The government has finally decided to construct as well as operate the pipeline that will deliver natural gas from Southern Luzon to Metro Manila to allow as many end-users to benefit from the service, an official said on Friday.

"PNOC (Philippine National Oil Co.) will own and operate the Batangas- Manila (Bat-Man) pipeline," said Energy Undersecretary Jose M. Layug, Jr. in an interview with reporters.

"Based on the studies we saw the most optimal model is for the government to operate the pipeline so there will be open access for all entities so there is no monopoly," he added.

Bidding for the engineering and procurement contract of the 105- kilometer natural gas pipeline will start in the first quarter of 2013.

Construction is targeted to start in the same year and will take three years to complete, the department said.

Several private firms have expressed interest in the project after the government said it was considering including it in the public-private partnership program.

The Energy department originally planned to build the pipeline, with a terminal and as a facility to supply the planned 600-megawatt (MW) power plant - the estimated demand for the Luzon island group - comprising the second and third phases, respectively, which will be constructed by the private sector.

Other future projects may also source requirement from the pipeline, the department said.

Supply from the Batangas facility is piped in from the Malampaya natural gas project in offshore Palawan.

An unsolicited proposal from Abacus Consolidated Resources and Holdings, Inc. to build the package of pipeline with terminals along the way for $1.2 billion was rejected by the PNOC in September last year. It was originally proposed as part of the Arroyo administration's long-term natural gas plan.

A preliminary study by the Japan International Cooperation Agency, however, showed that the facility will only cost a little over a fifth of the amount, or $150 million, since expected demand alone can cover the cost of building the pipeline without the terminals.

The final study will be released within this month.

Meanwhile, Mr. Layug said PNOC will have to create a subsidiary to handle pipeline operations.

"PNOC will create a subsidiary for the pipeline so it can solely focus on the pipeline. It will also have to look for contracts to use the gas in the pipeline," said Mr. Layug.



Copyright 2012 BusinessWorld Publishing Corporation. All Rights Reserved.