The Philippines economy continues to grow rapidly with GDP growing more than 7.5% in 2022 and expected to continue expanding faster than 5% per annum. Domestic energy consumption is growing, driven by significant public infrastructure development and the private sector investing in manufacturing and services. Because of this, the demand for power is growing and how to meet that demand is the subject of much political debate.
The Philippines has become heavily reliant on coal-fired power generation. The Malampaya gas field is the only significant indigenous gas resource, with production providing the bulk of gas-fired power generation in the country. Malampaya is expected to be depleted by 2024, and how to manage that has driven much of the debate around the future of the gas sector.
The Philippines has been a potential new market for imported LNG for many years, with production from Malampaya starting to decline and limited economic potential for new production. Gas is used exclusively to supply 3.2 GW of generation on Luzon, which is equivalent to 21% of national generation. Nationwide generation is dominated by coal with 46%, with 22% provided by renewables, predominantly geothermal and hydro. The country also has geographical challenges with many isolated island power grids of limited size slowing the development of robust national power grids.
Historically, a barrier to LNG was cost competitiveness versus coal generation but recently government policy has switched to mandating a lower carbon generation mix in future. The Department of Energy Philippine Energy Plan 2018 – 2040, focuses on the following objectives:
- Increase the production of clean and indigenous sources of energy to meet the growing economic development of the country.
- Decrease the wasteful use of energy through energy efficiency tools and strategies.
- Ensure a balance between reliable and reasonably priced energy services, support for economic growth, and environmental protection.