Philippines banks on LNG to help avoid power shortage

The 'erratic' fuel supply from the Malampaya gas field could be supplemented by liquefied natural gas (LNG) to ensure that there would be no local power shortage in the medium term, the Department of Energy (DOE) said on Monday.

Energy Secretary Raphael Lotilla explained that the private sector could provide the additional LNG supply by June to make up for the 1,200 megawatts (MW) lost after the Gas Supply and Purchase Agreement (GSPA) between the Malampaya consortium and National Power Corp. (Napocor) expired last year.

'The loss of 1,200 MW acting as baseload is nothing short of a nightmare for any administration,' Lotilla said at a forum hosted by the Makati Business Club on Monday.

Reduced capacity

The energy chief was referring to the 1,200-MW capacity Ilijan power plant, which had been sourcing its supply of indigenous natural gas from the Malampaya gas field until the GSPA lapsed in June 2022.

State-owned Power Sector Assets and Liabilities Management Corp. (Psalm) turned over the Ilijan plant to San Miguel Corp. in the same month, after the expiration of a build-operate-transfer contract with Korea Electric Power Corp.

According to Lotilla, LNG is a welcome addition to the country's power supply, given the 'erratic supply from Malampaya because of the declining field.'

The energy secretary admitted, however, that LNG prices were largely unpredictable and importation could lead to an increase in the cost of power.

'With the Energy Regulatory Commission (ERC), we are looking at price shock protection mechanisms,' Lotilla said.

'We know that LNG will be volatile … If the current spot prices are still going to be relatively elevated this year and maybe in 2024, we've got to look at that side of protecting consumers and the industry,' he added.

Industry experts have been urging the government to ramp up its long-term supply of LNG due to volatile spot market prices.

Coming soon

The DOE last month said the country's first two LNG terminals were expected to open in the first half of 2023, adding that securing supply would not be a problem.

LNG, being a cleaner source of energy than coal, is seen critical during the global transition to a low-carbon future.

In October 2021, former Energy Secretary Alfonso Cusi announced that the Malampaya natural gas output was starting to decline due to depletion of reserves and decreasing reservoir pressure.

The DOE had projected that the remaining Malampaya gas reserves would be completely depleted by the first quarter of 2027