BG plc joint venture First Gas Holdings has agreed in principle the terms for the purchase of natural gas for a power project on Luzon island in the Philippines, to supply Manila with electricity.

The first stage of the project is a 1000MW power station, with a planned second stage taking the total capacity to 1500MW.

The gas will be supplied by Shell and Occidental on a long term contract from their offshore Camago-Malampaya field, supplies will run for 22 years beginning in January 2002.

The power plant will begin producing electricity for the local distributor, Meralco, to supply customers in Metro Manila from 1999. First Gas Holdings has in place an agreement with Enron for a supply of condensate from 1999 to 2002, when natural gas will become available.

In December 1996, First Gas Holdings - in which BG plc has a 40 per cent interest - signed a £310 million contract with Siemens to construct and operate the first 1000MW of generating capacity.

BG plc Executive Director Stephen Brandon said: "The agreement with Shell/Occidental represents a key milestone for the project. It will enable the development of the Camago-Malampaya field, and mark the beginning of a natural gas industry in the Philippines.

"The role being played by BG plc through First Gas Holdings is an important demonstration of our capability throughout the gas supply chain, and our ability to take major projects from the drawing board to reality."

Negotiations on financing the project are at an advanced stage, and full financial closure is expected later this summer this year, enabling construction to begin.

First Gas Holdings is looking to develop more gas-related business opportunities in the Philippines, including further power plants and the construction of a high pressure pipeline system. The pipeline could also carry natural gas to major areas of industrial and commercial growth in the country.

Note to editors

First Philippine Holdings, the BG plc partner in the project, is part of the Benpres Group, which has major interests in broadcasting, water distribution, telecommunications, power generation and distribution, oil pipelines, transport infrastructure projects, financial services and property development.