Malampaya’s finite bounty spurs hectic race for more renewables, other oil-gas fields

By Lenie Lectura -October 10, 2019
from Business Mirror

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Malampaya Phases 2 and 3, located some 50 km offshore from Palawan

THE Philippines continues to be confronted with energy supply challenges.  But one that has to be dealt with immediately is the urgency to find and develop new energy sources to fill the void that will be left in the wake of the Malampaya gas field depletion.

If no viable alternatives to the gas field—supplying more than 40 percent of Luzon’s power requirement—are presented anytime soon, it is possible that rotational brownouts may hit Luzon again.

“Unless we find new indigenous natural gas deposits or develop the capacity to import and process natural gas, we stand to lose a tremendous amount of energy-generation capacity. This will compromise our energy supply stability in the coming decades,” Senate energy committee head Sherwin Gatchalian said.

The latest discovery announced by the Department of Energy (DOE) is the Alegria oil field, which is found to have commercial quantities of natural gas and oil resources. However, it could only power up a 60-megawatt (MW) gas plant and produce only 180 to 360 barrels of oil per day.

Albeit small, the agency said this is still a positive development since this will help the economy because it will support the local industry using crude oil.

Contracting round

On a larger scale, the DOE launched the Philippine Conventional Energy Contracting Program (PCECP), a process through which the agency awards service contracts for the exploration and development of various energy resources, including oil.

It offered 14 predetermined areas (PDAs) but received offers to explore only four areas. The agency also received nominations for prospective areas in Southeast Luzon Basin, Northwest Palawan Basin, Sulu Sea Basin and Agusan-Davao Basin.

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Senate energy committee head Sherwin Gatchalian

“We’re happy to get a third of the predetermined areas,” commented DOE Assistant Secretary Leonido J. Pulido III.

The DOE said it would continue to encourage investors, especially foreign firms, to participate in the program.

Though the Philippines is essentially a frontier country as far as energy resource development is concerned, Pulido said an existing territorial dispute on Recto Bank in the West Philippine Sea does not exactly make the country marketable.

“If you look at the context of the Philippines, we are currently competing against markets from Africa, we’re currently competing for investments from the US. In a lot of these international companies, the tendency really is to, shall we say, invest in areas that are very, very stable, where the risk is less. So there is difficulty, there is a challenge there and we are working on that,” commented Pulido.

Still, the DOE expressed hope that the contracting round would result in finding another Malampaya.

Renewables

While this is being pursued, the DOE is collaborating with the National Renewable Energy Board (NREB) to build a renewable energy (RE) portfolio of 2,000 megawatts by offering a green energy tariff via an auction.

NREB will allocate the RE capacity to the distribution utilities (DUs) which, in turn, are required to purchase RE because of their Renewable Portfolio Standards (RPS) mandate.

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Energy Secretary Alfonso Cusi said the Philippines remains open to the possibility of harnessing nuclear energy for the country’s energy requirements so long as it is both feasible and viable to implement the highest safety and compliance standards.

Atty. Monalisa Dimalanta, NREB chairman, explained that the implementation of the program must coincide with the RPS, a policy mandating DUs to source a minimum portion of energy from renewable sources, thus guaranteeing a market for RE generators.

NREB is the advisory body tasked by the law to recommend policies, rules and standards to govern the implementation of the RE law, which granted fiscal and nonfiscal incentives to RE projects.

This plan, said DOE Secretary Alfonso Cusi, will help achieve the target of increasing the country’s renewable capacity to 15,304 megawatts by 2030.

Another key policy lined up to hit the country’s target of 22,000 MW in RE capacity, with RE accounting for 35 percent of the total energy mix by 2030, is the Green Energy Option (GEO).

GEO, Cusi said, will empower consumers to demand that their energy is sourced from renewable resources.

Meanwhile, a consumer group said it would closely monitor the DOE and NREB on how they will enforce the proposed green energy tariff program.

“The DOE is mulling a green rate for renewable energy players. The DOE is planning to set a ceiling price for new renewable energy players to attract investors and promote competition in the subsector, but LKI [Laban Konsyumer Inc.] is cautious about this,” said LKI president Victor Dimagiba.

LKI urged the agencies to focus on the possible rate impact on consumers and asked to be allowed to participate in crafting the proposed policy.

“DOE should show that there is no subsidy with RE under their proposal. Hopefully, this is not an innovation of the Feed in Tariff [FIT] and FIT Allowance power rate scheme, which the consumer group had consistently opposed,” Dimagiba said.

Gatchalian expressed the same concern, saying the DOE and the NREB must conduct a careful study on the program in order to prevent any unnecessary pass-on charges to consumers.

“Will this new tariff require subsidy and, if so, how much will the rate effect on consumers be? These are some of the things that the DOE needs to thoroughly study before they push through with the plan,” said the senator.

Go nuclear?

Another path being pursued by the DOE to boost energy security amid the looming Malampaya depletion is nuclear energy.

Cusi said the Philippines remains open to the possibility of harnessing nuclear energy for the country’s energy requirements so long as it is both feasible and viable to implement the highest safety and compliance standards.

Citing the technical assessment of the International Atomic Energy Agency (IAEA), the DOE listed the use of nuclear energy for possible inclusion in the country’s energy mix.

Cusi said his office has submitted to the Office of the President the proposed national policy on nuclear energy. He said the policy addresses the issue of whether nuclear energy is going to be an option for the country, especially since “there are provinces already that are available [and] ready to take nuclear as a power source.”

In fact, during President Duterte’s visit to Moscow last week, the Philippines and Russia agreed to “jointly explore” the prospects of constructing a nuclear power plant in the Philippines.

This plan, however, is risky, according to Gatchalian. “We should study this well because it’s very risky and nuclear power plants should have a lot of safeguards,” he said, adding that an in-depth study must be conducted.

Meantime, the country will continue to be heavily dependent on oil imports while industry stakeholders continue to aggressively pursue and support new players, conduct more oil exploration discoveries, and invest in other forms of renewable energy.

“Together with our country’s economic management team, the DOE and your entire energy family remain unyielding in finding ways to manage the situation at hand.

“We will not rest from pushing vital industry reforms, including the crafting of policies that promote the exploration and development of our indigenous energy resources, the expansion of our renewable energy capabilities, uphold the integrity of safety and resiliency standards, and bring power to unserved and underserved areas in the Philippines,” the DOE said.

These are the promises of DOE. Only time will tell if the country will be able to achieve these in time to find a new replacement for the Malampaya gas facility, which remains to be the single, most important energy project for the country.

Image Credits: ShellNonie ReyesRoy Domingo