlum prlce Lo Lhe uS gas suppllers, and Lhe b" facLor covers Lhe full cosL of
llquefacLlon, LransporLaLlon and regaslflcaLlon. PlsLorlcally, Lhe lower 48 uS sLaLes have been gas
lmporLers, lncludlng LnC, noL exporLers, buL Lhls ls now changlng wlLh Lhe shale gas gluL on Lhe markeL
and low gas prlces.

1
!CC sLands for !apanese CusLoms-cleared Crude, whlch ls Lhe average prlce of cusLoms-cleared crude oll lmporLs
lnLo !apan (formerly Lhe average of Lhe Lop 20 crude olls by volume) as reporLed ln cusLoms sLaLlsLlcs, also known
by lLs nlckname Lhe !apanese Crude CockLall."
2
8ased on prlvaLe communlcaLlon wlLh energy economlsL !lm !ensen, lnLernaLlonal LnC experL, WesLon
MassachuseLLs, u.S.A.
3
See hLLp://www.reuLers.com/arLlcle/2012/01/16/lndla-lng-gall-lduSL3L8CC2x420120116

uecember 2012

I|gure 1: Iapan LNG r|ce Iorecasts - 52012]mmbtu

llgure 1 shows a comparlson of LnC prlces ln !apan, Lhe world's largesL LnC lmporLer, and an LnC prlce
seLLer for Lhe Aslan markeL. lL shows !apanese LnC prlces under Lhe above Lwo scenarlos, as well as Lhe
2011 WLC forecasL of !apanese LnC prlces. llgure 2 shows forecasLs prlces for LnC landed ln
hlllpplnes, and conLrasLs Lhese LnC prlce forecasLs wlLh Lhe forecasLed prlces for fuel olls and coal,
whlch would be Lhe prlnclpal compeLlng fuels wlLh naLural gas ln lndusLrlal markeLs. 1he LnC prlces ln
llgure 2 do noL lnclude Lhe 7 per cenL lmporL duLy LhaL currenLly applles Lo Lhe lmporL of LnC Lo Lhe
hlllpplnes. 1hls lmporL duLy exlsLs, buL ln pracLlce ls never collecLed as Lhere are currenLly no lmporLs of
LnC Lo Lhe hlllpplnes. CCSl has assumed LhaL lf Lhe governmenL wanLs Lo promoLe Lhe use of clean-
burnlng naLural gas as a caLalysL Lo economlc developmenL and Lo help lower Lhe operaLlng cosLs of local
lndusLry, Lhen Lhe ellmlnaLlon of Lhls lmporL duLy wlll be one componenL of Lhe governmenL's supporL
for Lhe developmenL of Lhls lndusLry.

I|gure 2: Iorecast h|||pp|ne Lnergy r|ces, 2012-203S

uecember 2012

+"+" /'292&: 4()9-)(120&.
Some general concluslons LhaL can be drawn from Lhe forecasLs deplcLed ln llgure 2:
luel oll prlces, boLh llghL and resldual, wlll be slgnlflcanLly hlgher Lhan naLural gas prlces under
each scenarlo. uependlng upon whlch of Lhe scenarlos ls selecLed, naLural gas wlll en[oy a prlce
advanLage ranglng beLween 10 and 32 over resldual fuel oll and beLween 28 and 46 llghL fuel
oll (commodlLy cosL landed ln Lhe hlllpplnes). 1hese prlce spreads are largely because Lhe lLA's
2011 WLC expecLs naLural gas prlces Lo conLlnue Lo be slgnlflcanLly dlscounLed relaLlve Lo oll
prlces.
Coal wlll conLlnue Lo be Lhe cheapesL fuel source, accordlng Lo Lhe lLA forecasLs. 1hls, of course,
ls before any carbon prlclng, whlch would be expecLed Lo dlsproporLlonaLely fall on coal prlces.
Whlle lL ls reasonable Lo expecL lncreaslng pressure Lowards and lncreaslng llkellhood of carbon
prlces belng adopLed over Lhls forecasLlng horlzon, lL ls very dlfflculL Lo esLlmaLe when Lhls may
happen ln counLrles llke hlllpplnes.
LnC prlces can be expecLed Lo grow ln real Lerms, buL llkely noL as rapldly as oll prlces, especlally
over Lhe nexL decade, aL leasL. 1hls should make LnC an aLLracLlve fuel opLlon for Lhe Mlndanao,
whlch wlll beneflL Lhe reglonal economy.

uecember 2012

4.0 Demand Assessment
;"#" <%1=0>0)0:3
1he demand assessmenL was conducLed over a flve-monLh perlod beglnnlng ln november 2011. CCSl
wlLh Lhe asslsLance of Lhe ueparLmenL of Lnergy (uoL) meL varlous sLakeholders ln Manlla, uavao ClLy,
lllgan ClLy, Cagayan de Cro (lncludlng Lhe PlvluLC lndusLrlal LsLaLe) and Ceneral SanLos. 1hese
sLakeholders lncluded governmenL deparLmenLs and agencles and varlous buslness groups ln each of Lhe
Mlndanao communlLles. 1hese meeLlngs were used Lo develop a LargeL llsL of buslness and lndusLry LhaL
were llkely Lo beneflL from Lhe avallablllLy of naLural gas as an energy source. 1hls lnformaLlon
supplemenLed Lhe prellmlnary research conducLed by Lhe consulLlng Leam, whlch lncluded boLh lnLerneL
research and personal communlcaLlon. lrom Lhls lnlLlal screenlng, a llsL of poLenLlal lndusLrles was
developed and ranked lnLo hlgh, medlum and low poLenLlal LargeLs.

1hrough boLh dlrecL and lndlrecL asslsLance from Lhe above-noLed buslness groups CCSl engaged wlLh
local parLles Lo conducL load surveys wlLh buslness and lndusLry LhaL comprlsed Lhe LargeL llsL of
poLenLlal end users of naLural gas. Surveyors used Lhe load survey form (a copy of whlch ls aLLached as
Appendlx l) developed for Lhe pro[ecL Lo collecL lnformaLlon each of Lhe lndusLrles' currenL energy
consumpLlon requlremenLs. ln some cases, Lhe lndusLrles were provlded Lhe survey form dlrecLly from
uoL or CCSl for self-compleLlon. ln elLher case, CCSl's hlllpplnes Lnergy LxperL aLLempLed Lo compleLe
a verlflcaLlon lnLervlew wlLh each of Lhe companles. SlgnlflcanL efforL was expended on Lhe verlflcaLlon
process ln order Lo ensure Lhe daLa would be of Lhe hlghesL posslble quallLy.

1he load survey form ldenLlfles exlsLlng energy use by fuel Lype and provldes an opporLunlLy for Lhe
company Lo ldenLlfy Lhelr lnLeresL ln swlLchlng Lo naLural gas based on varlous levels of cosL savlngs,
belng 0, 10, or 20. 1he opporLunlLy was also provlded Lo lndlcaLe where varlous processes are noL
candldaLes for fuel swlLchlng.

;"!" 80(> ?-'5%3 @%.-)1. 63 A'%(
8esulLs from each of Lhe flve areas have been summarlzed below. lor each of Lhese areas, a pro[ecLlon
has been made of Lhe annual consumpLlon forecasL for Lhose cusLomers who are expecLed Lo converL Lo
naLural gas wlLhln Lhe flrsL Lhree years of naLural gas belng avallable. 1hese flgures are shown ln Lhe
Annual" column. rocess loads for cusLomers were lncluded ln Lhe Annual column lf Lhelr deslred
savlngs could be achleved by subsLlLuLlng naLural gas for Lhelr exlsLlng fuels based on Lhe compeLlLlve
fuel assessmenL deLalled ln SecLlon 3. rocess loads where Lhe deslred fuel savlngs could noL be
achleved have been lncluded ln Lhe luLure" column.

ower generaLlon loads were generally excluded from Lhe lmmedlaLely converLlble loads as mosL
lndusLry ln Mlndanao currenLly malnLaln some form of backup power generaLlon. 1hls ls no doubL due ln
parL Lo Lhe someLlmes unrellable naLure of Lhe power sysLem ln Mlndanao. lrom Lhe load survey, lL ls
clear LhaL many of Lhese cusLomers run Lhls backup generaLlon frequenLly. 1hese loads have been
excluded under Lhe assumpLlon LhaL lf naLural gas flred generaLlon ls lnLroduced Lo Lhe mlx of
generaLlon servlng Lhe lsland, Lhen rellablllLy wlll be lncreased and Lhe need Lo run Lhese generaLors wlll
be decreased. Loads were only consldered lmmedlaLely converLlble lf a deLalled undersLandlng of Lhe
cusLomer's requlremenLs could be obLalned and power generaLlon lnsLalled ls lnLegral Lo Lhe cusLomer's

uecember 2012

operaLlons and noL slmply for back up. All oLher power generaLlon loads were lncluded ln Lhe luLure
caLegory.

Slmllarly, coollng loads were excluded from Lhe lmmedlaLely converLlble loads. 1hls ls because Lhe ablllLy
Lo converL Lo gas flred chlllers or coollng ls dependenL on more Lhan [usL wllllngness on Lhe parL of Lhe
cusLomer Lo converL. Cas flred chlllers are generally larger and heavler Lhan Lhelr elecLrlc equlvalenLs.
1herefore, Lhe cusLomer's physlcal planL musL be able Lo accommodaLe Lhe larger slze and welghL. ln
addlLlon, Lhe economlc advanLages of gas flred chlllers are noL sufflclenL Lo warranL Lhe replacemenL of
exlsLlng coollng sysLems unless Lhose sysLems are nearlng Lhelr end of llfe. CollecLlng Lhls sorL of deLalled
lnformaLlon was beyond Lhe scope of whaL could pracLlcally be collecLed by Lhe load survey. 1here were
some slgnlflcanL coollng loads ldenLlfled by Lhe load survey and lL ls reasonable Lo assume LhaL some of
Lhese cusLomers mlghL be lnLeresLed ln converLlng Lhese loads durlng Lhe flrsL Lhree years of Lhe
avallablllLy of gas, however ln order Lo malnLaln a conservaLlve approach Lo forecasLlng poLenLlal loads,
coollng load has only been lncluded under luLure Load.

4.2.1. Cagayan de Cro
1he ClLy of Cagayan de Cro ls Lhe reglonal cenLre of norLhern Mlndanao, slLuaLed along Lhe shores of
Maca[alar 8ay. 1he clLy's populaLlon ls ln excess of half a mllllon people and Lhe clLy ls a hub for buslness
and lndusLry. WlLhln Cagayan de Cro, 32 companles were ldenLlfled as poLenLlal users of naLural gas. Cf
Lhese, slx were ranked as hlgh poLenLlal and 14 were ranked as medlum poLenLlal. 1hese 20 formed Lhe
pool of companles LargeLed Lo compleLe Lhe gas demand survey. Surveys were compleLed wlLh four of
Lhe hlgh poLenLlal LargeLs and slx of Lhe medlum poLenLlal LargeLs.

1ab|e 2 - Cagayan de Cro Market Survey kesu|ts

Company
Ident|f|er
eak (GI]hr) Annua| (GIs) Iuture (GIs) Ind|cated Sav|ngs
1o Convert
CC01 34 30,068 232,000 20
CC03 131 21,081 1,233,789 30
CC04 167 42,497 - noL Speclfled
CC03 224 336,899 333,477 10
CC07 8 - 2,229 20
CC09 - - - noL Appllcable
384 630,343 2,043,493

4.2.2. nIVIDLC
1he PlvluLC lndusLrlal LsLaLe ls locaLed norLheasL of Cagayan de Cro ClLy along Lhe shores of Maca[alar
8ay and sLreLchlng lnland for several kllomeLers. 1he esLaLe lLself ls more Lhan 3,000 hecLares ln slze,

uecember 2012

maklng lL one of Lhe largesL lndusLrlal esLaLes ln Lhe hlllpplnes. lor Lhe purposes of Lhls sLudy, Lhe
lndusLry locaLed ln Lhe nelghbourlng communlLles of vlllanueva and !aasan have been lncluded ln Lhe
survey resulLs for PlvluLC. ln Lhls area, 26 companles were ldenLlfled as poLenLlal gas users. Cf Lhese,
14 were raLed as havlng elLher hlgh or medlum poLenLlal and were approached Lo compleLe Lhe survey.
LlghL of Lhese companles compleLed Lhe survey and Lhree of Lhose represenL a slgnlflcanL porLlon of Lhe
naLural gas poLenLlal ln norLhern Mlndanao.

1ab|e 3 - nIVIDLC Market Survey kesu|ts

Company
Ident|f|er
1o Convert
P02 113 617,998 323,603 0-20
P03 29 - 97,200 20
P08 - - - noL Appllcable
P09 - - - noL Appllcable
P11 191 1,039,722 382,731 0
P12 4 22,328 - 20
P13 26 4,328 391 10-20
P14 30 134,800 21,600 20
413 1,839,176 823,743

4.2.3. I||gan
lllgan ClLy ls locaLed approxlmaLely 40 km from Cagayan de Cro on Lhe easLern shores of lllgan 8ay. 1he
clLy has heavy lndusLrlal zones Lo Lhe norLh and souLh of Lhe clLy. 1here were nlne lndusLrles ldenLlfled
as poLenLlal users of naLural gas ln Lhe lmmedlaLe lllgan area. Cf Lhese, Lwo were ldenLlfled as hlgh
poLenLlal LargeLs and Lhe resL were [udged elLher medlum or low. Surveys were successfully compleLed
wlLh flve of Lhe nlne companles ldenLlfled.

1ab|e 4 - I||gan C|ty Market Survey kesu|ts

Company
Ident|f|er
1o Convert
lC04 23 133,900 - 20
lC03 11 69,938 2,309 noL Speclfled
lC06 - - 3,370,000 10
lC07 36 202,300 1,700,000 20
lC09 3 14,173 83 20
404,313 7,073,094*
* ApproxlmaLely 7 mllllon C!s ldenLlfled as luLure poLenLlal relaLes Lo coal consumers who lndlcaLed a
mlnlmum of 10 savlngs Lo converL. As Lhese savlngs wlll noL occur under currenL pollcles, Lhese
volumes have noL been facLored lnLo deslgn opLlons ln Lhe subsequenL sLages of Lhe reporL.

uecember 2012

4.2.4. Davao C|ty
uavao ClLy ls a vlbranL reglonal hub. AL nearly 1.3 mllllon people, lL ls Lhe largesL clLy ln Mlndanao. ln
uavao ClLy and Lhe lmmedlaLely surroundlng reglon, 32 companles were lnlLlally ldenLlfled as poLenLlal
users of naLural gas. Cf Lhose, four were ranked as hlgh poLenLlal and nlne were ranked as medlum
poLenLlal. 1he large number of low poLenLlal LargeLs ls parLlally due Lo Lhe relaLlvely hlgh number of
hoLels and shopplng malls, LhaL are poLenLlal markeLs buL prlmarlly for Lhelr coollng loads. All of Lhe 13
LargeLs ldenLlfled as elLher hlgh or medlum poLenLlal were lnLervlewed and compleLed load surveys,
however lL was laLer undersLood LhaL one of Lhe companles surveyed only malnLalns an offlce ln uavao
ClLy and does noL have any operaLlons ln Lhe reglon. 1he largesL load cenLres ln uavao are locaLed aL Lhe
clLy's ouLsklrLs or beyond resulLlng ln a very dlspersed dlsLrlbuLlon of load maklng Lhe avallable opLlons
for servlng Lhls load challenglng.

1ab|e S - Davao C|ty Market Survey kesu|ts

Company
Ident|f|er
1o Convert
uA01 19 43,231 - 20
uA02 6 31,668 2,228 20
uA03 - - 4,380,000 10
uA04 2 12 - 20
uA03 23 - - Wlll noL ConverL
uA06 13 1,370 28,231 20
uA07 2 1,934 - 20
uA08 40 - 112,264 20
uA09 7 - 3,441 Wlll noL ConverL
uA10 36 146,060 216,000 10
177 226,473 4,764,623*

*4,380,000 C!s relaLed Lo currenL coal consumpLlon has been excluded from Lhls LoLal and from deslgn
assumpLlons

4.2.S. Genera| Santos
Ceneral SanLos ClLy and Lhe surroundlng reglon ls home Lo slgnlflcanL fresh seafood processlng and
cannlng lndusLrles. lnland aL olomolok Lhere ls also agrlculLural processlng lndusLrles lncludlng fresh
frulL and meaL processlng. 1he nearby communlLy of Alabel ls home Lo a small elecLrlc power generaLlng
sLaLlon. ln Ceneral SanLos, 32 companles were lnlLlally ldenLlfled as poLenLlal users of naLural gas. Cf
Lhose, 9 were ranked as hlgh poLenLlal and 24 were ranked as medlum. lL was declded LhaL Lhese 33
companles would consLlLuLe Lhe survey LargeLs ln Lhls reglon. Survey compleLlon was 100 per cenL of Lhe
hlgh poLenLlal lndusLrles and 46 per cenL of Lhe lndusLrles ldenLlfled as medlum poLenLlal.

uecember 2012

1ab|e 6 - Genera| Santos Market Survey kesu|ts

Company
Ident|f|er
1o Convert
CS01 133 216,000 328,048 noL Speclfled
CS02 13 - 87,617 20
CS03 16 - 38,181 20
CS04 14 - 144,381 20
CS03 4 432 131 20
CS06 3 630 133 noL Speclfled
CS07 14 - 8,003 20
CS08 46 9,301 176 10
CS09 3 - 144,000 noL Speclfled
CS10 3 723 12,404 noL Speclfled
CS12 36 176 293,611 30
CS13 18 72,900 1,207 20
CS14 1 - 360 20
CS13 9 - 43,020 20
CS16 14 - 260,393 20
CS17 12 706 43,947 20
CS18 14 12,768 33,698 10
CS19 29 - 12,182 10
CS20 6 1,161 6,606 10
CS21 322 2,730,000 - 10
714 3,064,817 1,700,340

;"+" B1=%' /01%&12() ?0-'9%. 0C D%E(&> C0' 7(1-'() $(.

4.3.1. Coo||ng Load
ln addlLlon Lo Lhe lnformaLlon on coollng load collecLed on Lhe load survey, Lhe sLudy Leam also accessed
daLa from an ongolng sLudy on commerclal and lndusLrlal chlllers belng conducLed by Lhe hlllpplne
ueparLmenL of LnvlronmenL and naLural 8esources (uLn8). ln Lhe lndusLrlal secLor, coollng load conslsLs
prlmarlly of refrlgeraLlon appllcaLlons ln Lhe food processlng lndusLrles, whlle ln Lhe commerclal secLor
coollng load conslsLs prlmarlly of alr condlLlonlng. 1he uLn8 survey covers prlmarlly shopplng cenLres
and hoLel complexes LhaL were noL covered ln Lhe load survey for Lhls sLudy. 1he uLn8 daLa shows
approxlmaLely 100,000 C!s annual equlvalenL coollng load from commerclal cusLomers ln Cagayan de
Cro, and approxlmaLely 300,000 C!s annual equlvalenL ln uavao ClLy. 1o daLe, Lhe uLn8 has noL
collecLed daLa ln Ceneral SanLos or lllgan. 1he load survey showed slgnlflcanL lndusLrlal coollng load ln
Ceneral SanLos, prlmarlly ln Lhe seafood processlng lndusLry, buL also ln oLher secLors of Lhe food
processlng lndusLry. 1he poLenLlal coollng load ldenLlfled ln Ceneral SanLos by Lhe load survey alone
exceeds 400,000 C!s annual equlvalenL.

uecember 2012

4.3.2. 1ransportat|on Load
1he LransporLaLlon markeL ls anoLher vlable source of demand for naLural gas. Powever, LransporLaLlon
has been a dlfflculL markeL for naLural gas Lo crack even ln norLh Amerlca where naLural gas ls relaLlvely
lnexpenslve and plenLlful. 1he LradlLlonal markeL for alLernaLlve LransporLaLlon fuels such as naLural gas
has been fleeL vehlcles LhaL reLurn Lo a cenLral locaLlon each nlghL for refuelllng. 8uses, garbage Lrucks,
dellvery Lrucks and Laxls have been some of Lhe earllesL adopLers of naLural gas for vehlcles. naLural gas
for vehlcles has LradlLlonally been ln Lhe form of compressed naLural gas, Lhough Lhe Lechnology
allowlng Lhe use of LnC dlrecLly ln vehlcles has also been commerclallzed.

As naLural gas ls falrly sLralghLforward converslon from LC, Lhose segmenLs of Lhe LransporLaLlon
markeL LhaL have already converLed Lo LC are a parLlcularly aLLracLlve segmenL. Cn Mlndanao, Lhls
segmenL ls prlmarlly Laxl cabs. ln Lhe uavao reglon, where Lhere are nearly 4,000 Laxl cabs, more Lhan 33
per cenL of Lhose Laxls have been converLed Lo LC. ln Cagayan de Cro, Lhere are abouL half Lhe number
of Laxls as ln uavao and a smaller share, less Lhan 10 per cenL, have been converLed Lo LC. lnLerclLy
busses represenL anoLher poLenLlal for converslon. 1here are approxlmaLely 1,300 lnLerclLy busses
operaLlng ln Mlndanao. Whlle LransporLaLlon represenLs an addlLlonal poLenLlal markeL, Lhere would be
slgnlflcanL addlLlonal work requlred Lo develop Lhe relaLed lnfrasLrucLure and Lechnlcal experLlse
requlred Lo make Lhls markeL vlable.

4.3.3. Cther Demand on M|ndanao or L|sewhere |n the h|||pp|nes
Whlle Lhe scope of Lhls assessmenL was conflned Lo Lhe flve areas deLalled above, Lhese flve areas are
noL Lhe only poLenLlal demand cenLers on Mlndanao. CLher poLenLlal cusLomers and lndusLry clusLers
were ldenLlfled ln 8uLuan, 8ukldnon and Zambongua and cerLalnly as Lhe avallablllLy of naLural gas
comes closer Lo belng a reallLy, Lhere wlll be Llme Lo explore Lhese poLenLlal markeLs. 1he sLudy Leam
dld make a prellmlnary examlnaLlon of all Lhree of Lhese markeLs and Lhe one LhaL offers Lhe greaLesL
poLenLlal ls Zambongua by vlrLue of a slngle power generaLor LhaL ls currenLly flred wlLh bunker fuel, buL
ls easlly converLlble Lo naLural gas. Slmllarly, an LnC Lermlnal locaLed ln norLhern Mlndanao could easlly
serve saLelllLe locaLlons on oLher lslands of Lhe hlllpplne archlpelago.

4.3.4. Commerc|a| Market Segment
1he ma[orlLy of Lhe poLenLlal demand for naLural gas ln Lhe commerclal segmenL comes from Lhe coollng
load dlscussed above. Powever boLh cooklng and waLer heaLlng represenL addlLlonal poLenLlal
commerclal loads LhaL could be economlcally served, parLlcularly where Lhese loads occur ln slgnlflcanL
concenLraLlons such as hoLel complexes and shopplng malls or resLauranL dlsLrlcLs.

4.3.S. 8ott|ed Compressed Natura| Gas (CNG)
1he poLenLlal also exlsLs for Lhe developmenL of markeL for compressed naLural gas sold and dlsLrlbuLed
ln boLLles or Lanks for boLh Lhe resldenLlal and small commerclal markeL. As noLed ln Lhe LransporLaLlon
secLlon above, LC Lo naLural gas converslons are very slmple and cosL effecLlve. MarkeL forces wlll
deLermlne lf Lhere ls markeL for Lhe dlsLrlbuLlon of boLLle CnC elLher ln compeLlLlon wlLh boLLled LC or
compllmenLary Lo Lhls exlsLlng markeL.

uecember 2012

;";" A::'%:(1%> D%E(&>
Whlle Lhese oLher sources of demand for naLural gas dlscussed above are poLenLlally slgnlflcanL, Lhey
have noL been accounLed for dlrecLly ln Lhe assessmenL of Lhe aggregaLed demand, nor have Lhey been
facLored ln dlrecLly Lo Lhe deslgns conLemplaLed Lo serve Lhe load ln Mlndanao. Powever, lL ls equally
unreasonable Lo assume LhaL all ldenLlfled load ls llkely Lo converL Lo naLural gas, parLlcularly ln Lhe shorL
Lerm. lor deslgn purposes, Lhe enLlre Annual load ls assumed Lo converL and half of Lhe luLure load ls
assumed Lo converL. ln addlLlon, a furLher unspeclfled luLure" load equal Lo half of Lhe luLure load has
been added for deslgn purposes.

1ab|e 7 - M|ndanao Aggregated Annua| Demand (|n GIs and |n 1onnes of LNG)
Locat|on Annua| Iuture Unspec|f|ed
Iuture
Northern M|ndanao

!asaan Lo Cagayan de Cro 2,439,633 1,262,020 1,262,020
lllgan 440,313 831,347 831,347
Northern M|ndanao 1ota| 2,880,166 2,113,S67 2,113,S67
Northern M|ndanao |n 1onnes of LNG S1,9S8 38,129 38,129
Southern M|ndanao
Ceneral SanLos, olomolok & Alabel 3,064,817 830,270 830,270
uavao 226,473 192,312 192,312
Southern M|ndanao 1ota| 3,291,292 1,142,S82 1,142,S82
Southern M|ndanao |n 1onnes of LNG S9,272 20,612 20,612
1C1AL 6,171,4S8 3,2S6,149 3,2S6,149
1C1AL |n 1onnes of LNG 111,230 S8,741 S8,741

uecember 2012

S.0 D|str|but|on Cpt|ons
F"#" G&1'0>-9120&
ln deLermlnlng Lhe opLlmum dlsLrlbuLlon sLraLegy and lnfrasLrucLure requlremenLs Lo serve Lhe
ldenLlfled cusLomers on Lhe lsland of Mlndanao, CCSl consldered and evaluaLed Lhe Lrucklng of LnC and
CnC, Lhe lnsLallaLlon of lsolaLed underground plpellne neLworks and Lhe LransporLaLlon of naLural gas ln
LnC form vla marlne barges. CaplLal and operaLlng cosLs for Lhese modes of dlsLrlbuLlon were
consldered.

ln general Lerms dlsLrlbuLlng naLural gas vla plpellne ls Lhe mosL economlc meLhod of dlsLrlbuLlon. Whlle
caplLal cosLs are someLlmes hlgher, plpellnes en[oy low operaLlng cosL and are an efflclenL way Lo dellver
gas over shorL dlsLances, and, dependlng upon Lhe volume, over long dlsLances as well.

F"!" G&C'(.1'-91-'% C0' D2.1'26-12&: 7(1-'() $(.
naLural Cas ulsLrlbuLlon lnfrasLrucLure CpLlons - Ma[or ComponenLs
lLem # ComponenL uescrlpLlon
1 lpellnes 1he maln plpellne from Lhe LnC recelvlng Lermlnal ls
recommended as a sLeel plpellne operaLlng aL 19 8ar
(283 psl). 1he laLeral servlce llnes Lo cusLomers can
elLher be comprlsed of polyeLhylene or sLeel dependlng
on Lhe dellvery pressure Lo Lhe cusLomers. Cenerally
speaklng Lhree opLlons exlsL for Lhe maLerlal used ln
plpellne sysLems. Medlum uenslLy olyeLhylene whlch ls
used for plpellnes where an operaLlng pressure of less
Lhan 80 psl ls requlred,Plgh uenslLy olyeLhylene plpe
whlch ls used where operaLlng pressure beLween 80 psl
and 123 psl are requlred, andSLeel lpe, whlch ls used
where operaLlng pressures above 123 psl are requlred.
2 ulsLrlcL ressure 8educlng SLaLlons ressure reduclng sLaLlons LhaL are lnsLalled wlLhln a
plpellne neLwork Lo reduce supply pressures from a
feeder plpellne for dlsLrlbuLlon of Lhe naLural gas lnLo a
lower pressure plpellne sysLem LhaL feeds more Lhan
one cusLomer.
3 CusLomer 8egulaLlng and MeLerlng
laclllLy
ls an assembly lnsLalled aL Lhe cusLomer's premlse LhaL
reduces pressure for flnal dlsLrlbuLlon wlLhln Lhe
cusLomer's faclllLy and measures gas dellvered Lo Lhe
cusLomer for bllllng purposes.
LnC 1ruck
4 An LnC Lanker Lruck LransporLs naLural gas ln llquld
formaL from Lhe bulk Lermlnal Lo a sLorage and
regaslflcaLlon faclllLy servlng one or more cusLomers.
1he naLural gas ls LransporLed aL approxlmaLely mlnus

uecember 2012

162 degrees celslus. A Lanker wlLh slze Lyplcally varylng
from 13 m
3
Lo 36 m
3
ls Lowed by a Lruck elLher fuelled by
dlesel or naLural gas.
LnC SLorage and vaporlzaLlon
3 LnC SaLelllLe SLorage A LnC saLelllLe sLorage faclllLy wlll have one or more
cryogenlc (nlckel sLalnless) sLorage Lanks. 1hese Lanks
are Lyplcally a cyllnder, wlLh sLalnless lnLerlor shell and a
sLeel ouLer shell wlLh lnsulaLlon or vacuum ln beLween.
uependlng on slze Lhey may be conflgured elLher
verLlcally or horlzonLally.
vaporlzer
6 SaLelllLe vaporlzer 1here are many vaporlzer Lypes buL for Lhe appllcaLlons
ln Lhls pro[ecL elLher alr or hoL waLer ls llkely Lo be Lhe
medlum used Lo vaporlze Lhe LnC. Cas flred vaporlzers
were chosen for Lhls appllcaLlon. Cas flred vaporlzers
have lower caplLal cosL buL hlgher operaLlng cosL Lhan
uslng alr. 1hey have fewer problems Lhough slnce when
Lhe LnC passes Lhru Lhe flnned Lubes for heaL exchange
a feedback conLrol sysLem can conLrol Lhe waLer
LemperaLure. lor alr, Lhe flnned Lube heaL exchanger can
lce up. vaporlzers are slzed Lo meeL Lhe peak hour
demand and also have backup capaclLy.

7
F"+" @%90EE%&>%> D2.1'26-120& BH120&. (&> 40.1. I 70'1=%'& <2&>(&(0

uue Lo Lhe number of lndusLrlal cusLomers, Lhe proxlmlLy of Lhese cusLomers Lo each oLher, and Lhe
proxlmlLy of Lhese cusLomers Lo Lhe recelvlng Lermlnal, Lhe poLenLlal cusLomers ln Lhe PlvluLC area are
ldeally sulLed Lo be served from a naLural gas plpellne dlsLrlbuLlon sysLem.

A plpellne sysLem of approxlmaLely 27.4 kllomeLers ln lengLh ls proposed Lo serve a clusLer of cusLomers.
1he cusLomers Lo be servlced from Lhls plpellne are ouLllned ln 1ables 2 and 3 of Lhe uemand
AssessmenL SecLlon of Lhe reporL. A slngle llne dlagram lndlcLlng plpe slzes and pressures ls conLalned ln
Appendlx ll and Lhe concepLual rouLlng of Lhe plpellne ls lllusLraLed ln Lhe Coogle LarLh lmage conLalned
ln Appendlx lll.

1he concepLual plpellne sysLem proposed by CCSl ls capable of supplylng a peak load of 30,000 m3/hr
wlLh an lnleL pressure from Lhe LnC vaporlzaLlon faclllLy of 19 bar (approxlmaLely 283 psl). 1he plpe
slzes and caplLal cosLs are shown ln Lhe Lable below. 1he concepLual plpellne sysLem ls deslgned Lo
serve Lhe currenL poLenLlal peak hourly load of approxlmaLely 23,630 m3/hr and leave a resldual
capaclLy of approxlmaLely 6,330 m3/hr for fuLure load growLh.

1ab|e 8 - nIVIDLC D|str|but|on Infrastructure, Cap|ta| and Cperat|ng Costs

uecember 2012

Item Descr|pt|on ty (M)
Un|t Cost
(USD)
1ota| Cost
(USD)
1 4 lnch SLeel lpe 400 78 31,200
2 6 lnch SLeel lpe 3,430 112 386,400
3 8 lnch SLeel lpe 13,270 140 2,137,800
4 10 lnch SLeel lpe 6,820 183 1,248,060
3 12 lnch SLeel lpe 1,300 218 327,000

Sub-1ota| |pe||nes 27,440 4,130,460

6
LaLeral Servlce Llnes and CusLomer MeLerlng
& ressure 8educlng SLaLlons
6 200,000 1,200,000

Sub-1ota| Serv|ces 1,200,000

Sub-tota| Mater|a| and Labour S,330,460

7 MarkeLlng (3 ) 1S9,914
8 Lnglneerlng (3 ) 266,S23
9 ConsLrucLlon MgmL (8 ) 426,437
10 ConLlngency (10 ) S33,046
11 CaplLal Allowance for SLarL-up of CperaLlons S00,000

nIVIDLC 1ota| Cap|ta| Costs 7,216,380

nIVIDLC Annua| Cperat|ng Cost Lst|mate 280,000

1he MarkeL uemand AssessmenL ldenLlfled four (4) cusLomers ln lllgan LhaL could be served by naLural
gas. 1hese cusLomers are 110 kllomeLers from Lhe LnC lmporL 1ermlnal / naLural gas supply source.
CCSl consldered Lhree opLlons for supply Lhe naLural gas:
1. A plpellne from Lhe LnC lmporL 1ermlnal Lo end use cusLomers,
2. CnC LransporLed vla Lruck and Lraller comblned wlLh a LoLal of four (4) kllomeLers of dlsLrlbuLlon
plpellne, and
3. LnC LransporLed vla Lruck and Lraller comblned wlLh a LoLal of four (4) kllomeLers of dlsLrlbuLlon
plpellne.

1he flrsL opLlon, of uslng a plpellne Lo supply Lhe naLural gas, was ruled ouL early due Lo Lhe hlgh caplLal
cosL of runnlng Lhe plpellne Lhe lengLh requlred Lo servlce Lhe relaLlvely small requlremenLs of Lhe lllgan

uecember 2012

cusLomers. 1he cuL-off polnL on feaslblllLy of CnC versus LnC supplled by Lruck and Lraller ls known Lo
be 100-130 km's where below Lhls dlsLance Lhe feaslblllLy favours supply by CnC and above Lhls dlsLance
Lhe feaslblllLy favours supply by LnC. Clven lllgan ls exacLly on Lhe cuL-of dlsLance of Lhe Lwo opLlons
Lhe economlcs of boLh opLlons are consldered Lo be equal. CnC would have lower caplLal cosLs buL
hlgher operaLlng cosLs Lhan LnC, buL over a reasonable pro[ecL llfespan Lhe cosLs of boLh are
comparable aL Lhls dlsLance. A ma[or conLrlbuLor Lo Lhe hlgher operaLlng cosLs of CnC ls Lraller capaclLy.
CnC Lrallers have a maxlmum capaclLy of approxlmaLely 13 m
3
of LnC equlvalenL versus Lhe 36 m
3

capaclLy of Lhe LnC Lraller. 8ased on Lhe above CCSl used Lhe LnC supply opLlon Lo deLermlne cosLs for
supplylng naLural gas Lo Lhe cusLomers ln lllgan as Lhe LnC supply opLlon has Lhe added flexlblllLy Lo acL
as a saLelllLe supply Lermlnal for oLher cusLomers furLher ouL from lllgan and Lhese added cusLomers
could be served elLher vla LnC or CnC. 1he demand ln lllgan can be served from one LnC 1ruck and
1raller. CCSl has added Lhe cosL of a second Lraller Lo Lhe esLlmaLe for securlLy of supply lssues ln case
Lhe case of requlred malnLenance and repalrs Lo Lhe prlmary LnC Lraller.

1he concepLual deslgn Lo serve Lhe four cusLomers ln lllgan conslsLs of Lwo saLelllLe LnC Lermlnals and
Lwo secLlons of polyeLhylene dlsLrlbuLlon plpellne LoLalllng 4 kllomeLers ln lengLh. lor recelvlng Lhe 36
cube (cublc meLer) dellvery recommended ln Lhls reporL, Lwo 120 cube sLorage Lanks would seem Lo be
opLlmum for Lhe saLelllLe locaLed on Lhe souLh slde of Lhe clLy. Cne 120 cube Lank (or smaller) would
saLlsfy Lhe oLher locaLlon on Lhe norLh slde of Lhe clLy. 1he componenLs of Lhe sysLem and assoclaLed
caplLal cosLs are shown ln Lhe Lable below.

1ab|e 9 - I||gan D|str|but|on Infrastructure, Cap|ta| and Cperat|ng Costs

Item Descr|pt|on ty
Un|t Cost
(USD)
1ota| Cost
(USD)
1 LnC 1ruck and 1raller 2 430,000 900,000
2 Spare LnC 1raller 1 230,000 230,000
3 LnC SaLelllLe 1ermlnal 2 1,010,000 2,020,000
4 6 lnch olyeLhylene lpe 4000 m 32 208,000

Sub-tota| Mater|a| and Labour 3,378,000

3 MarkeLlng 2S,000
6 lpellne Lnglneerlng 2S,000
7 lpellne ConsLrucLlon MgmL 3S,000

I||gan 1ota| Cap|ta| Costs 3,463,000

I||gan Annua| Cperat|ng Cost Lst|mate 477,000

As wlll be deLalled ln Lhe dlsLrlbuLlon cosLs secLlon, Lhe dlsLrlbuLlon opLlons ouLllned for boLh PlvluLC
and lllgan show very favourable economlcs and llkely form a loglcal flrsL phase for naLural gas
dlsLrlbuLlon for Mlndanao. luLure phases wlll Lake longer Lo develop as Lhey requlre Lhe developmenL of

uecember 2012

local marlne dlsLrlbuLlon from Lhe LnC Lermlnal ln norLhern Mlndanao Lo reglonal hubs for furLher
dlsLrlbuLlon.

F";" @%90EE%&>%> D2.1'26-120& BH120&. (&> 40.1. I ?0-1=%'& <2&>(&(0
CCSl consldered Lhree opLlons for supply Lhe naLural gas Lo uavao and Ceneral SanLos:
1. A plpellne from Lhe LnC lmporL 1ermlnal aL PlvluLC and runnlng overland Lo end use
cusLomers ln uavao and Ceneral SanLos,
2. LnC LransporLed vla Lruck and Lraller comblned wlLh a LoLal of approxlmaLely LwenLy (20)
kllomeLers of dlsLrlbuLlon plpellne, and
3. LnC LransporLed vla barge Lo a reglonal saLelllLe Lermlnal locaLlon ln Ceneral SanLos area and
Lhen dlsLrlbuLed Lo cusLomers ln Lhe uavao and Ceneral SanLos area vla plpellnes and LnC
Lrucks.

CCSl recommends Lhe maln supply of LnC for Lhe uavao and Ceneral SanLos areas be supplled vla LnC
Lrucks loaded aL Lhe maln Lermlnal ln PlvluLC and rouLed Lo saLelllLe Lermlnals locaLed ln uavao and
Ceneral SanLos.

1he flrsL opLlon, of uslng a plpellne from Lhe maln lmporL Lermlnal Lo supply Lhe naLural gas, was ruled
ouL early due Lo Lhe hlgh caplLal cosL of runnlng Lhe plpellne Lhe lengLh requlred Lo servlce Lhe uavao
and Ceneral SanLos cusLomers. 1he Lhlrd opLlon of uslng a sysLem of barges Lo LransporL Lhe LnC was
ruled ouL afLer some sLudy due Lo Lhe complexlLles LhaL exlsL wlLh Lhls mode of LransporL. AlLhough
Lechnology has evolved slnce Lhe early days of uslng barges Lo LransporL LnC, Lhere remaln challenges
wlLh Lhls Lype of LransporL and for LhaL reason lL ls noL wldely used Loday. Marlne opLlons Lo serve Lhe
souLhern half of Lhe lsland are llkely Lo emerge overLlme as a beLLer way Lo serve Lhls markeL,
parLlcularly lf oLher local markeLs such as Cebu are Lo be developed. Powever, aL Lhls Llme, Lhe second
opLlon of uslng LnC Lrucks loaded aL PlvluLC and Lravelllng overland Lo Lhe uavao and Ceneral SanLos
area provldes Lhe mosL cosL effecLlve and proven meLhod of LransporL and Lherefore ls Lhe opLlon CCSl
recommends.

1he Lable below summarlzes Lhe caplLal cosLs assoclaLed wlLh Lhe recommended opLlon.

1ab|e 10 - Davao and Genera| Santos 1ransportat|on and D|str|but|on Infrastructure, Cap|ta| and
Cperat|ng Costs

Item Descr|pt|on ty
Un|t Cost
(USD)
1ota| Cost
(USD)
1 LnC 1ruck and 1raller 7 430,000 3,130,000
2 LnC SaLelllLe 1ermlnal 3 1,010,000 3,030,000
3 6 lnch olyeLhylene lpe 20,000 m 32 1,040,000
4 LaLeral Servlce Llnes Lo CusLomers 10 200,000 2,000,000

Sub-tota| Mater|a| and Labour 11,240,000

uecember 2012

3 MarkeLlng (3) 91,200
6 lpellne Lnglneerlng (3) 1S2,000
7 ConsLrucLlon MgmL (8 ) 243,200
8 CaplLal Allowance for SLarL-up of CperaLlons 2S0,000

Davao ] Gen San 1ota| Cap|ta| Costs 11,824,400

Southern M|ndanao Annua| Cperat|ng Cost Lst|mate 6,200,000

F"F" 4A/JK (&> B/JK A..-EH120&. (&> 82E21(120&.
1he CALx and CLx esLlmaLes prepared for Lhls sLudy are dlrecLlonal ln naLure and based upon
concepLual deslgns as opposed Lo deLalled deslgns. 1hey have been complled ln order Lo provlde an
esLlmaLe of Lhe cosLs for Lhe dlsLrlbuLlon of naLural gas and Lo asslsL ln calculaLlng Lhe esLlmaLed
feaslblllLy of naLural gas as an alLernaLlve energy sources. lL has been necessary Lo make assumpLlons
regardlng maLerlal and labour prlclng as well as slLe lnfluences.

Cpex for Lhe plpellne sysLems has been assumed aL approxlmaLely 2.3 of caplLal cosLs. Cpex esLlmaLes
for Lhe LnC were esLlmaLed based on Lhe Mlndanao pump prlce for dlesel fuel and Lhe fuel usage raLes,
drlver wage raLe ($10/hr), lnsurance lncludlng llablllLy for flammable goods Lransfer, rouLlne
LracLor/Lraller malnLenance, LracLor englne replacemenL and mlscellaneous. 1racLor fuel was Lhe blggesL
componenL maklng up approxlmaLely 60 of Lhe operaLlng cosL.

As for Lhe LnC saLelllLe Lermlnal operaLlng cosLs lL was esLlmaLed beLween 2-3 of LnC volume was
requlred Lo fuel Lhe vaporlzers and prlced lL aL $13/C!, operaLor/malnLenance wages aL $10/hr, 2 of
lnlLlal caplLal cosLs for varlous and sundry annual malnLenance and admlnlsLraLlon requlremenLs, and
llablllLy lnsurance cosLs. LlablllLy lnsurance for 363d/year for flammable llqulds sLorage and Lransfer was
Lhe blggesL porLlon of Lhe operaLlng cosL and lLs approxlmaLe lmpacL.

unlL cosLs are based on currenL pro[ecL conLracL cosL daLa avallable Lo CCSl wlLh ad[usLmenLs for Lhe
locaLlon of Lhls pro[ecL. CllenL cosLs, approvals, land leases, rlghL of way permlLs, llcenses eLc. are
excluded. CCSl assumes LhaL aL Llme of lnsLallaLlon a Lenderlng process would be used Lo obLaln besL
value.

F"L" /'%)2E2&('3 D2.1'26-120& @(1% J.12E(1%.
ln order Lo summarlze Lhe manner ln whlch pro[ecLed demand wlll lnLegraLe wlLh pro[ecLlons for caplLal,
operaLlng and commodlLy cosLs Lo culmlnaLe ln a dellvered cosL of gas Lo Lhe end consumer, CCSl has
conducLed some prellmlnary raLe analysls for Lhe recommended hase 1 reglons of Cagayan de Cro
(lncludlng Lhe PlvluLC lndusLrlal LsLaLe), and lllgan. ln boLh cases Lhe analysls reflecLs Lhe cosL of gas,
LogeLher wlLh Lhe cosL of Lhe dlsLrlbuLlon lnfrasLrucLure. 1he cosLs assoclaLed wlLh Lhe LnC Lermlnal are
noL reflecLed ln Lhe pro[ecLed raLes alLhough Lhe World 8ank has calculaLed LhaL Lhe LhroughpuL cosL
assoclaLed wlLh Lhe Mlndanao LnC Lermlnal should be ln Lhe range of uSu 1 per mmbLu.

uecember 2012

lor Cagayan de Cro, Lhe dellvered cosL of gas ls pro[ecLed Lo commence aL uSu 13.80 per mmbLu ln ?ear
1, lncreaslng Lo uSu 18.30 ln ?ear 20. Cver Lhe 20 year analysls perlod, Lhe prlce ls pro[ecLed Lo average
uSu 13.27 ln 2013 dollars. Cf Lhls LoLal, approxlmaLely $12.93 ls aLLrlbuLable Lo Lhe commodlLy, whlle
Lhe remalnlng $.32 ls allocaLed Lo Lhe cosL of Lhe dlsLrlbuLlon lnfrasLrucLure. 1he reallzaLlon of poLenLlal
fuLure demand, as reflecLed ln 1ables 2 and 3 would have Lhe effecL of reduclng Lhe presenL value of
LhaL componenL of Lhe cosL of gas LhaL ls aLLrlbuLable Lo Lhe dlsLrlbuLlon lnfrasLrucLure.

lor llllgan, Lhe dellvered cosL of gas ls pro[ecLed Lo commence aL uSu 13.37 per mmbLu ln ?ear 1,
lncreaslng Lo uSu 20.90 ln ?ear 20. Cver Lhe 20 year analysls perlod, Lhe prlce ls pro[ecLed Lo average
uSu 14.67 ln 2013 dollars. As was Lhe case wlLh Cagayan de Cro, approxlmaLely $12.93 of Lhls LoLal ls
aLLrlbuLable Lo Lhe commodlLy, whlle Lhe remalnlng $1.72 ls allocaLed Lo Lhe cosL of Lhe dlsLrlbuLlon
lnfrasLrucLure. Clven Lhe slgnlflcanL poLenLlal fuLure demand ln llllgan, as reflecLed ln 1able 4, Lhere ls
an opporLunlLy for LhaL porLlon of Lhe raLe allocaLed Lo Lhe dlsLrlbuLlon lnfrasLrucLure ln fuLure years Lo
be only a fracLlon of Lhe currenL $1.72 pro[ecLlon.

1hls same prellmlnary raLe analysls has been prepared for SouLhern Mlndanao. lor Ceneral SanLos and
uavao, Lhe dellvered cosL of gas ls pro[ecLed Lo commence aL uSu 16.43 per mmbLu ln ?ear 1, lncreaslng
Lo uSu 21.97 ln ?ear 20. 1he 20 year average prlce ls pro[ecLed Lo be uSu 13.73 ln 2013 dollars. As ln Lhe
prevlous cases, approxlmaLely $12.93 of Lhls LoLal ls aLLrlbuLable Lo Lhe commodlLy cosL, wlLh $2.80 ls
allocaLed Lo Lhe cosL of Lhe dlsLrlbuLlon lnfrasLrucLure.

F"M" /'29% 40EH('2.0&. 10 40EH%1210' ,-%).
ln secLlon 3.2, Lhe charL ln llgure 2 showed forecasLed prlces of LnC, dlesel, bunker oll, and coal. 1hese
same prlce forecasLs are represenLed ln Lable formaL below. 1hese comparaLlve cosLs provlde a valuable
plcLure of Lhe relaLlve cosL of Lhese varlous energy sources, however Lhey are somewhaL llmlLed ln Lhelr
uLlllLy ln LhaL Lhey do noL Lake lnLo accounL dlsLrlbuLlon cosLs.

1ab|e 11 - r|ce Compar|sons to Compet|tor Iue|s

h|||pp|ne Landed Costs of LNG, Iue| C|| and Steam Coa|, Current
r|ces Scenar|o, |n USD per mmbtu
CaLargas LnC CAlL LnC LlghL lC 8esldual lC SLeam Coal

2012 17.19 12.89 24.03 19.11 4.13
2013 18.23 13.37 23.43 20.27 4.19
2014 19.30 13.83 26.87 21.44 4.23
2013 20.33 14.34 28.30 22.60 4.28
2016 20.79 14.39 28.90 23.09 4.31
2017 21.23 14.83 29.49 23.38 4.33
2018 21.67 13.10 30.09 24.07 4.39
2019 22.11 13.33 30.68 24.33 4.42
2020 22.33 13.61 31.28 23.04 4.46
2021 22.89 13.81 31.73 23.42 4.49

uecember 2012

2022 23.23 16.01 32.21 23.80 4.32
2023 23.38 16.20 32.68 26.18 4.33
2024 23.92 16.40 33.14 26.36 4.38
2023 24.26 16.60 33.60 26.94 4.61
2026 24.33 16.80 33.97 27.24 4.64
2027 24.80 17.00 34.33 27.34 4.67
2028 23.07 17.20 34.70 27.83 4.69
2029 23.33 17.39 33.06 28.13 4.72
2030 23.60 17.39 33.42 28.43 4.74
2031 23.81 17.76 33.70 28.66 4.76
2032 26.01 17.93 33.98 28.88 4.78
2033 26.22 18.10 36.26 29.11 4.80
2034 26.42 18.27 36.34 29.34 4.82
2033 26.63 18.44 36.81 29.37 4.84

ln order Lo provlde a more meanlngful comparlson of Lhe cosL of energy dellvered Lo Lhe cusLomer, CCSl
conLacLed some of Lhe Mlndanao lndusLrles lncluded ln Lhe demand assessmenL survey and obLalned,
on a confldenLlal basls, acLual fuel cosLs pald by Lhese cusLomers ln mld-2012. 1hese dellvered fuel cosLs
and Lhe correspondlng dellvered cosLs of LnC are provlded ln Lhe Lable below. 1hese cosLs are excluslve
of Lhe 12 percenL vA1, as Lhe vA1 ls ulLlmaLely credlLed back Lo Lhese lndusLrles aL Lhe Llme Lhey sell
Lhelr end producL. 1he prlces for dlesel, bunker and LC lnclude hlllpplne Lxclse 1axes aL Lhelr
approprlaLe raLe. 1he LnC prlces ln Lhe Lable below are for regaslfled LnC ln lllgan, Lhe hlghesL prlced
locaLlon for hase 1 LnC based on Lhls analysls. 1o arrlve aL Lhese prlces, Lhe 2012 prlces from Lhe Lable
above have been used wlLh an addlLlonal $1 per mmbLu assumed for Lhe LnC Lermlnal fee and $1.72 per
mmbLu added for dlsLrlbuLlon cosLs. 1he LnC prlces do noL lnclude hlllpplne Lxclse 1axes, as Lhere are
currenLly no exclse Laxes levled on naLural gas ln 1he hlllpplnes. An exclse Lax on naLural gas may be
revlslLed once naLural gas becomes avallable. Slmllarly, LnC prlces do noL lnclude Lhe seven per cenL
lmporL duLy currenLly lmposed on lmporLed LnC. CCSl recommends LhaL ln order Lo promoLe Lhe
developmenL of LnC as an energy source Lhe hlllpplne governmenL should ellmlnaLe Lhe exlsLlng
lmporL duLy.

1ab|e 12 - Not|ona| LNG r|ces Compared to 2012 Actua| Iue| Costs

Mlndanao 2012 ulsLrlbuLed CosL of luel ln uSu per mmbLu

CaLarCas LnC CAlL LnC LlghL luel Cll 8esldual luel
Cll
LC
uSu /
mmbLu

19.91 13.61 29.88 23.94 40.62
Savlngs of
CaLarCas
LnC
- nA 33.36 16.83 30.98
Savlngs of
CAlL LnC
21.39 - 47.76 34.79 61.37

uecember 2012

ln Lhls conLexL, Lhe dellvered cosL of LnC can provlde fuel cosL savlngs of 16-33 over bunker fuel or
resldual fuel oll and 33-48 savlngs over dlesel or llghL fuel oll.

F"N" ,2&(&92() A&()3.2. <%1=0>0)0:3
1o deLermlne Lhe economlc vlablllLy of supplylng gas Lo each of Lhe four reglons under conslderaLlon,
CCSl underLook an lnLegraLed flnanclal analysls comprlslng Lhe followlng sLeps:
1. LxlsLlng fuel use was deLermlned for Lhe ma[or cusLomers ln each of Lhe four reglons under
conslderaLlon. AlLernaLlve fuels lncluded coal, kerosene, propane, dlesel, and bunker oll.
2. LxlsLlng fuel use was caLegorlzed Lo deLermlne Lhe volumes LhaL can be readlly converLed Lo gas,
and Lhe volumes LhaL are more llkely Lo be converLed ln Lhe long Lerm.
3. 1wenLy year pro[ecLlons were deLermlned for Lhe commodlLy cosL of each alLernaLlve fuel.
1ransporLaLlon cosLs were added Lo arrlve aL a landed cosL for Lhe cusLomer.
4. uslng relaLlve values for heaL conLenL, Lhe landed cosL of alLernaLlve fuel was converLed lnLo an
equlvalenL volume of naLural gas.
3. naLural gas commodlLy prlces were pro[ecLed for a LwenLy year perlod. CAlL Cas prlce
pro[ecLlons, as ouLllned ln Lhe LnC rlce lorecasL above, were uLlllzed as a base case, LogeLher
wlLh Lhe CurrenL ollcy Scenarlo.
6. CaplLal and operaLlng cosLs were deLermlned for four dlfferenL opLlons for Lhe LransporLaLlon of
gas Lo each of Lhe four reglons. 1hese lncluded:
a. 1ransporL of LnC by LnC powered Lruck
b. 1ransporL of LnC by dlesel powered Lruck
c. 1ransporL of LnC by barge
d. 1ransporL of gas by plpellne
7. nv analyses were underLaken ln whlch Lhe annual dlfference beLween Lhe landed cosL of
alLernaLlve fuels and Lhe commodlLy cosL of naLural gas was neLLed agalnsL Lhe caplLal and
operaLlng cosLs assoclaLed wlLh each of Lhe four LransporLaLlon opLlons for each of Lhe four
reglons. 8ased on Lhe relaLlve neL presenL values, Lhe opLlmal gas LransporLaLlon meLhod was
deLermlned for each of Lhe four communlLles.
8. ln order for Lhe gaslflcaLlon of Lhe reglons Lo be economlcally vlable, Lhe sum of Lhe neL presenL
values of Lhe opLlmal alLernaLlves for Lhe vlable reglons musL exceed Lhe cosL of Lhe LnC
Lermlnal comblned wlLh Lhe cosL of llquefacLlon and LransporLaLlon of Lhe LnC, by an amounL
LhaL allows for sufflclenL savlngs Lo enLlce cusLomer converslon.
9. SenslLlvlLy analyses were underLaken Lo conflrm Lhe valldlLy of Lhe resulLs of Lhe nv analyses
under varlous assumpLlons, lncludlng:
a. lndlvldually excludlng each alLernaLlve fuel from Lhe analysls
b. lndlvldually excludlng each reglon from Lhe analysls

uecember 2012

c. uLlllzlng CaLar Cas prlclng pro[ecLlons
d. uLlllzlng Lhe new ollcy Scenarlo for gas prlces
e. varylng Lhe dlscounL raLe for Lhe nv analysls
10. rellmlnary calculaLlons were performed Lo deLermlne Lhe average raLes LhaL cusLomers would
be requlred Lo pay per SecLlon 3.3 above. lor purposes of Lhe raLe calculaLlons, Lhe afLer-Lax
welghLed average cosL of caplLal was assumed Lo be 10, and Lhe annual percenLage of raLe
base recovered was assumed Lo be 2.3 (regardless of Lhe caplLal sLrucLure).
11. CLher key assumpLlons uLlllzed wlLhln Lhe flnanclal analyses lncluded:
a. lnflaLlon raLe of 2.0
b. Lxchange raLe of $.02367 uSu per hlllpplne eso
c. ulscounL raLe for Lhe nv analysls of 13

uecember 2012

6.0 o||cy and kegu|atory Ana|ys|s
L"#" B5%'52%O
1here are Lhree complemenLary ob[ecLlves for Lhe CovernmenL of Lhe hlllpplnes Lo balance ln
developlng Lhe pollcy and regulaLory framework for Lhe esLabllshmenL of a dlsLrlbuLlon neLwork for
naLural gas on Lhe lsland of Mlndanao. 1hese ob[ecLlves lnclude:
roLecLlng Lhe publlc lnLeresL,
SupporLlng economlc developmenL, and
ALLracLlng prlvaLe secLor lnvesLmenL and parLlclpaLlon.
uurlng Lhe lnlLlal developmenL phase of Lhls new energy source and esLabllshlng Lhe assoclaLed
lnfrasLrucLure for Lhe dlsLrlbuLlon of Lhe naLural gas, Lhe ablllLy Lo aLLracL prlvaLe secLor lnvesLmenL Lo
underLake Lhls developmenL becomes a prlmary ob[ecLlve. As Lhe avallablllLy of Lhls new energy source
beglns Lo flourlsh, lL wlll be necessary Lo ensure Lhe conLlnued aLLracLlon of prlvaLe secLor lnvesLmenL
and parLlclpaLlon ln order Lo promoLe economlc developmenL. ln Lhls conLexL, lL ls reasonable Lo
anLlclpaLe an evoluLlon of Lhe regulaLory framework over Llme, beglnnlng wlLh whaL mlghL be descrlbed
as ro[ecL urlven 8egulaLory Model ln Lhe early years, whlch could be as much as a decade, Lo a more
lormal 8egulaLory Model once Lhe markeL has maLured and become fully developed and porLlons of Lhe
markeL have become compeLlLlve.

Many aspecLs of Lhe ro[ecL urlven 8egulaLory Model can be bullL lnLo Lhe lnlLlal conLracLs LhaL are used
Lo develop Lhe requlred lnfrasLrucLure. AspecLs of Lhe lormal 8egulaLory Model can Lhen be developed
over Llme ln a manner approprlaLe Lo Lhe evolvlng markeLplace. lL ls nelLher necessary nor pracLlcal Lo
Lhlnk LhaL Lhe hlllpplnes should develop a lormal 8egulaLory Model for Lhe dlsLrlbuLlon of naLural gas
for elLher Mlndanao or Lhe enLlre counLry ln advance of movlng forward wlLh such a relaLlvely small
dlsLrlbuLlon neLwork as ls envlsloned for Mlndanao. 8y adopLlng a ro[ecL urlven 8egulaLory Model, Lhe
governmenL of Lhe hlllpplnes can ensure Lhe publlc lnLeresL ls proLecLed whlle supporLlng economlc
developmenL ln Mlndanao and aLLracLlng Lhe requlred prlvaLe secLor lnvesLmenL.

L"!" @%90EE%&>%> @%:-)(10'3 ,'(E%O0'P
LxecuLlve Crder no. 66, serles of 2002, deslgnaLed Lhe ueparLmenL of Lnergy (uCL) as Lhe lead agency
ln developlng Lhe hlllpplne naLural gas lndusLry. SubsequenLly, uCL Clrcular no. 2002-08-003,
oLherwlse known as Lhe lnLerlm 8ules and 8egulaLlons Covernlng Lhe 1ransmlsslon, ulsLrlbuLlon and
Supply of naLural Cas, was lssued. 1he clrcular serves as a gulde Lo Lhe overslghL anLlclpaLed for Lhe
downsLream naLural gas lndusLry ln Lhe hlllpplnes and ldenLlfles uCL as Lhe body wlLh regulaLory
overslghL for Lhe dlsLrlbuLlon of naLural gas. uurlng Lhls developmenL phase of dlsLrlbuLlon lnfrasLrucLure
ln Mlndanao, CCSl anLlclpaLes LhaL many of Lhe regulaLory provlslons wlll be conLracLually based, and ln
all llkellhood wlll resulL from a compeLlLlve blddlng process. ln Lhls conLexL, Lhe ro[ecL urlven
8egulaLory Model, whlch would be admlnlsLered by Lhe uCL, funcLlons as a complalnL based or
reacLlonary model whereby, followlng conLracL award, Lhe Lerms of Lhe conLracL are fulfllled by Lhe
successful parLy(s) who esLabllsh Lhe anLlclpaLed buslness relaLlonshlps wlLh cusLomers and charge Lhe
raLes anLlclpaLed by Lhe formulas seL ouL ln Lhe conLracLs. lf one of Lhe parLles Lo Lhls arrangemenL, or
for LhaL maLLer a member of Lhe publlc, feels LhaL Lhe Lerms of Lhe conLracL are noL belng adhered Lo,
Lhen Lhe uCL would become lnvolved as Lhe resulL of complalnL from an lnLeresLed parLy. As Lhe

uecember 2012

dlsLrlbuLlon lnfrasLrucLure ln Lhe reglon maLures, a more dlrecL overslghL regulaLory model may become
deslrable, ln whlch case Lhe hlllpplne CovernmenL may conslder addlng Lo Lhe regulaLory overslghL
duLles of Lhe Lnergy 8egulaLory Commlsslon LhaL currenLly oversees porLlons of Lhe elecLrlclLy secLor, or
Lhe esLabllshmenL of a separaLe 8egulaLory Commlsslon Lo oversee Lhe naLural gas lndusLry. WheLher
regulaLory overslghL resldes wlLh a new commlsslon, Lhe L8C or uCL, addlLlonal resources wlll be
requlred by Lhese agencles ln order Lo fulflll Lhese expanded mandaLes.

L"+" /'0Q%91 D'25%& @%:-)(10'3 <0>%)
6.3.1. Introduct|on
A ro[ecL urlven 8egulaLory Model ls recommend lnlLlally for Mlndanao ln order Lo enable Lhe successful
lnLroducLlon of LnC whlle proLecLlng Lhe lnLeresLs of Lhe Cas AggregaLor, end-use cusLomers and Lhe
general publlc. Whlle Lhe pro[ecL envlsloned for Mlndanao ls small, and Lhe number of cusLomers
proposed Lo be served ls small, when compared Lo Lhe scale of gas dlsLrlbuLlon pro[ecLs and sysLems ln
many developed counLrles around Lhe world, Lhe need sLlll exlsLs for regulaLory overslghL ln crlLlcal
areas. CCSl recommends LhaL Lhe mlnlmum amounL of regulaLory overslghL be placed on Lhe pro[ecL aL
Lhe ouLseL and LhaL Lhe regulaLory overslghL maLures as Lhe use of naLural gas maLures on Lhe lsland of
Mlndanao.

ln general Lerms Lhe ro[ecL urlven 8egulaLory Model should encompass Lhe followlng lLems whlch are
ln keeplng wlLh Lhe regulaLory framework already ln place for Lhe Malampaya pro[ecL:
1. 8evlew and approval of Lhe drafL conLracLual Lerms developed for Lhe selecLlon of Lhe Cas
AggregaLor.
2. erlodlc revlew, agalnsL Lhe esLabllshed formula, of Lhe reLall prlce for naLural gas charged Lo
end-use cusLomers
3. 1he esLabllshmenL of approprlaLe lndusLry speclflc safeLy regulaLlons needed Lo supplemenL
exlsLlng esLabllshed safeLy regulaLlons.
4. erlodlc audlLlng of Lhe lndusLry Lo ensure compllance Lo lndusLry regulaLlons.

L";" G&C'(.1'-91-'% R0 S% @%:-)(1%>
ln order for naLural gas Lo become a vlable fuel cholce for Mlndanao, Lhree dlsLlncL seLs of lnfrasLrucLure
wlll need Lo be developed:
1he LnC Lermlnal,
1he anchor power planL, and
1he dlsLrlbuLlon neLwork.
1he scope of Lhls reporL relaLes prlmarlly Lo Lhe dlsLrlbuLlon lnfrasLrucLure, however, Lo Lhe exLenL LhaL
Lhe dlsLrlbuLlon lnfrasLrucLure ls dependenL on Lhe LnC Lermlnal, relevanL polnLs wlLh regard Lo Lhe LnC
Lermlnal have also been lncluded.

1he norLhern Mlndanao LnC Lermlnal wlll be a separaLe buslness, and ln all llkellhood, operaLed by a
separaLe company. 1he servlces offered by Lhe LnC Lermlnal are llkely Lo lnclude:

1he berLhlng of LnC carrlers aL Lhe LnC Lermlnal,

uecember 2012

8ecelpL of LnC Lhrough unloadlng aL Lhe Lermlnal,
1emporary sLorage of LnC,
vapourlzaLlon or re-gaslflcaLlon of LnC and assoclaLed compresslon of Lhe re-gaslfled LnC, and,
1he dlspaLchlng of re-gaslfled LnC lnLo Lhe downsLream gas plpellne neLwork.
MosL, lf noL all, of Lhese acLlvlLles are llkely Lo be covered by a unlform per unlL charge LhaL wlll be
conslsLenLly charged Lo all consumers ln norLhern Mlndanao. 1he level of LhaL charge wlll ldeally be Lhe
resulL of a blddlng process from proponenLs wlshlng Lo be Lhe operaLor of Lhe norLhern Mlndanao LnC
Lermlnal. 1haL charge wlll also ldeally decllne over Llme as volume LhroughpuL aL Lhe Lermlnal lncreases
above cerLaln Lhresholds. 1he formula for Lhe LhroughpuL charges musL be well undersLood and wlll
become a pass Lhrough cosL pald by cusLomers of Lhe dlsLrlbuLlon sysLem.

Slmllarly, Lhe dlsLrlbuLor of naLural gas should be expecLed Lo LreaL Lhe cosL of Lhe LnC lLself as a cosL
LhaL ls passed-Lhrough wlLhouL mark-up Lo consumers. 1he dlsLrlbuLor wlll earn Lhe reLurn on lLs
lnvesLmenL Lhrough Lhe Larlffs charged Lo cusLomers for Lhe dlsLrlbuLlon of Lhe naLural gas.

uue Lo Lhe relaLlvely small slze of Lhe markeL, lL ls recommended LhaL a slngle enLlLy be conLracLed and
charged wlLh Lhe role of procurlng adequaLe gas supplles and provldlng all relaLed dlsLrlbuLlon servlces.
1hls approach wlll allow for a more Llmely developmenL of Lhe requlred lnfrasLrucLure. lL wlll be more
effecLlve for Lhe hlllpplne CovernmenL Lo evaluaLe and negoLlaLe a conLracL wlLh a slngle enLlLy whlch,
Lhrough Lhls sLrucLure, wlll Lhen have Lhe scope necessary develop Lhls markeL ln an efflclenL manner. 8y
provldlng a full scope of conLrol over Lhe dlsLrlbuLlon ln Lhe early sLage of Lhe lnfrasLrucLure
developmenL, Lhe governmenL wlll remove any poLenLlal barrlers LhaL bldders would oLherwlse face
assoclaLed wlLh aggresslvely developlng Lhe markeL. 1hls should serve Lo maxlmlze LhroughpuL and
Lherefore lower per unlL cosLs for all cusLomers. WlLhln Lhls conLexL, lL ls noL necessary LhaL a slngle
enLlLy perform all of Lhese funcLlons. 8aLher, Lhe successful bldder could be:

A slngle enLlLy wlLh Lhe necessary scope Lo fulflll all funcLlons,
A slngle enLlLy LhaL puLs ln place Lhe requlred sub-conLracLors ln order Lo fulflll all funcLlons, or
A consorLlum of companles whlch LogeLher can fulflll all Lhe requlred funcLlons.
8ased on Lhe lnfrasLrucLure lald ouL ln Lhe ulsLrlbuLlon CpLlons secLlon, Lhere are llkely Lo be Lhree
componenLs Lo Lhe dlsLrlbuLlon of LnC and re-gaslfled LnC. Lach of Lhese wlll need Lo be sub[ecL Lo prlce
and oLher regulaLlons. 1hese Lhree componenLs are:

1he plpellne dlsLrlbuLlon sysLem,
1he Lrucklng of LnC Lo saLelllLe regaslflcaLlon faclllLles and subsequenL plpellne dellvery Lo
cusLomers, and,
8arglng or shlpplng of LnC Lo saLelllLe LnC Lermlnals and Lhe subsequenL Lrucklng of LnC Lo
local re-gas faclllLles and/or plpellne dlsLrlbuLlon of re-gaslfled LnC.
A poLenLlal fourLh componenL ls Lhe dlsLrlbuLlon of naLural gas ln Lhe form of Compressed naLural Cas
(CnC). Clven Lhe relaLlvely small slze of Lhls markeL, lL ls recommended LhaL lnlLlally a slngle franchlse
for Lhe dlsLrlbuLlon of LnC and re-gaslfled LnC be granLed for Lhe lsland of Mlndanao. 1here are

uecember 2012

complemenLary componenLs of Lhe dlsLrlbuLlon neLwork, namely Lhe Lruck dlsLrlbuLlon of LnC or CnC,
LhaL could llkely be operaLed as a compeLlLlve markeLplace, however, ln Lhe lnLeresL of Lhe orderly
developmenL of Lhe markeL as a whole, Lhere are beneflLs Lo allowlng a slngle franchlsee Lo ldenLlfy and
secure cusLomers, converL Lhem Lo naLural gas dellvered by CnC or LnC Lanker and Lhen work Lo
develop Lhe markeL such LhaL plpellne dlsLrlbuLlon sysLems become economlcally aLLracLlve. An lnlLlal
Lerm of 10 Lo 13 years wlll allow Lhe franchlsee Lo develop Lhls markeL. 1o Lhe exLenL LhaL cusLomers
conLlnue Lo be served by Lruck dlsLrlbuLlon, a purely compeLlLlve model for Lhls porLlon of Lhe markeL
can be evaluaLed aL Lhe concluslon of Lhe lnlLlal Lerm. rovlslons for auLomaLlc exLenslon of Lhe
franchlse ln areas where plpellne neLworks are lnsLalled could also be bullL lnLo Lhe lnlLlal conLracL.

6.4.1. Gas rocurement
1he procuremenL of LnC for Mlndanao wlll llkely be performed by a slngle enLlLy, known as Lhe Cas
AggregaLor who wlll also be charged wlLh developlng Lhe naLural gas dlsLrlbuLlon sysLem on Lhe lsland.
SlgnlflcanL flexlblllLy should be afforded Lhls gas procuremenL funcLlon such LhaL Lhe aggregaLor can
secure supplles on Lerms conslsLenL wlLh Lhe needs of lLs cusLomers. Some sorL of mlx beLween long-
Lerm and shorL Lerm prlclng may be advanLageous, however, Lhe aggregaLor wlll llkely secure supplles
from mulLlple sources ln order Lo Lake advanLage of currenL prlclng dynamlcs aL any parLlcular polnL ln
Llme.

6.4.2. |pe||ne D|str|but|on System
lL ls anLlclpaLed LhaL Lhe lnlLlal plpellne dlsLrlbuLlon sysLem wlll be ln Lhe reglon lmmedlaLely surroundlng
Lhe LnC Lermlnal. Whlle a flnal locaLlon for Lhe LnC Lermlnal has noL been selecLed, lL ls assumed LhaL lL
wlll elLher be wlLhln Lhe PlvluLC lndusLrlal LsLaLe or furLher norLh of PlvluLC along Lhe coasL. ln
elLher case, lL ls anLlclpaLed LhaL Lhe plpellne dlsLrlbuLlon sysLem wlll exLend boLh norLh and souLh from
Lhe locaLlon of Lhe Lermlnal, wlLh Lhe souLhern leg sLreLchlng Lo Lhe norLhern edge of Lhe ClLy of Cagayan
de Cro. 1he prlmary mandaLe of Lhe plpellne owner/operaLor wlll be Lo manage and malnLaln Lhe hlgh
pressure gas plpellne accordlng Lo prescrlbed safeLy sLandards. 1he uCL, ln lLs role provldlng regulaLory
overslghL, wlll need Lo cause Lhe owner/operaLor of Lhe gas plpellne Lo comply wlLh cerLaln AcLs and
8egulaLlons beyond Lhose relaLed Lo Lhe procuremenL and dlsLrlbuLlon of naLural gas. lor example,
addlLlonal AcLs and/or regulaLlons wlll be needed ln Lhe areas of:

1he adopLlon of lnLernaLlonal sLandards for Lhe englneerlng and consLrucLlon of Lhese
faclllLles
CperaLlons and MalnLenance pracLlces
Cas lpellne LxcavaLlon 8egulaLlons
Workplace PealLh and SafeLy 8egulaLlons
uangerous Coods Pandllng and 1ransporLaLlon of eLroleum roducLs
Cas llred Appllance 8egulaLlons.

6.4.3. Mar|ne and 1ruck De||very Systems
ln addlLlon Lo Lhe plpellne dlsLrlbuLlon sysLem, lL ls anLlclpaLed LhaL Lrucks, maklng use of exlsLlng road
neLworks, and posslbly marlne opLlons, wlll be used Lo dlsLrlbuLe LnC from Lhe maln Lermlnal Lo elLher

uecember 2012

lndlvldual cusLomers or groups of cusLomers. ln Lhe case of groups of cusLomers, Lhese cusLomers would
be llnked LogeLher by locallzed plpellne dlsLrlbuLlon sysLems. ln each case where elLher marlne or Lruck
opLlons are used Lo dellver LnC, a regaslflcaLlon faclllLy wlll be requlred Lo converL Lhe LnC from lLs
llquld Lo lLs gaseous sLaLe. uue Lo Lhe cosL of Lhese faclllLles, Lhere wlll need Lo be a crlLlcal mass of
demand for naLural gas before such lnsLallaLlons wlll become economlcally feaslble. 1he lnlLlal
lndlcaLlons from Lhe markeL assessmenL sLudy underLaken here lndlcaLes LhaL such crlLlcal mass exlsLs ln
lllgan, approxlmaLely 110 road kllomeLres from PlvluLC, and posslbly ln Ceneral SanLos. Clven LhaL Lhe
marlne faclllLles requlred Lo serve Ceneral SanLos are more complex and wlll requlre greaLer lnvesLmenL,
lL ls expecLed LhaL Lhey wlll noL form a parL of Lhe lnlLlal bulld ouL of Lhe dlsLrlbuLlon lnfrasLrucLure on
Mlndanao, buL raLher wlll be developed durlng fuLure phases.

Where Lhe requlred crlLlcal mass of demand does noL exlsL Lo [usLlfy an lnvesLmenL ln regaslflcaLlon
faclllLles, cusLomers can sLlll be supplled wlLh naLural gas ln Lhe form of Compressed naLural Cas (CnC).
CnC can also be dellvered by Lanker Lruck and fed elLher dlrecLly Lo a cusLomer or lnLo a local plped
dlsLrlbuLlon sysLem. CnC ls well sulLed Lo smaller lndusLrlal cusLomers, as well as lnsLlLuLlonal cusLomers
(such as hosplLals), large commerclal cusLomers (such as hoLels) or areas where smaller commerclal
cusLomers are locaLed ln close proxlmlLy Lo one anoLher.

8oLh Lhe marlne and Lruck dlsLrlbuLlon sysLems could concelvably be fully compeLlLlve servlces, buL
durlng Lhe lnlLlal phase of developlng Lhe markeL ln Mlndanao, lL ls recommended LhaL Lhese also fall
under Lhe pro[ecL regulaLory model overseen by Lhe uCL. ln Lhls way, Lhe selecLed aggregaLor wlll have
greaLer conLrol and lnfluence over Lhe developmenL of Lhe markeL and wlll be able Lo bld more
aggresslvely Lhe overall volume LhaL wlll flow Lhrough Lhe LnC Lermlnal. ln addlLlon Lo approval from
uCL under Lhe pro[ecL regulaLory model, Lhe aggregaLor wlll also requlre a Lrucklng franchlse from Lhe
Land 1ransporLaLlon lranchlse and 8egulaLory 8oard.

6.4.4. Supp|y to 8ott|ed CNG D|str|butors
AnoLher form of dlsLrlbuLlon Lo end use cusLomers LhaL can be expecLed Lo develop ls boLLled CnC
dlsLrlbuLlon. 8oLLled CnC can be used ln nearly any appllcaLlon where boLLled LC ls currenLly used.
8oLLled CnC ls commonly used for resldenLlal waLer heaLlng and cooklng as well as for slmllar uses ln
small commerclal appllcaLlons. Clven LhaL Lhere ls a fully funcLlonlng and fully compeLlLlve markeL for
boLLled LC dlsLrlbuLlon, lL ls recommended LhaL Lhe boLLled CnC markeL be LreaLed as fully compeLlLlve
from Lhe ouLseL. ln Lhls sense, boLLled CnC dlsLrlbuLors wlll become cusLomers of Lhe LnC aggregaLor.
lrom a regulaLory perspecLlve, uCL wlll need Lo ensure LhaL currenL regulaLlons ln place Lo govern Lhe
dlsLrlbuLlon of LC wlll be sufflclenL when applled Lo Lhe dlsLrlbuLlon of CnC.

L"F" 4-.10E%'.
1here are several maln groups or classlflcaLlons of cusLomers LhaL are expecLed Lo consume naLural gas
once lL becomes avallable on Mlndanao. 1he largesL volume of gas comlng Lhrough Lhe LnC Lermlnal ls
expecLed Lo be consumed by Lhe anchor power planL, whlch wlll posslbly be co-locaLed wlLh Lhe LnC
Lermlnal. uependlng upon Lhe locaLlon of Lhe power planL, lL may or may noL be a cusLomer of Lhe
plpellne dlsLrlbuLlon sysLem, buL ln any case, lL wlll be a cusLomer of Lhe LnC Lermlnal and Lhls power
planL wlll play a crlLlcal role ln maklng Lhe economlcs of an LnC Lermlnal on Mlndanao feaslble. 1he slze
of Lhls anchor power planL has noL been deLermlned, buL lL ls llkely Lo be ln Lhe range of 300 Lo 430 MW,

uecember 2012

and wlll llkely be deslgned Lo operaLe Lo provlde backup and peaklng power Lo Lhe Mlndanao power
grld.

CLher cusLomers on Lhe lsland are llkely Lo lnclude lndusLrles LhaL requlre process heaL and/or sLeam ln
Lhelr manufacLurlng processes, and food processors LhaL requlre a comblnaLlon of process heaL and
coollng capaclLy ln order Lo keep Lhelr producLs cooled prlor Lo shlpplng Lo markeL. Many of Lhese
exlsLlng lndusLrles also malnLaln back up generaLlon LhaL could be converLed Lo naLural gas, alLhough Lhe
need for such backup generaLlon may be reduced ln Lhe evenL LhaL naLural gas ls used Lo provlde more
dlverse and rellable grld-connecLed power generaLlon capaclLy. 1he plvoLal expecLed lndusLrlal scale use
of naLural gas ls for power generaLlon. Several exlsLlng power generaLors expressed a deslre Lo converL
exlsLlng dlesel and bunker oll-flred generaLlon Lo naLural gas. CLhers sLlll expressed an lnLeresL ln addlng
addlLlonal naLural gas-flred generaLlon Lo exlsLlng generaLlon resources.

1he flnal seL of cusLomers LhaL can expecLed Lo be served by Lhe naLural gas dlsLrlbuLlon sysLem are
commerclal and lnsLlLuLlonal cusLomers LhaL have elLher slgnlflcanL waLer-heaLlng, cooklng, or coollng
loads. 1hese cusLomers may be served dlrecLly by Lhe plpellne dlsLrlbuLlon sysLem, or lndlrecLly by elLher
CnC Lanker Lruck or CnC boLLle dlsLrlbuLlon.

L"L" @%:-)(120& 0C D2.1'26-120& 40.1.
lL ls recommended Lhe prlclng mechanlsm for Lhe plpellne porLlon of Lhe dlsLrlbuLlon sysLem be on a
posLage sLamp" basls ln Lerms of dlsLance lnasmuch as lL ls assumed Lhe plpellne would only be
exLended Lo Lhe crlLlcal mass of cusLomers whlch coalesce wlLhln reasonable economlc reach of Lhe
naLural gas Lermlnal. lL ls expecLed LhaL each of Lhe large volume cusLomers, be Lhey naLural gas flred
Lurblne generaLlon faclllLles or lndusLrlal cusLomers, lndlvldually cover Lhe cosL of any Lake-off plpellne
requlremenLs from Lhe maln hlgh pressure llne. AparL from dlsLance, conslderaLlon can be lncorporaLed
lnLo Lhe Larlffs charged by Lhe gas plpellne owner/operaLor Lo recognlze Lhe dlfferenL levels of load
facLor. A hlgher load facLor cusLomer should be afforded a lower unlL Larlff relaLlve Lo a cusLomer wlLh a
low load facLor as Lhls conslderaLlon recognlzes plpellne capaclLy raLher Lhan dlsLance.

1here ls llkely an economlc [usLlflcaLlon Lo esLabllsh LhaL cusLomers served elLher by Lruck-Lraller or
marlne dellvery should be sub[ecL Lo dlfferenLlal raLes due Lo Lhe addlLlonal caplLal and operaLlng cosLs
LhaL wlll be requlred ln order Lo provlde servlce Lo Lhese cusLomers. Powever Lhe declslon Lo esLabllsh
varlous raLe zones versus Lhe alLernaLlve of opLlng for posLage sLamp raLes for Lhe enLlre lsland ls as
much a soclal declslon as lL ls an economlc one. 1here are a varleLy of facLors LhaL musL be balanced ln
maklng such a declslon, as lnherenLly LhaL declslon accepLs a level of cross subsldy beLween lndlvldual
cusLomers. 1he reallLy ls LhaL Lhe seLLlng of raLes for any publlc uLlllLy resulLs ln cross subsldy from one
cusLomer or seL of cusLomers Lo anoLher. 1he quesLlon Lhen becomes whaL ls Lhe accepLable level of
cross-subsldy. ln a case such as Mlndanao, a level of cross-subsldy may be deslrable ln LhaL hlgher raLes
pald by some cusLomers can be used Lo lmprove Lhe economlc vlablllLy of addlng addlLlonal cusLomers
ln more marglnal reglons of Lhe lsland. 1hls may be beneflclal Lo Lhose same cusLomers LhaL pay Lhe
hlgher raLes ln LhaL each addlLlonal unlL LhaL passes Lhrough Lhe maln LnC Lermlnal wlll serve Lo lower
Lhe per unlL cosL of LhaL plece of lnfrasLrucLure.

1he lnlLlal dlsLrlbuLlon sysLem, as ouLllned ln Lhe dlsLrlbuLlon opLlon porLlon of Lhls 8eporL should noL
requlre any subsldy ln order Lo reallze Lhe consLrucLlon and malnLenance of Lhe plpellne sysLem. 1he

uecember 2012

plpellne owner/operaLor may be requlred Lo make paymenLs for cerLaln franchlse fees lnasmuch as Lhe
plpellne wlll be expecLed Lo cross varlous properLles, be Lhey prlvaLe, publlc or munlclpal. 8lghLs-of-way
wlll need Lo be obLalned by Lhe plpellne owner/operaLor and agreemenLs slgned ln advance of
consLrucLlon. Such agreemenLs wlll be sub[ecL Lo uCL revlew and approval. 1he plpellne
owner/operaLor should be sub[ecL Lo reporLlng Lo Lhe uCL on an annual basls for flnanclal conflrmaLlon
of lLs falr raLe of reLurn. 1he Larlffs wlll be revlewed by Lhe uCL on an annual basls and changed only
when prescrlbed by Lhe uCL. 1he Larlffs can be deslgned Lo cover dlfferenL cusLomer caLegorles, once
Lhe cusLomer mlx has been ldenLlfled. 1he Larlffs can also be deslgned wlLh an lncenLlve sLrucLure bullL
lnLo Lhem such LhaL hlgher volumes of gas belng dellvered (Lhereby maxlmlzlng LhroughpuL of Lhe LnC
Lermlnal) would resulL ln boLh lower unlL raLes for cusLomers and hlgher proflLs for Lhe dlsLrlbuLor.

lL ls also lmporLanL LhaL conslderaLlon be glven Lo Lhe lmplemenLaLlon of leglslaLlon seL down for a
8egulaLory 8oard. lL ls ln Lhe publlc lnLeresL Lo ensure raLes are [usL and reasonable for Lhe cusLomers
whlle aL Lhe same Llme, provldlng a falr raLe of reLurn Lo Lhe operaLor of Lhe faclllLles. Such 8egulaLory
8oard should have Lhe purvlew Lo deLermlne lf franchlse excluslvlLy should be granLed. lL wlll also have
Lhe [urlsdlcLlon Lo seL down Lhe sLrucLure of Lhe dlsLrlbuLlon llcences. 1he 8oard can also exerclse lLs
[udgemenL Lo deLermlne Lhe ldeal raLe sLrucLure for any glven parLlclpanL. lor example, Lhe
lmplemenLaLlon of posLage sLamp" raLes may be consldered approprlaLe so as Lo noL unduly
dlsadvanLage any parLlcular cusLomer or group of cusLomers. Such an aLLlLude would enhance Lhe
orderly economlc growLh of Lhe broader reglon Lo Lhe beneflL of all concerned. As a sysLem maLures,
Lhe 8oard wlll have Lhe wherewlLhal Lo assess Lhe merlLs of lncremenLal expanslon of faclllLles.

L"M" @%:-)(120& 0C $(. ?-HH)3 40.1.
1he cosL Lo supply naLural gas Lo Lhe lsland of Mlndanao should be a pass-Lhrough cosL Lo Mlndanao
consumers boLh ln Lerms of Lhe LnC supply and Lhe charges relaLed Lo Lhe LnC Lermlnal. WheLher Lhe
role of LnC suppller falls Lo Lhe Lermlnal operaLor, as ls done ln some [urlsdlcLlons, or a markeL
aggregaLor, or, as has been recommended here, a slngle enLlLy LhaL serves as boLh markeL aggregaLor
and dlsLrlbuLor, Lhe concepL of a pass-Lhrough cosL of gas can been equally applled. 1he pass-Lhrough
mechanlsm can elLher be conLracLually agreed upon or seL ouL by Lhe regulaLor. ln elLher case one of Lhe
mosL lmporLanL prlnclples ls LhaL Lhe mechanlsm be LransparenL noL only Lo Lhe overslghL agency, buL
especlally so Lo cusLomers. ln Lhe case of Mlndanao, lL ls anLlclpaLed LhaL a conLracLually based
mechanlsm would be mosL approprlaLe, especlally ln Lhe early years, however, ln Lhe evenL LhaL such a
mechanlsm cannoL be agreed upon ln esLabllshlng a conLracL, a regulaLory alLernaLlve ls always an
opLlon.

As lL can be anLlclpaLed LhaL aL leasL ln Lhe early years, Lhere wlll llkely be a slngle suppller (posslbly from
many dlfferenL sources of supply) Lhe conLracL wlLh LhaL suppller wlll need Lo seL ouL rules approprlaLe
Lo a sole suppller arrangemenL. 1he uCL should reLaln elLher an overslghL and revlew funcLlon, or aL Lhe
very leasL an enforcemenL funcLlon ln Lhe evenL LhaL some lndependenL body or parLy ls puL ln place Lo
arblLraLe dlspuLes as Lo prlces or servlce levels. ln Lhls scenarlo, uCL would be enLlLled Lo ad[usL prlces,
lssue flnes, or, ln Lhe exLreme, suspend or revoke a llcense. 1he aggregaLor, as boLh suppller and
dlsLrlbuLor, has a vesLed lnLeresL ln malnLalnlng poslLlve cusLomer relaLlonshlps, parLlcularly ln Lhe early
years of Lhe developlng markeL place. ln Lhls conLexL, a conLracLually deflned, complalnL-based meLhod
of regulaLlon ls very approprlaLe ln Lhese clrcumsLances. 1he aggregaLor wlll wanL Lo malnLaln open and
LrusLworLhy relaLlonshlps and a conLracL can be esLabllshed Lo reflecL LhaL. ln Lhe evenL LhaL dlspuLes

uecember 2012

arlse beLween Lhe aggregaLor and cusLomers, Lhe uCL would be charged wlLh recelvlng complalnLs,
lnvesLlgaLlng Lhelr leglLlmacy and rullng on approprlaLe sancLlons. WlLhln Lhls conLexL, Lhe aggregaLor
has Lhe opLlon Lo be as creaLlve as lL wanLs Lo be ln Lerms of seLLlng raLes and sharlng lnformaLlon, so
long as lL keeps cusLomers on-slde.

L"N" ?(C%13 @%:-)(120&
lL ls recommended LhaL a number of AcLs, 8egulaLlons and Codes be applled. 1he producL by naLure
can be hazardous lf noL managed properly and as such, requlres sLrlcL adherence by lndusLry parLles Lo
comprehenslve AcLs and 8egulaLlons. 1o Lhe exLenL gas ls LransporLed Lhrough Lhe use of a gas
plpellne, Lhe lmplemenLaLlon of a naLural Cas lpellne SLandard laylng ouL Lhe mlnlmum requlremenLs
for deslgn, consLrucLlon, operaLlons and malnLenance requlremenLs becomes lmperaLlve. AddlLlonally
8egulaLlons such as a !"# %&'()&*( +,-"."/&0* 1(23)"/&0*" become lmperaLlve Lo lnform and requlre
Lhlrd parLles Lo acL responslbly ln Lhe vlclnlLy of Lhe burled plpellnes. lurLhermore, Lo Lhe exLenL, gas ls
shlpped vla rolllng sLock, 4"*2(503# !006# 7"*6)&*2 "*6 85"*#'05/"/&0* 09 %(/50)(3: %5063-/#"
becomes lmporLanL. 1o Lhe exLenL gas ls sold Lo gas flred generaLlon faclllLles and any oLher lndusLrlal
faclllLles, a seL of !"# ;&5(6 <'')&"*-( 1(23)"/&0*#" ls lmporLanL.
1he lndlcaLlve conLenLs of varlous AcLs and 8egulaLlons mosL appllcable Lo Lhe sub[ecL maLLer of Lhls
reporL are seL ouL below. lL ls recognlzed LhaL Lhe 8epubllc of Lhe hlllpplnes has exLenslve AcLs and
8egulaLlons ln place and has an esLabllshed Lnergy 8egulaLory Commlsslon. lL ls suggesLed LhaL
conslderaLlon flrsL be glven Lo Lhe esLabllshlng an orderly sLrucLure for Lhe lndusLry, as fore noLed. AfLer
whlch, lL can be deLermlned whlch of Lhe exlsLlng AcLs and 8egulaLlons prescrlbed can be applled ln Lhe
noLed geographlc area and ln Lhe clrcumsLances. AmendmenLs can Lhen be drafLed as necessary.

1he Lype of regulaLory framework dlscussed here exlsLs ln many developed naLural gas markeL places
around Lhe world. CCSl recommends LhaL Lhe hlllpplnes lnlLlally adopL, from an approprlaLe
[urlsdlcLlon, a developed pro[ecL regulaLory framework along wlLh Lhe requlred naLural gas lndusLry
speclflc safeLy sLandards and regulaLlons. 1hls framework can be modlfled overLlme as needed and ln
sLep wlLh Lhe maLurlng naLural gas markeLplace ln Mlndanao. 1hls approach ls conslsLenL wlLh Lhe
approach Laken by many emerglng naLural gas markeLplaces.

6.8.1. Natura| Gas |pe||ne Systems Standard
1hls ls Lhe SLandard LhaL would cover Lhe deslgn, consLrucLlon, operaLlon and malnLenance of naLural
gas plpellne sysLems. uCL Clrcular 2002-08-003 allows for Lhe adopLlon of approprlaLe lSC sLandards or
oLher lnLernaLlonal accepLed sLandards approved by uCL. ln addlLlon Lo Lhe sLandards conLemplaLed ln
Lhe Clrcular, Lhe followlng secLlons ouLllne addlLlonal areas LhaL should be addressed.

6.8.2. Gas |pe||ne Lxcavat|on kegu|at|ons
Cas lpellne LxcavaLlon 8egulaLlons esLabllsh Lhe requlremenL for Lhlrd parLles wanLlng Lo excavaLe Lo
conLacL Lhe owners of burled gas llnes and provlde noLlce of Lhelr lnLenL Lo excavaLe wlLh perLlnenL
deLalls. 1he regulaLlons would also requlre Lhe owner of Lhe burled plpellnes Lo provlde advlce Lo Lhe
person glvlng noLlce of Lhe locaLlon of any gas plpellne ln or near Lhe locaLlon of Lhe proposed
excavaLlon and Lo prescrlbe approprlaLe meLhods of excavaLlon. 1hls Lype of regulaLlon also esLabllshes

uecember 2012

safeLy pracLlces wlLh respecL Lo above ground markers ldenLlfylng Lhe locaLlon of burled plpellnes and
Lhe lnlLlal noLlflcaLlon sLeps Lo be Laklng lf a plpellne ls damaged durlng excavaLlon.

6.8.3. Dangerous Goods nand||ng and 1ransportat|on of etro|eum roducts
LxlsLlng acLs and regulaLlons wlll need Lo be revlewed Lo ensure Lhelr adequacy ln relaLlon Lo Lhe
properLles of boLh LnC and re-gaslfled LnC. 1hese acLs can Lhen elLher be modlfled or regulaLlons
speclflc Lo naLural gas can be developed. 1he lssues LhaL need Lo be consldered lnclude:
a. CuallflcaLlons for eLroleum 1echnlclans Llcence
b. varlous Lypes of Lank lnsLallaLlons
c. AlLernaLlon of approved sLorage slLes
d. Leak deLecLlon devlces
e. roducL Lransfer areas
f. Secondary conLalnmenL
g. CondlLlons of operaLlng permlL
h. rohlblLlon of sLorage, excepL lf ln compllance
l. rohlblLlon of dellvery, excepL lf ln compllance
[. Crounds for refusal of permlL
k. use of Lank vehlcle for sLorage
l. 1esLs of Lanklng and underground plplng

6.8.4. Gas I|red App||ance kegu|at|ons
1he purpose of Cas llred Appllance 8egulaLlons ls Lo seL Lhe mlnlmum safeLy and quallLy sLandards
for Lhe producLs LhaL would be ellglble for sale ln Lhe hlllpplnes and Lo esLabllsh safe lnsLallaLlon
sLandards and pracLlces. 1hese regulaLlons generally focus on Lhe followlng areas,
a. 1he process and requlremenLs for gas flLLlng and gas equlpmenL lnsLallers Lo become llcensed.
b. LsLabllshes Lhe classes and scope of gas flLLer and lnsLaller llcences, e.g.,
l) lndusLrlal Cas llLLer's Llcence
ll) LC Llcence
lll) Llcence renewal
lv) Loss of llcence
c. ldenLlfles and lays ouL Lhe requlremenLs for lnsLallers Lo apply for and obLaln and lnsLallaLlon
permlL for naLural gas equlpmenL lnsLallaLlons.
d. Lays ouL Lhe process and requlremenL for a Lhlrd parLy lnspecLlon of all gas equlpmenL
lnsLallaLlons. Speclfles Lhe naLural gas equlpmenL lnsLallaLlon code LhaL wlll be appllcable for
Mlndanao.

6.8.S. Workp|ace Safety and nea|th
As was Lhe case wlLh Pandllng of uangerous Coods regulaLlons, exlsLlng acLs and regulaLlons relaLed Lo
Workplace SafeLy and PealLh wlll need Lo be revlewed Lo ensure Lhelr adequacy ln relaLlon Lo Lhe
properLles of boLh LnC and re-gaslfled LnC. 1he exlsLlng provlslon can elLher be modlfled or regulaLlons
speclflc Lo naLural gas can be developed. 1he lssues LhaL need Lo be consldered lnclude:

uecember 2012

a. ueallng wlLh flammable and exploslve subsLances
b. venLllaLlon requlremenLs
c. 8equlremenLs for safe work procedures Lo be developed and lmplemenLed.
d. 8equlremenLs for rouLlne lnspecLlons of workplace
e. noLlflcaLlon of serlous lncldenLs aL workplace ls provlded Lo Lhe relevanL auLhorlLles
f. 8ecord reLenLlon requlremenLs
g. 1he need for rlsk assessmenLs Lo be conducLed by Lhe employer and requlremenL of employers
Lo puL ln place effecLlve rlsk mlLlgaLlon plans.

L"T" @0)% 0C $05%'&E%&1
1he CovernmenL of Lhe hlllpplnes has a key, Lhough supporLlng, role ln esLabllshlng a vlable supply of
naLural gas Lo Lhe lsland of Mlndanao, and perhaps Lhe enLlre souLhern hlllpplnes. 1hls supporLlng role
should be almed prlmarlly aL developlng a clear regulaLory framework Lo faclllLaLe Lhe varlous
LransacLlons necessary Lo make Lhe lnfrasLrucLure vlable ln Mlndanao. ln addlLlon Lo Lhe framework ln
relaLlon Lo Lhe naLural gas dlsLrlbuLlon sysLem, as has been ouLllned here, Lhe governmenL wlll also need
Lo provlde a regulaLory framework LhaL wlll encourage Lhe long-Lerm lease of an LnC Lermlnal and
consLrucLlon of a regaslflcalLon faclllLy ln order Lo supply boLh Lhe dlsLrlbuLlon sysLem and Lhe anchor
power planL. ln Lerms of developlng a power planL, Lhe governmenL wlll also need Lo esLabllsh a clear
regulaLory framework LhaL wlll seL down Lerms for a long Lerm power purchase agreemenL beLween an
lndependenL power producer and Lhe local elecLrlc dlsLrlbuLlon companles ln Mlndanao.

L"#U" @%:-)(10'3 ,2'.1 ?1%H.
1he lnlLlal shorL-Lerm focus of regulaLlon ln Lhe area of naLural Cas for Mlndanao should be on
lmplemenLlng Lhe mlnlmum necessary quallLy, safeLy and consumer prlce seLLlng and monlLorlng
mechanlsms ln order Lo enable Lhe successful lnLroducLlon of naLural gas Lo Lhe reglon, whlle aL Lhe
same Llme proLecLlng consumer and publlc lnLeresLs.

CCSl recommends LhaL Lhe hlllpplnes lnlLlally adopL, from an approprlaLe [urlsdlcLlon, a developed
pro[ecL regulaLory framework along wlLh Lhe requlred naLural gas lndusLry speclflc safeLy sLandards and
regulaLlons. 1hls framework can be modlfled overLlme as needed and ln sLep wlLh Lhe maLurlng naLural
gas markeLplace ln Mlndanao. 1hls approach ls conslsLenL wlLh Lhe approach Laken by many emerglng
naLural gas markeLplaces.

uecember 2012

7.0 Conc|us|on
1he markeL assessmenL of naLural gas poLenLlal among lndusLrlal users ln Mlndanao has revealed a
subsLanLlal poLenLlal markeL, a large porLlon of whlch ls easlly served wlLhln close proxlmlLy Lo Lhe
poLenLlal locaLlon of a LnC Lermlnal norLheasL of Cagayan de Cro. 1he forecasL cosL Lo lmporL LnC,
vaporlze Lhe producL Lo naLural gas and dlsLrlbuLe lL Lo cusLomers ls well wlLhln range LhaL wlll make LnC
and regaslfled LnC a vlable alLernaLlve energy source Lo boLh fuel oll and LC. 1he Mlndanao markeL ls
relaLlvely small ln global Lerms, buL lL can also be served wlLh relaLlvely llLLle lnvesLmenL. 1he
governmenL of Lhe hlllpplnes should proceed Lo share Lhe lnformaLlon wlLh regard Lo Lhls markeL's
poLenLlal wlLh poLenLlal lnvesLors and members of Lhe lndusLry who are besL sulLed Lo maklng a pro[ecL
llke Lhls a reallLy. 1he governmenL's role ls Lo seL Lhe framework LhaL wlll make Lhls posslble ln Lhe shorL
Lerm whlle worklng Lo esLabllsh reasonable rules for Lhe lndusLry as lL maLures over Llme.

ALnulx l
=>?4<?<@ A@<4 BC1D+E ;@1=
FACILITY INFORMATION: PARENT COMPANY INFORMATION:
Facility Name Parent Company
2
Company Name Head Office Address
UTM Coordinates
1
Email Address
Address or Location Telephone
Major Product or Industry FACILITY CONTACT DETAILS:
Number of Employees Contact Person
Operating Hours per Day Position
Floor Area (sq m)
3
Email Address
Other
pls specify
(________) 0% 10% 20% NOT
Major Process Loads
1. Boilers
Total Connected Load (Btu/hr)
Annual Consumption
2. Ovens
Annual Consumption
3. Furnaces
Annual Consumption
4. Other:
Annual Consumption
Cooling/Chilling Loads
Number of Units
Total Installed Capacity (TR)
Annual Consumption
Power Generation
Total Installed Capacity (kW)
Fuel Consumption Capacity (Btu/hr)
Annual Fuel Consumption
Prepared by: Date:
Position: Telephone:
Notes:
1
Universal Transverse Mercator GPS coordinates of the facility, if available.
2
If the facility's company is a subsidiary. Also indicate "government" if government-owned.
3
Plant floor area or commercial space.
MINDANAO NATURAL GAS ENERGY DEMAND STUDY
Electricity
(kWh/yr)
CURRENT FUEL USE:
Likely to convert to
NatGas in 3-5 yrs if
savings in the following
LPG
(ltr/yr)
Coal
(MT/yr)
Diesel
(ltr/yr)
Kerosene
(ltr/yr)
Bunker Oil
(ltr/yr)
All information declared in this survey will be handled with full confidentiality and
for the sole use of the Department of Energy.
For questions in filling this form, please send email to jrescay@gmail.com

ALnulx ll
B>?!A+ A>?+ 4><!1<=B ;@1 %>%+A>?+
4>B81>FC8>@? BEB8+=B

!"#$%& '"#& (")$*)+ , -."/"0&1 -"2&%"#& !345&+

!622%3 -*&446*& , 78 9)*

LNG Station - STEAG
P= 19bar
Q= 30,000m3/h
P= 18.8bar
Nestle
P= 16.8bar
Q= 6,537m3/h
10
Q=20,000m3/h
L= 6,820m
Del Mont Phil.
P=18.0 bar
Q= 3,823m3/h
Future Take-Off
P= 16.8bar
Q= 4,766m3/h
12
Q=30,000m3/h
L= 1,500m
8
Q=16,177m3/h
L= 4,880m
4
Q=4,874m3/h
L= 400m
Minergy
P=16.5 bar
Q= 4,874m3/h
4
Q=3,298m3/h
L= 500m Phil. Sinter
P= 18.3bar
Q= 3,298m3/h P= 18.5bar
8
Q=15,000m3/h
L= 1,500m
8
Q=11,702m3/h
L= 650m
Coca Cola
P= 18.4bar
Q= 1,450m3/h
P= 17.8bar
8
Q=10,243m3/h
L= 6,300m
4
Q=5,574m3/h
L= 300m
Philipinas Kao
P= 17.5bar
Q= 5,574m3/h
6
Q=4,669m3/h
L= 3,450m
Future Take-Off
P= 17.4bar
Q= 3,793m3/h
PICMW
P= 17.4bar
Q= 117m3/h
RI Chemical
P= 17.4bar
Q= 759m3/h
!"#$%& '"#& (")$*)+ ,&#&*)% !)#-./ 0"1&%"#& !2/-&+

!311%2 0*&//3*& 4 56 7)*

8
Q=9,500m3/h
L= 2,700m
6
Q=4,650m3/h
L= 1,500m
10
Q=17,000m3/h
L= 4,100m
3
Q=1,100m3/h
L= 400m
2
Q=200m3/h
L= 1,050m
8
Q=8,900m3/h
L= 1,500m
6
Q=4,20m3/h
L= 1,000m
8
Q=7,250m3/h
L= 400m
2
Q=150m3/h
L= 580m
LNG Regasification
P= 19bar
Q=26,200 m3/h
Celebes Canning
P= 16.28bar
Q= 100m3/h
10
Q=11,000m3/h
L= 6,500m
10
Q=20,500m3/h
L= 10,0000m
Future Take-Off
P=16.28 bar
Q= 4,100m3/h
Seatrade Canning
p= 16.85bar
Q= 200m3/h
p= 17.16bar
6
Q=9,500m3/h
L= 250m
8
Q=6,000m3/h
L= 12,200m
6
Q=3,940m3/h
L= 3,600m
Matutum Meat
P= 16.69bar
Q= 410m3/h
Future Take-Off
P= 16.69bar
Q= 1,650m3/h
Dole Philippine
P= 16.44bar
Q= 3,940m3/h
Future Take-Off
p= 17.52bar
Q= 3,500m3/h
Southern Ph. Power
P= 18.63bar
Q= 9,500m3/h
San Andreas Fish.
P=16.51 bar
Q= 150m3/h
Citra Mina
P= 16.42bar
Q= 1,1000m3/h
p=16.90bar
Q=800m3/h
P= 16.50bar
Q=1,500m3/h
P= 18.71bar
P= 16.52bar
Q=1,500m3/h
2
Q=500m3/h
L= 350m
RDEX Food
Wharf 2 Plant
p=16.80bar
Q= 500m3/h
Philippine Canning
P=16.65 bar
Q= 600m3/h
RDEX Food Fishport
L= 16.36bar
Q= 450m3/h
10
Q=30,000m3/h
L= 3,000m
!"#"$ % &'() &'*) + ,-./0 &'*) &'11-(20'1 34 5)6 78/2-9: % !';5*-< ().)(028
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ALnulx lll
!@@!A+ +<187 >=<!+B @; G@?G+%8C<A
%>%+A>?+ 4>B81>FC8>@? BEB8+= 1@C8>?!

miles
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10
20

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