In the current effort to frustrate the landmark $1-billion deals in which Shell and Chevron cede their shares in the Malampaya consortium to Davao City businessman Dennis Uy’s Udenna Corp., big businesses are believed to have instigated efforts to scuttle the shares transfers.
Undertakings as expensive as the recent Udenna transactions are underway for the construction of liquefied natural gas (LNG) depots in which the fuel will be imported instead of being produced in the country.
When the LNG projects were initiated, the projection was Service Contract 38 covering the Malampaya gas field expires in 2024, and the assets would transfer to the government, which will operate it until the wells are depleted, which some estimate will happen in 2027.
Then came Udenna’s purchase of the oil giants’ shares, bearing with them the promise to prolong the project and had sought an extension of SC 38, which is allowed under a provision of the contract.
This threw off the timetable of those who made expensive bets on LNG since, aside from the chance is high of finding new wells in the area to revitalize the supply of Malampaya and eating up on LNG demand, it would also mean the pipeline that links to a host of power plants running on natural gas will remain in the hands of the consortium.
Then the Senate public hearings on the Malampaya deal started to roll and later on, the demand from diverse vested interest groups for the Department of Energy (DoE) to cancel the deal.
DoE, however, maintained what transpired are purely business transactions, which the government should not intervene in.
LNG proponents should not rush to attain their profit line at the expense of Malampaya since there would be enough demand to go around, as more power plants are needed and which are already lined up to support the projected boom in the economy.
The country had also committed to phase out coal plants that currently are the source of more than 50 percent of the country’s power generation.
Indeed, it will need both the development of more natural gas fields and importation to fill the gap in power supply in the post-pandemic period, which is expected to usher in another global economic renaissance.
The seven percent growth in the third quarter was a signal for the energy sector to prepare for a surge in demand.
Government’s direction is to take advantage of the strategic location of the country in the region to become an LNG hub, which is being aggressively pushed by Energy Secretary Al Cusi.
Natural gas currently provides 3,200 megawatts of electricity and accounts for 21.1 percent of generated electricity in 2019, but for Luzon Island alone, the fuel’s share is about 29.3 percent.
Whether or not SC 38 is extended, LNG eventually will be pivotal in meeting the rising demand for electricity as businesses rev up.
DoE had laid down the regulatory framework for the entry of LNG, such as the “Rules and Regulations of the Philippine Downstream Natural Gas Industry,” which is in conjunction with Executive Order 30 on Energy Projects of National Significance (EPNS) and Republic Act 11032, or the Ease of Doing Business Act, to encourage more LNG projects.
LNG’s time has come, and it should complement local fuel production, not compete with it.