LNG: Transitioning to cleaner power for the growth of our nation

The next few years will be critical for our country. After the economic downturn occasioned by the pandemic, and with our pursuit of middle-income status in the global stage, our organizations, industries, and sectors need to work doubly hard to achieve their targets.

We are also aware that simply growing in nominal terms is not enough; we need to aim for sustainable, inclusive, and equitable growth not only for a select few but for as many Filipinos as possible, in as many places in the archipelago as possible. 

The present administration has clearly set directions towards the digitalization of our government systems and our industries to drive economic growth. For this, we need power. 

The Department of Energy, in its Power Development Plan, says peak demand is expected to increase fourfold from 2020 to 2040. This is equivalent to a rise in demand by almost 7% annually. Thus, to adequately supply the demand, our installed capacity must not only increase fourfold but at least fivefold – from 22,317 MW in 2019 to 114,601 MW in 2040. 

This demand must be met by existing, committed and new build capacities.

Unfortunately, the Malampaya gas field a critical source of fuel for the generation of power for 20% the Luzon grid, is being depleted.

Though the renewal of the Malampaya Service Contract No. 38 for another 15 years will extend the operations of the Malampaya gas field until Feb. 22, 2039, exploration and the development of a new offshore platform will take about a decade.

Given this, an immediate alternative to import liquefied natural gas (LNG) is urgently needed to respond to the impending energy gap. Addressing the coming shortfall will protect us from potential electricity disruptions and bolster our energy reserves.

It will not only address the decline of the Malampaya gas field but provide a reliable and consistent energy supply that will benefit consumers, industries, and our overall economy. 

In this day and age, there is no more room for power interruptions. These power outages are a bane to our economy. They disrupt the regular course of business. They create uncertainty and erode confidence in our infrastructure, making an unfavorable impression of our country in the eyes of investors. 

More acutely, citizens themselves feel not only the inconvenience but the outright disadvantage of power outages through interruptions in their everyday lives, whether they are at home, at school, at work, or doing business from anywhere. 

So, why the big push to switch from coal to LNG?

It's all about finding a cleaner option than coal for our country's power plants. Actually, the DOE already has an ongoing moratorium on building new coal powered plants.  

Think of LNG as a transition energy source—it's the bridge fuel we're using while we wait for renewable energy to get more affordable and for power storage technologies to catch up.

We know how solar, and wind can be as unpredictable as the weather.  And get this, studies show that LNG cuts carbon emissions by about half compared to coal. That's a clear win for the environment.

Thus, LNG as a cleaner fuel can close the gap between supply and demand, serving as a critical component of our baseload generation requirements as it is a proven source of stable and dependable energy. 

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But as global demand for LNG grows, expect market forces to push up the price. So, while it is our priority to ensure adequate power supply, government regulators must be ready with measures to protect consumers from price volatilities.

The government has recognized the need to address these challenges to our energy security as well as ensure that this would be affordable. Toward this end, there is a pending bill in Congress called the Philippine Downstream Natural Gas Industry Development Act.

This establishes a preference for natural gas as a cleaner energy source, and seeks to strengthen and reinforce regulations in the natural gas industry. When it becomes a law, it would address existing gaps, enhance oversight, and ensure transparent and reasonable pricing of natural gas.

It is, after all, up to the government to develop long-term plans for LNG and institute measures to address environmental concerns, ensure sustainability, and promote renewable energy integration.

These efforts toward clear and stable regulatory frameworks will no doubt attract investment, promote market stability, and facilitate the growth of a thriving LNG industry. Thus, the government is open for private sector partnerships to provide the expertise, and huge long term investments required for these large scale energy ventures.

Heeding this call of the government to help achieve energy security are three power supply companies – Aboitiz Power Corp., Meralco PowerGen Corp., and San Miguel Global Power Holdings.

It is heartening to see these big companies, though competitors in other industries, working together for a common goal. They aim to build an LNG facility in Batangas province, and estimated cost is US$ 3.3 billion. This facility is seen to be the country’s first and biggest, envisioned to produce 2,500 megawatts generation capacity of baseload power by year’s end.

This unprecedented team up of three of the country’s biggest, most successful, and reputable business groups sends a strong signal to potential investors that there is much confidence and opportunity as the Philippines pushes on to be one of the fastest growing economy of the region.

Kit Belmonte is a co-convenor at CitizenWatch Philippines.