"It’s as good a time as any to reflect on the impact of sound policy on the lives of ordinary people."
"It’s as good a time as any to reflect on the impact of sound policy on the lives of ordinary people."
Few things signal Christmas season in the Philippines more joyously as twinkling, multi-colored lights. On Christmas Eve, one can expect every house and street across the country to be ablaze with their own versions of Christmas lights. A tradition that dates back to when Christmas trees were decorated with candles, they symbolize the light that the birth of Jesus brought into the Christian world. Over the decades, advances in technology such as LED made Christmas lights more wondrous and fun, without the fire hazard that candles brought.
Even so, Christmas lights are still plugged into electric sockets and therefore consume electricity. If anything, the Christmas season only highlights the need for the country to make its energy supply abundant and affordable. At the recent First Asia Pacific LNG Investment Summit, a step toward this direction was proposed: Make the Philippines the Southeast Asian hub for liquefied natural gas by building an LNG receiving terminal.
The country, according to the organizers, is “poised to have a thriving LNG industry within a few years with a projected capacity of 7 million metric tons annually by 2020, the earliest estimate when indigenous fuel from the Malampaya gas field would run out.”
But there seems to be something problematic about a proposal that prioritizes importing LNG from other countries when a more viable option presents itself: developing our very own indigenous reserves by encouraging investments in the exploration and development of more “Malampayas.”
For instance, a pending bill being drafted by the Senate energy committee, considers the construction of an integrated LNG receiving terminal as well as making sure that such imported shipments have buyers. But for starters the Malampaya reserves, which supplies up to half of the power requirements of Luzon, is expected to last beyond 2029, when it is supposed to have been fully consumed.
“Exploring in the indigenous gas is now the forefront of the Philippine energy industry,” said Shell Philippines Exploration B.V. Managing Director Don Paulino, who cited the example of the North Sea oil in Europe that had gone beyond the initial 50-year estimate.
“This is a reservoir. We believe it will stay beyond 2029. There will still be plenty of resources that Malampaya can give,” he said. “If reserves will be fully consumed, I believe it will be replaced. What it is something we do not know yet, and we haven’t found.”
In fact, in 2015, a new offshore platform—the first to be designed and built in the country—guaranteed that the Malampaya natural gas field would be able to fulfill its commitments and, more importantly, ensure the steady supply of natural gas to power the Luzon electricity grid.
“This latest phase in Malampaya is a continuation of the Malampaya Deep Water Gas-to-Power Project’s positive legacy to the Philippines by providing the country a safe, reliable, and cleaner energy resources,” said SPEC Managing Director Sebastian Quiniones.
Construction of the platform took about two years and a team of more than 1,400 Filipino workers at the Keppel Shipyard in Subic, Zambales. This means the project generated more than a thousand direct jobs in addition to the additional business for local companies as well as elevated competencies and technical know-how for the workers. Its safety record—11.8-million safe man hours—was another impressive aspect of the project.
All in all, the endeavor put the Philippines on the global map of oil and gas platform fabrication, an example of the potential of the Filipino workforce to excel in terms of technical skill. More critically, going forward, the cumulative technical know-how that was passed on translates to a competitive edge for the Philippines when it comes to future oil and gas projects in the region and worldwide.
This is important considering that the Philippines is currently lagging behind its neighbors when it comes to exploration based on the number of oil and gas rigs. In 2017, Indonesia, Thailand, and Malaysia had 34, 14, and seven oil and gas rigs, respectively, while the Philippines had two. This is despite the presence of reserves and the technical know-how, a trend that the proposed LNG terminal will no doubt exacerbate.
Worse, the terminal will discourage further exploration and therefore compromise what could be a productive reliance on indigenous sources of natural gas. By depending on foreign-sourced LNG under the proposal, the country becomes exposed to higher power prices due to exchange rate risks and the overall volatility of global fuel prices, as well as possible problems in supply owing to potential geopolitical risks in sourcing and transporting fuel.
All in all, then, exploration represents a better and more sustainable solution for the country’s power situation. By utilizing indigenous sources, the Philippines not only limits its exposure to factors beyond its control, the infrastructure build-up will also lead to job creation, skills training, and a multiplier effect in terms of the businesses in local host communities.
This doesn’t even include the potential royalties that will be remitted to the country’s coffers. For perspective, the Malampaya operation generated some $3.53 billion, or P161 billion, in royalties from 2001 to 2017. In contrast, only foreign investors will benefit from the proposed LNG terminal and importation.
As Filipinos celebrate amid bright Christmas lights, the holiday season is as good a time as any to reflect on the impact of sound policy on the lives of ordinary people—in this case, the effects of a sensible direction for the power sector and resplendent lights in households big and small.