Phl’s need for LNG critical – Fitch

The Philippine government’s ambitious target to expand its renewable power capacity, coupled with a concerted effort to promote the space, could pose significant downside risks to natural gas consumption in the domestic power industry, credit intelligence and market data provider Fitch Solutions said.

To address the potential natural gas deficit, the Department of Energy has approved seven gas-fired power plants with a combined capacity of 7.1 gigawatts, and ten more gas-fired power plants with a total capacity of 8.8GW have been proposed.

The Philippines’ demand for LNG from the power sector could go up to 6mtpa if all new projects come online by 2027, excluding gas demand from the existing five power plants that currently receive gas from the Malampaya gas project.

However, it will be necessary to import nearly 9.0mtpa of LNG to feed 12 gas-fired power plants once Malampaya stops gas production.

The Philippines’ self-sufficiency in natural gas production is coming to an end as output from the Malampaya gas field is expected to deplete by 2024, Fitch Solutions said on Wednesday.

In an emailed commentary, Fitch Solutions said the Philippines exclusively relies on gas supplies from the Malampaya gas field and has been self-sufficient since the field began production in 2002.

Citing data from the Department of Energy, the company said the country’s natural gas reserves from its sole Malampaya gas field will be depleted by 2024, which could result in “permanent loss of gas supplies” from domestic sources, leaving the country with a considerable natural gas deficit.

“The outlook for gas production from domestic sources is bleak even though the moratorium on oil and gas activities in the West Philippine Sea was lifted in October 2020,” Fitch Solutions said.

According to the US-based risk service, credit intelligence, and market data provider, the DOE plans to spend P350.4 billion for upstream explorations. She is targeting to produce an additional 3.1bcm of gas, but it remains to be seen whether the Philippines will be able to see gas production in the near-to-medium term.

Unless gas can be produced from domestic sources, Fitch Solutions said the Philippines would need to rely exclusively on imported liquified natural gas moving forward.

Phl gas market

Fitch Solutions said the Philippines’ natural gas market is relatively small, with gas consumption almost exclusively used in the power industry, representing 96 percent of total gas consumption.

“Gas consumption from the energy sector dropped further following the closure of Shell’s refinery. There has not been a strong policy push to promote gas use in the Philippines,” it said.

“Lack of adequate gas supplies from domestic sources is one of the key reasons that the government has promoted gas in industrial, residential, and commercial sectors,” it added.

In the near-to-medium term, the Philippines’ gas consumption may face upside risks against planned LNG-fired power plants. However, long-term gas demand growth will depend on the government’s policies to promote investments in gas-fired power projects.

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