Senator Sherwin Gatchalian on Wednesday cautioned the Energy Department against creating a monopoly in the country’s emerging liquefied natural gas industry.
“Inadvertently, we are creating a monopoly because we’re only allowing one entity to construct and to supply. In effect, he will now control the terminal. He will now control supply,” Gatchalian, head of the Senate energy committee, said in a recent hearing.
Gatchalian reacted to the department’s pronouncements that only one permit would be issued to an LNG project.
The department started accepting applications to develop the country’s first integrated LNG facility, estimated to cost around $2 billion.
“Why are we limiting it to one, creating a virtual monopoly? The end of the value chain should be the consumer. In effect, the consumer might be inadvertently penalized in just limiting it to one entity?” he said.
The department is presently evaluating 10 applications under the Philippine Natural Gas Regulation, created to ensure the successful implementation of the first LNG facility.
Energy Undersecretary Donato Marcos said the applications would be on a “first-come, first-served” basis and would include compliance to financial closing.
“The first one who gets the financial closing and all the compliance will definitely get the project,” Marcos said.
Gatchalian asked Marcos on the “limiting factor” if the investors were the ones taking the huge risk. Applicants need to put up an LNG facially with a minimum capacity of five million metric tons per annum.
“You open but you will only give one permit to construct…You’re creating a monopoly,” Gatchalian said.
Marcos said the move was meant to ensure the commercial viability of the project. “Otherwise, if we issue permit to one investor which is compliant in all aspect and then we issue another one…the commercial viability of the project will be affected,” Marcos said.
Marcos said the applicants needed to identify the project location and market to ensure the viability of the project.
He said the department wanted to avoid flippers who would sell the permit once they obtained it for quick profit, which could affect the momentum of the project.
“We want to have it realized the soonest possible time. We are looking at, maybe this year or the early next year. It has to be groundbreaking,” Marcos said.
The government is pursuing the construction of an LNG facility to prepare for the decline of natural gas output from the Malampaya field starting 2022.