DOE assumes noncommittal stance on gas in fuel mix policy

The Department of Energy (DOE) is rethinking its fuel mix policy favoring gas, citing a young market and high prices.

“We are coming up with a fuel mix policy, but [it is] noncommittal, nonfirm,” Energy Secretary Carlos Jericho L. Petilla said.

As to when this would come out, Petilla said there was no set date for the issuance, but “the DOE is working on it.”

The Philippines is trying to lessen its reliance on coal, which is polluting, and on petroleum, with its volatile prices.

However, while gas burns cleaner than coal and other hydrocarbons like crude oil, it is also more expensive. The energy chief noted that, because of cost considerations, there are natural gas power plants overseas that are not running, such as those in Thailand.

Petilla said he would not want to announce a fuel mix where gas would make up, for example, 25 percent.

“When prices surge, you’ll blame me,” Petilla quipped. “However, we have to have a proper mix. We can’t use only coal.”

Liquefied natural gas (LNG) is mainly used by power companies and industrial customers with their own power generation capacity. Natural gas is also being considered as fuel for the transport market.

Natural gas is more expensive in Asia than in the United States due to the extra transport costs borne by shippping, and the very young market, Petilla said.

“Let’s wait for prices to soften,” Petilla said.

Presently, the DOE is formulating a fuel mix policy that will encourage energy diversification that is cleaner and sustainable, such as renewable energy and LNG.

On LNG, the DOE is now drawing up a plan to increase its share in the energy mix by importing and developing sources to eventually achieve energy sustainability.

For this project, the World Bank is providing technical assistance through its transaction advisors the Lantau Group and Arup.

On renewable energy, the Philippines aims to triple by 2030 its current capacity of 5,400 megawatts. Programs such as the Feed-In-Tariff, which guarantees power rates for renewable energy providers, are being implemented to help meet this target.

Also, as part of preparations for the fuel mix policy, the DOE made arrangements with the US Export-Import (Ex-Im) Bank on $1 billion worth of guarantees and dollar loans to back US exports in local renewable energy and LNG projects, said Mario C. Marasigan, director of the energy department’s Renewable Energy Management Bureau.

In the meantime, private sector initiatives are ongoing. First Gen Corp., the Philippines’ second largest electricity producer, intends to spend at least $1 billion on an LNG terminal to be opened by 2016. The terminal will be put up on a 20-hectare lot near the company’s Sta. Rita plant in Batangas.

First Gen sources its fuel requirements from Royal Dutch Shell’s Malampaya field off Palawan. The Malampaya reserves are expected to last until 2022 unless new drillings are undertaken to sustain production.