Pap Underscores Role Of Indigenous Energy In PH Progress

This was the gist of the talk of the president of the Petroleum Association of the Philippines (PAP) Don Paulino during the recent launch of the Department of Energy (DOE) Philippine Conventional Energy Contracting Program (PCECP) in Bonifacio Global City.

Paulino, who is also the Managing Director of Shell Philippines Exploration B.V. (SPEX), quoted studies that showed that the country's energy requirements will double in 20 years and to help meet this increased demand, the government should ramp up tapping energy sources that's indigenous or native to the Philippines.

"There have been a lot of studies in the past and one such study says that GDP growth is strongly correlated to energy demand and vice versa," Paulino noted. "Therefore, we need energy to grow the Philippines," he added.

No less than the President Rodrigo Duterte himself reiterated the need for more explorations. In a message read by Cabinet Secretary Karlo Alexei Nograles, the President said, "I have already said this before – our country remains underexplored. We have, for the longest time, become dangerously complacent with importing the bulk of our petroleum requirements."

For his part, Energy Secretary Alfonso Cusi said that the ever-rising demand of power supply in the country warrants an aggressive approach to develop its energy resources--one of which is petroleum. Cusi shared that other ASEAN countries have been drilling much more than the Philippines. "It is about time we change this," Cusi stressed.

Paulino however noted that the real challenge for the Philippines is providing sustainable energy, and providing it at the cheapest way possible. "But in order to do this, we have to develop local indigenous energy sources," he stressed.

The country's electricity requirements are currently mostly met by imported fuel. According to Paulino, the Philippines is a rich source of energy and, if properly tapped, can complement the growth of renewables and lessen the country's reliance on imported oil. "The truth is that there is local, cleaner-burning energy in the Philippines and it is already providing 30 to 50 percent of the country’s power needs, this is natural gas from Malampaya," Paulino asserted.

"What we need right now is to encourage more explorations so we can find and develop new indigenous energy sources," he stressed. "An example of this is what we have been doing with Malampaya in the last 17 years," he added.

The Malampaya model

The Malampaya Deep Water Gas-to-Power project has been providing around 30% of the country's energy needs. This even peaks to 50% during the summer months.

Since 2001, the Malampaya project has been drawing natural gas from beneath the seafloor of the West Philippine Sea and this fuels five power station plants with a total generating capacity of 3,200 megawatts.

The benefits of the project, however, extend beyond being able to draw and make use of natural gas for energy. Malampaya enables the country to reduce its oil imports, ensure a more stable supply of energy, a cleaner source of power from natural gas, and help various communities develop sustainable social and environmental programs.

The Malampaya consortium is led by SPEX as the project's operator, with joint venture partners Chevron Malampaya LLC and Philippine National Oil Company Exploration Corporation (PNOC-EC). The consortium has remitted a total of over US$10 billion in revenues to the National Government since the project's start of operations in 2001.

The amount represents the country’s 60% share of net proceeds from Malampaya as mandated under Presidential Decree No. 87 which is then treated as part of a special fund to finance the government’s energy resource development programs.

This makes the Malampaya project one of the most successful Public-Private Partnerships (PPP) in the country.

Moving forward

As Paulino stressed the need to do more explorations for natural gas, he also expressed his optimism of the country's energy situation. "I do believe that we have the capacity and the potential to do more explorations which can result in a second or even a third Malampaya," he noted.

Paulino, however, mentioned two things that must happen before we can enable new explorations in the country. "We must first have a longer-term stable fiscal environment before we can expect investors to come in and help in looking for new indigenous energy sources," he claimed. "A lot of things play out in this, including the COA issues and the TRAIN 2 tax reform law," he added.

Paulino also believes that the government must also quickly resolve the geo-political issues that the country is facing with its neighboring countries so that new explorations can be done without much hindrance.

"Our neighboring countries started at the same level as us. But now the Philippines is lagging behind in explorations. However, the optimist in me sees two opportunities in this that we can leverage on," Paulino revealed. "One is that since the country is underexplored, we have opportunities to find more gas out there. And the other is that we can avoid the mistakes of our neighbors," Paulino added.

Paulino also talked about his experience in oil explorations the North Sea, the world's most active offshore drilling region with over 175 active rigs drilling. "What if we can replicate what they did in the North Sea here in the Philippines?" Paulino mused. "We can easily do that if we can only mature the level of collaboration between the government and the private sector and get investors to invest in more oil drillings much like in the North Sea."

Paulino concluded his talk by encouraging the private sector to look for opportunities across the full energy value chain and learn from other mature basins.

"Through synergy and collaboration, we can make it more economical for us to produce, explore, and develop indigenous energy and fulfill our role to sustain the energy business in the country," Paulino emphasized.

"There's a reason why we are developing indigenous energy. It is really for the children--so that we develop their future and give them a better Philippines," he concluded.