By John Victor D. Ordoñez, Reporter
PRESIDENT Ferdinand R. Marcos, Jr. has signed into law a bill that aims to develop the country’s natural gas industry as the Philippines seeks to diversify its power mix and fast-track its transition to renewable energy (RE).
Republic Act (RA) No. 12120 or the Philippine Natural Gas Industry Development Act seeks to promote natural gas as a “cost-effective source of energy and an indispensable contributor to energy security.”
Aside from establishing the Philippine Downstream Natural Gas Industry (PDNGI), the law also aims to develop the Philippines as a liquefied natural gas (LNG) trading and transshipment hub within Asia-Pacific.
The law also wants to promote natural gas as a transition fuel to renewable energy by creating a legal and regulatory framework for the downstream natural gas industry.
The Philippines is under pressure to seek other sources of energy as the Malampaya gas field, which supplies a fifth of all power generated in the country, is expected to run out of easily recoverable gas by 2027.
The government is trying to raise the share of RE in the country’s energy mix to 35% by 2030 and to 50% by 2040 from 22%.
Under the law, the Department of Energy (DoE) will be the lead agency for the industry, with the power to evaluate, approve and issue permits for natural gas facilities. It will prepare the PDNGI Development Plan, as well as establish standards on gas quality, facility and a code of practice for the industry.
“(The) procurement and utilization of indigenous natural gas, including without limitation, by gas-fired power plants, shall be prioritized over imported natural gas provided that is consistent with the state’s policy of ensuring energy security and consumer welfare,” the law stated.
The law also noted that power produced from indigenous natural gas will have priority over other conventional energy sources.
Under the law, an entity may hold an interest in upstream and downstream natural gas facilities as well as the supply of natural gas, but this will be subject to competition laws.
The processing and grant of all permits for PDNGI facilities will go through the Energy Virtual One-Stop Shop under the DoE.
Under the law, substantial investments for the development of PDNGI facilities will have to undergo an evaluation for possible entitlement to certain fiscal incentives.
“The purchase and sale of indigenous natural gas, aggregated gas and power generated by generation facilities using indigenous natural gas and aggregated gas shall be exempt from value-added tax (VAT),” the law stated.
Philippine Petroleum Association President Edgar Benedict C. Cutiongco said the new law would streamline licensing and permitting for natural gas industry players, which could reduce the country’s reliance on imported gas.
“The law underscores the importance of tapping indigenous oil and gas reserves… RA 12120 is likely to encourage the government and private entities to expedite exploration and development indigenous oil and gas resources,” Mr. Cutiongco said in a Viber message.
In a statement, the Power for People Coalition said the law would only benefit gas companies and is unlikely to lower power costs for consumers.
“Gas is one of the most expensive sources of electricity, as can be seen from the experience of South Asian countries who have chosen it as fuel for power plants,” it said.
“Contrary to the industry’s claim of gas being a transition fuel, this bill ensures lock-in and continued dependence on expensive electricity…”
IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said the government should avoid relying solely on foreign firms in developing the natural gas sector.
“Tapping foreign expertise at the start is expected but there should be a plan to gradually develop indigenous Filipino technological capacity,” he said in a Viber message.
“A plan to do so is the best measure for maximum long-term benefit from the exploitation of Philippine natural gas resources.”