Thirty one years from its discovery, the Malampaya natural gas reserve in the deep waters off northwest Palawan remains a major source of energy powering the Philippine economy.
It was an exploration feat for the oil-starved country that led partners Shell Philippines Exploration B.V. (SPEX) and Occidental Petroleum Corp. of the US (Oxy) to harness the offshore field’s potential to the tune of $4.5 billion. Malampaya to date fuels the requirements of gas-fired power plants with a combined capacity of 2,700 megawatts of electricity in Batangas province.
The gas field has also played its role in mitigating climate change. Malampaya gas provides an alternative source of clean fuel, and is much less pollutive than dirty crude oil or coal. Natural gas produces half the carbon dioxide that coal does in producing energy.
The use of natural gas to produce electricity has been shown to stabilize power generation and reduce as well greenhouse gases that science has found to be the main cause of global warming. With the development of renewable energy sources yet to mature in the Philippines, Malampaya is serving its role in the transition to much cleaner fuel.
“Natural gas-fired power plants can serve as quick starting reserves which could complement the variability of RE technologies such as solar and wind,” the Department of Energy (DOE) says in its updated Power Development Plan (PDP).
Keeping the supply of natural gas and its price stable in the Philippines, however, is a challenge. The government partly provided a solution after renewing Service Contract 38, the government license that allows extraction and the continued production of natural gas from the Malampaya oil field.
The renewal of SC 38 bodes well for the steady supply of indigenous natural gas, which costs less than fossil fuels. The Malampaya consortium, now led Prime Infrastrcuture Capital Inc. of tycoon Enrique K. Razon Jr., is now deep into the development of new wells in the area.
But Malampaya’s reserves are finite. How will the Philippines keep gas-fired power plants running as demand keeps growing? Buying it elsewhere depends on the vagaries of market forces.
Importing liquefied natural gas (LNG), though, seems to be the only viable solution. LNG is natural gas that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport.
But the system of bringing these LNG imports to power plants in a cost-efficient manner is chaotic at best, or non-existent. The Philippines must adopt a gas aggregator framework, complete with the infrastructure to support it. The framework would simply allow a group of consumers, in this case power plants, to combine their natural gas requirements and form a buying bloc. With greater bargaining power, the bloc or cartel may secure lower costs or more stable prices in a highly competitive market.
President Ferdinand Marcos Jr. has welcomed the proposal when Prime Infra unveiled it in Malacañang. “It seems that this gas aggregator idea is the key,” says Mr. Marcos Jr., after key officials of the Malampaya consortium relayed to him that work on developing new Malampaya wells is on track.
His open support for a more efficient system of gas distribution, through aggregation, was not based on guess work or popular appeal. Energy Secretary Raphael “Popo” Lotilla says gas aggregation will prevent volatility in prices that are often associated with a chaotic distribution system.
“That’s what we are trying to prevent from happening in terms of spikes in the price of imported LNG and the plan is to blend the lower price of Malampaya natural gas with imported LNG so that we can soften the impact or the volatilities of imported LNG,” Lotilla said in a recent interview with One News.
Cheaper LNG cost equals lower power rates. “The framework establishes a resilient and efficient natural gas supply chain,” adds Prime Infra chief executive officer Guillaume Lucci.
The gas aggregate framework offers an end to industry chaos and the start of a predictable system. It will offset market fluctuations that result in high LNG prices most of the time.