Drilling hope, not discounts

Drilling hope, not discounts | Daily Tribune

The announcement of a new gas discovery near the Malampaya gas-to-power facility in Palawan is welcome news for a country hungry for energy security. But before expectations run ahead of economics, it bears stressing that local gas finds have never guaranteed cheaper gas supply or electricity.

In the Philippines, as in the rest of the world, energy prices are shaped not by geography, but by global markets and the high cost of developing these oil and gas fields to extract what lies beneath.

Ergo, natural gas and oil, even when produced domestically, are priced against global benchmarks, as these are globally traded commodities, and their value is determined by international supply, demand, and geopolitics — not by where the resource happens to sit. This has been the Philippine experience for decades.

Malampaya itself is the clearest example. For more than 20 years, the field has supplied a substantial share of Luzon’s power generation. Yet electricity prices still moved in step with world oil and gas markets. This was not a policy failure but a commercial reality — Malampaya gas contracts were anchored to international fuel benchmarks, reflecting replacement fuel costs and opportunity pricing rather than purely local production expenses.

Earlier, oil discoveries in northwest Palawan followed the same logic. Fields such as Galoc and Nido improved supply security and reduced import dependence, but the crude they produced was priced against international markers.

Domestic production helped the balance of payments, not consumer price insulation.

The reason is straightforward and expensive. Offshore energy development requires massive investments for drilling rigs, seismic surveys, subsea facilities, processing plants, and pipelines.

These are high-risk, long-gestation investments. Investors, whether local or foreign, expect returns commensurate with those risks. Pricing gas below global market levels simply because it is produced locally would undermine project viability and deter future exploration.

The fundamentals of pricing remain unchanged. Apart from investments, there are also fiscal obligations due to government that include royalties, income taxes, and its actual contractual share. These are not add-ons, but built-in features of resource development meant to ensure the public benefits from national assets.

This is why promises of guaranteed price relief deserve skepticism. A new gas find can enhance energy security, reduce exposure to supply disruptions, and provide a more stable fuel base over the long term. What it cannot do is shield consumers from global price movements. Suggesting otherwise risks creating false hope and public frustration when bills remain stubbornly high.

As a Poll Starter, the recent gas finds are strategically important and worth welcoming. They extend domestic supply, improve energy security, and provide a longer planning horizon for government and industry. But global price benchmarks, capital recovery, investor returns, and government fiscal terms will continue to shape what consumers ultimately pay.

The real value of new gas lies not in instant price relief, but in resilience, reducing exposure to external shocks and stabilizing the energy system over time. Managing expectations now is not dampening optimism, it is ensuring that hope is anchored in economics, policy discipline, and reality.

The latest gas discovery is undeniably good news. It signals potential and possibility. But it is not a silver bullet for high energy prices. If the Philippines is to benefit fully, the public must be told not what it wants to hear — but what history and economics already make clear. In energy, hope must be grounded in reality. Otherwise, it becomes an expensive illusion.