Davao City Rep. Paolo Duterte pushed for the development of the Philippines’ downstream natural gas industry to help meet the country’s fast-rising energy demand and cushion future spikes in fuel prices.
In filing House Bill 4097, Duterte is seeking to put in place a regulatory framework that will aid the transition of the country’s emerging natural gas industry to a fully developed sector.
With production levels in the Malampaya gas field expected to fall substantially over the coming years, Duterte said Congress needs to act fast in passing HB 4097 and other similar measures in order to anticipate the elevated demand for electricity resulting from the country’s rapid post-pandemic growth.
Considered as the biggest success story in the Philippine energy sector, the Malampaya deepwater gas-to-power project signaled the birth of the natural gas industry in the country. The Malampaya gas field has contributed over $12 billion in revenues to the government and is responsible for delivering about 20 percent of the country’s electricity requirements.
However, its dwindling gas reserves could lead to the country importing liqueified natural gas (LNG) if no alternatives are found, Duterte, the bill’s author with Rep. Eric Yap of Benguet, Edvic Yap and Jeffrey Soriano of ACT-CIS party-list group as co-authors of the measure.
The legislative proposal will enable Malampaya gas field project operator, such as the Prime Infrastructure, to expand into more natural gas projects.
“Despite the establishment of the Philippine Energy Plan (PEP), threats of potential blackouts remain as the drilling activities in pursuit of exploring natural gas were halted. This is worsened by the skyrocketing prices of imported oil—signaling the urgent necessity to tap alternative sources of energy, particularly cleaner energy, from indigenous sources,” Duterte and Yap said in filing HB 4097.
HB 4097 also defines the responsibilities of the various government agencies and private entities in furthering the development of, and ensuring a level playing field in, the Philippine Downstream Natural Gas Industry (PDNGI).
“Most importantly, this bill seeks to ensure the delivery of secure, sustainable, sufficient, affordable and environment-friendly energy to all economic sectors in the country,” the bill’s authors said.
The downstream natural gas industry as defined under the bill refers “ to the sectors of transmission, distribution, supply, and use of natural gas and their related activities, such as importation, storing, regasification, transmission and distribution of natural gas to end-users.”
To encourage the investments needed for the construction, operation and maintenance of, and conversion to, natural gas facilities, such projects as certified by the Department of Energy (DOE), shall be included in the Strategic Investment Priority Plan (SIPP) for the next 10 years following the enactment and effectivity of the bill into law.
Among the tax incentives offered to PDNGI investors under the bill are income tax holidays, enhanced deductions and zero value-added tax (VAT).
Under the bill, the operation of LNG terminals, natural gas transmission systems, and natural gas distribution systems, including own-use facilities, are considered “energy projects of national
significance” whose implementation shall not be subject to unnecessary administrative processing delays.
Operators of transmission and distribution pipelines and their related facilities considered as public utilities are required to obtain a legislative franchise and a Certificate of Public Convenience and Necessity (CPCN) from the Energy Regulatory Commission (ERC).
The “operation of virtual pipelines and their related facilities, which are likewise considered public utilities, shall no longer be required a legislative franchise” under the bill. Their operators, however, are still required to secure a CPCN.
LNG terminals are not considered public utilities so they are exempted from securing a franchise and CPCN under the bill.
The DOE is tasked under the measure to prepare the Natural Gas Industry Development Plan (NGIDP), while the ERC is responsible for setting the rates and related terms and conditions of service for the industry, among their other functions to promote the development of the PDNGI.
The other agencies involved in developing and setting regulatory standards for the PDNGI are the Department of Environment and Natural Resources (DENR), Department of Health (DOH) and the Department of Trade and Industry (DTI).
Under the bill, all matters concerning abuse of market power, cartelization, and any anti-competitive or discriminatory behavior are subject to the quasi-judicial powers of the Philippine Competition Commission (PCC).
The measure also outlines the provisions governing the access of third-party users to LNG facilities; the standards on facilities, product and safety practices; responsibilities of permit holders and operators; and rules on anti-competitive behavior.