Partnership eases coal, LNG supply constraints

The Philippines and Indonesia have agreed to have their respective business sectors work closely together, especially when there are critical supply constraints on coal and liquefied natural gas, or LNG, to ensure energy security.

“The signing of the MoU reinforces and updates the long-term energy cooperation between the two countries. On the part of the Philippines, it is an offshoot of our President’s efforts to achieve higher energy security through energy diplomacy,” said Energy Secretary Raphael Lotilla in a media statement.

Lotilla noted that Indonesia and the Philippines share common energy concerns and can benefit from heightened levels of cooperation.

Indonesia and the Philippines are second and third globally regarding installed geothermal generation plants.

Both are currently highly dependent on coal-fired power plants and seek an orderly transition to cleaner technologies without imposing additional burdens on their respective populations.

Transitioning to clean energy to achieve the country’s energy security goals would require a transition fuel capable of providing baseload generation that would fill the gap when existing coal-fired power plants start to be retired.

Natural gas, including LNG, is a suitable transition fuel where the private sector investments in this technology will be facilitated to address the variability of renewable energy capacity additions and ensure the reliability and security of the power system.

The two countries are major sources of minerals needed for the energy transition and have vast potential for solar, wind, and ocean energy production.

Based on government data, the Philippines has been a dependable market for Indonesian coal, accounting for nearly 98 percent of total Philippine coal imports in 2022  — consistently increasing from 88 percent in 2017.

However, following the failure of Indonesian coal mines to provide an adequate supply for their domestic power plants and markets, the Indonesian government issued a coal export ban in January 2022.

The Philippines imported more than 80 percent of its coal requirements in 2023 and more than 90 percent in previous years.

Since then, the Philippines has exerted diplomatic efforts to ensure a steady coal flow from Indonesia.

In his remarks after the presentation, Marcos said that the MoU represents the will of both nations to keep enhancing and fortifying their bilateral ties, especially in the field of energy cooperation.

“Through this MoU, our countries create a new synergy as we cooperate to achieve energy security,” he said.

Marcos said he and Widodo had also instructed their respective agencies to expedite the signing of pertinent MoUs that will help unlock the economic potential of the BARMM to spur growth in the region.

Marcos said another MoU on science and technology is “nearing completion.”

Widodo, for his part, said he and Marcos decided to improve border and trade ties between the two nations.

Both parties committed to easing trade in coal and LNG as part of their collaboration, particularly when supplies are limited.