“When are we going to realize that indigenous gas holds the key to stable power supply and affordable electricity rates?”
DON’T look now, but prices of liquefied natural gas (LNG) are spiralling out of control, threatening our capability to provide ample energy supply to the economy as a whole.
In fact, the price swings in so far as LNG is concerned can be very unpredictable.
Fuel accounts for 30 to 40 percent of power costs. The 20 percent rise in LNG prices since Aug. 2024 has driven electricity rates up by 4 to 6 percent, further burdening consumers already reeling from high power bills.
Given the volatile nature of LNG pricing, we cannot afford to rely solely on imported fuel. But the thing is, we keep on importing huge volumes of it for our power generation needs. This has got to stop.
At present, LNG prices bought from the spot market range between USD17-18 MMBTU (Million British Thermal Units). Compare that to Malampaya gas prices which are only about USD11/MMBTU.
One of the biggest causes of current sky-high LNG prices can be easily traced to the bloody and destructive war in Ukraine started by Russia in Feb. 2022, or three years ago.
Sanctions against Russian President Vladimir Putin’s expansionist ambitions have pushed demand for LNG in directions we least expected. We certainly did not anticipate the impact of this armed conflict on LNG prices.
Key European economies that used to import Russian gas in large quantities are now turning to other sources, including smaller economies, from which the Philippines gets its supply.
The reduced Russian gas supply is driving the movement of spot LNG volumes towards Europe and the subsequent increase in price of spot LNG delivered to the East. The price escalation in the LNG trade has been going on for some time.
Senator Pia Cayetano, chairperson of the Senate committee on energy and sponsor of the Philippine Natural Gas Industry Development Act, had earlier persuasively argued and presented reliable data to dispel claims that LNG prices are lower than indigenous or Malampaya gas.
We must emphasize that our indigenous gas resources hold the key to energy security for the long term.
With the passage of Republic Act 12120, or the Philippine Natural Gas Development Act, we now have a clear legal framework to revitalize indigenous gas exploration, which has been nearly abandoned due to the absence of clear-cut policies.
Fully developing our indigenous gas resources will protect us from the uncertainties of LNG supply and likewise show our capability to become self-reliant.
When are we going to realize that indigenous gas holds the key to stable power supply and affordable electricity rates?
With the requisite law already in place, we can now buckle down to work toward self-reliance in our energy needs.
Natural gas is the cleanest-burning fossil fuel, producing about 50-60 percent fewer carbon dioxide emissions than coal when used for electricity generation.
It also produces significantly lower levels of sulfur dioxide and nitrogen oxides, which contribute to air pollution and acid rain.
LNG complements renewable energy sources like solar and wind. Due to their intermittent nature, renewables require backup power, which is often provided by natural gas. LNG ensures a stable supply of natural gas for power generation when renewables are not available.
LNG is increasingly used for electricity generation, either in dedicated natural gas power plants or as a fuel for dual-fuel generators that can switch between LNG and other fuels like diesel. Power plants fuelled by natural gas offer flexible and efficient power, especially in regions transitioning from coal.
Industries with high energy demand, such as petrochemicals, steel production, and manufacturing, use LNG as a cleaner fuel source. The versatility of natural gas allows it to power industrial operations while reducing greenhouse gas emissions.
The Philippine Natural Gas Development Act should be implemented to the letter at the soonest possible time, as it is really a game changer that will demonstrate our earnest efforts at self-reliance and attaining energy security.
(Email: ernhil@yahoo.com)