THE Marcos administration is fostering the conversion of existing equipment running on fossil fuel into facilities powered by natural gas, under a new law designed to promote the exploration and development of this indigenous clean fuel and transform the Philippines into a trading and transhipment hub for liquified natural gas (LNG) in the Asia-Pacific Region, National Unity Party (NUP) president LRay Villafuerte has said.

Republic Act (RA) No. 12120, which President Marcos signed just recently, aims to establish the Philippine Downstream Natural Gas Industry (PDNGI) to help achieve energy security and develop a transition fuel for the government’s accelerated switch from fossil fuel to renewable energy (RE), said Villafuerte, the CamSur congressman who co-authored this law and an advocate of renewables.

“Otherwise known as “The Philippine Natural Gas Industry Development Act,” RA 12120 aims to promote the exploration and development of, and attract private investments in, natural gas as a safe and cost-effective source of clean fuel as the government accelerates efforts to wean our country away from fossil fuel and into renewables in the long-term pursuit of a zero carbon global economy,” Villafuerte said.

“Promoting natural gas as an indigenous reliable and clean fuel will help our government achieve energy security, shield us from geopolitical risks arising from our heavy dependence on imported oil, and allow the country to progressively transition to RE sources,” he said.

The former governor of CamSur that is positioning itself as the country’s center for wind energy development said that with RA 12120, “the government aims to eventually produce enough natural gas to meet the increasing domestic demand for fuel and develop the Philippines as an Asia-Pacific hub for LNG trading and transshipment.”

This law promotes, he said, “the conversion of existing fossil fuel-operated equipment into facilities powered by natural gas, provided that such a conversion is technically and financially suitable, viable and workable.”

Villafuerte said that RA 12120 “provides for a slew of incentives to set the stage for an industry environment conducive to promoting and developing PDNGI while keeping the government aligned with its climate policy on transitioning to a low- or zero-carbon future by progressively raising the share of RE in the Philippine energy mix.”

Among the inducements for industry players under this new law are the Department of Energy (DOE)’s review and evaluation of all PDNGI facilities for possible inclusion or entitlement to incentives under the Strategic Investment Priority Plan (SIPP), subject to the tax incentives of the National Internal Revenue Code (NIRC) of 1997, as amended by RA 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.”

The purchase and sale of indigenous natural gas and power generated by generation companies (Gencos) using indigenous natural gas and aggregated gas are exempt from the payment of the value added tax (VAT), provided that the VAT-exemption of aggregate gas shall only cover the amount of indigenous natural gas used.

Through this new law, Villafuerte expressed the hope that the government will be able to find and develop a replacement for the Malampaya-Camago gas field off northwest Palawan, which is the reservoir in the DOE’s Service Contract (SC) 38 license area that supplies three major power plants in Batangas that is expected to run out by 2027 or 2029.

Malampaya produces about 429 million cubic feet of gas per day, fueling about 40% to 50% of power in Luzon.

This DOE-spearheaded gas field developed by Shell Philippines Exploration B.V. (SPEX), is a joint venture (JV) of the national government and a consortium of private investors.

The Razon-led Prime Energy Resources Development B.V. has been operating the Malampaya, on behalf of JV partners Udenna Corp. and the Philippine National Oil Co.-Exploration Corp. (PNOC-EC), after Prime Energy took control of this gas field from SPEX in November 2022.

The Senate and the House of Representatives passed their respective versions—Senate Bill No. 2793 and House Bill No. 8456—of this natural gas development measure in November 2024.

Under the Philippines’ ambitious decarbonization goal, the government aims to increase the share of renewables in our energy mix from 22% at present to 35% by 2030 and a higher 50% by 2040.

The country is trying to raise the share of RE in the country’s energy mix to 35% by 2030 and to 50% by 2040 from 22% now.

Under the new law, natural gas shall be developed as an energy fuel through “the safe, secure, reliable, transparent, competitive and environmentally responsible operation of the PDNGI value chain,” while ensuring its “alignment with the State’s policy on transitioning to a low-carbon future, consistent with the sustainable development goals on increasing the share of renewable energy in the country’s energy mix.”

It seeks to “promote and hasten the exploration and development of indigenous natural gas resources and facilities. and prioritize the use of indigenous over imported natural gas to help attain greater energy security without impairment of contracts,” and at the same time foster “natural gas as an additional energy source and a transition fuel to variable renewable energy by creating a legal and regulatory framework that will govern the promotion and development of the PDNGI.”

The DOE is tasked to supervise and monitor the PDNGI and develop strategies to implement the State policies declared under this RA 12120.

To achieve this mandate under the law, the DOE shall prepare the PDNGI development plan, based on modeling, considering forecasted demand, supply, and uses of natural gas in the country.

The DOE shall take into account the plans submitted by PDNGI Permit Holders and Participants, after open discussions and consultations with relevant government agencies and public and private stakeholders, within two (2) years from the effectivity of this Act.

AUTHOR PROFILE

Ryan Ponce Pacpaco