Natural gas pricing must be market-driven — expert

The government should allow a market-driven mechanism in determining the pricing scheme for natural gas, an international oil and gas research expert said yesterday.

In a press conference, Mohd Farid, senior manager for corporate information and research unit of Malaysia-based Petronas, said this mechanism should be like the one used in setting crude prices.

"Using the market competitiveness as benchmark for setting prices for natural gas will give consumer better cost,’’ Farid said.

According to him, the pricing scheme should also be based on supply and demand just like the one used in determining world crude prices.

Energy Secretary Vincent S. Perez earlier said they want to consider the experience and or best practices of Malaysia, Brunei and Indonesia in terms of dealing with natural-gas related activities. "So far, these countries have been successful in their respective natural gas business," Perez said.

Consumer Oil and Prize Watch (COPW) chairman Raul T. Concepcion said he is coordinating with the Department of Energy (DOE) to jointly study the possible ways to determine the pricing formula for natural gas.

Based on initial studies conducted by COPW, Concepcion said the price of natural gas could be based on return-on-rate-base (RORB) of the company.

"They might measure it based on the expected return on investment," Concepcion said.

Concepcion also shared Farid’s view that the pricing of natural gas could be determined by market forces.

The full commercial operation of natural gas is expected by January 2002. This means that the power plants fired by natural gas will be able to deliver electricity to end-users.

The DOE wants to develop the downstream natural gas industry and liberalize it to allow more investors to come into the sector. The first major natural gas development in the country is the Malampaya-Deep-To-Water-Gas Power project. – Donnabelle Gatdula