AI SearchApplication of the netback methodology in natural gas pricing : the case of the Philippines
Call Number: AIT Thesis no.ET-97-37 Material type:
TextSeries: Asian Institute of Technology. Thesis ; no. ET-97-37Publication details: Bangkok : Asian Institute of Technology, 1997Description: 70 leaves + 1 online resourceSubject(s): Online resources: Dissertation note: Thesis (M.Sc.) - Asian Institute of Technology, 1997 Summary: The discovery of natural gas in Camago/Malampaya, Palawan, in the Philippines has provided a big boost to the energy self-sufficiency targets of the country. However, as a new industry, natural gas development must confront a number of issues. Topping the list is the agreed price between the producer and buyer of natural gas. In fact, negotiations have dragged for three years ago, and the result is still in the process of being finalized. This study have tried to calculate the natural gas price at the point of sale of the Camago/Malampaya using the netback methodology. Considering all the limitations of the cost data, the study have also attempted to estimate the cost-based price of natural gas. This is to determine the gas price ranges: the netback as the upper limit price and the cost-based as the lower limit price. To calculate the netback value in power generation, two prototype power systems were optimized: one including gas and another without given quantities of gas. The WASP model was used to generate the least cost expansion plans, which were compared to determine the netback value of gas in power generation. The marginal cost of gas, on the other hand, was estimated using the average incremental cost approach. Moreover, the depletion premium, which represents the opportunity cost of using gas now rather than in the future, was calculated and then added. to the marginal cost of gas to obtain the cost-based price of natural gas. The result of the netback valuation and the cost-based estimation showed that at 12 percent discount rate, the prices of gas are $4.64/MMBTU and $3.93/MMBTU, respectively. The sensitivity analysis using a 10 percent discount rate resulted in a lower gas prices for both of the approaches mentioned. Comparing these with the actual initially agreed prices shows that the latter are within the range of the former, indicating the reliability of the methodologies in calculating the price of natural gas. The results of the study also confirms the sensitivity of natural gas prices to the discount rate.
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A thesis submitted in partial fulfillment of the requirements for the degree of Master of Science
Thesis (M.Sc.) - Asian Institute of Technology, 1997
The discovery of natural gas in Camago/Malampaya, Palawan, in the Philippines has provided a big boost to the energy self-sufficiency targets of the country. However, as a new industry, natural gas development must confront a number of issues. Topping the list is the agreed price between the producer and buyer of natural gas. In fact, negotiations have dragged for three years ago, and the result is still in the process of being finalized. This study have tried to calculate the natural gas price at the point of sale of the Camago/Malampaya using the netback methodology. Considering all the limitations of the cost data, the study have also attempted to estimate the cost-based price of natural gas. This is to determine the gas price ranges: the netback as the upper limit price and the cost-based as the lower limit price. To calculate the netback value in power generation, two prototype power systems were optimized: one including gas and another without given quantities of gas. The WASP model was used to generate the least cost expansion plans, which were compared to determine the netback value of gas in power generation. The marginal cost of gas, on the other hand, was estimated using the average incremental cost approach. Moreover, the depletion premium, which represents the opportunity cost of using gas now rather than in the future, was calculated and then added. to the marginal cost of gas to obtain the cost-based price of natural gas. The result of the netback valuation and the cost-based estimation showed that at 12 percent discount rate, the prices of gas are $4.64/MMBTU and $3.93/MMBTU, respectively. The sensitivity analysis using a 10 percent discount rate resulted in a lower gas prices for both of the approaches mentioned. Comparing these with the actual initially agreed prices shows that the latter are within the range of the former, indicating the reliability of the methodologies in calculating the price of natural gas. The results of the study also confirms the sensitivity of natural gas prices to the discount rate.
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