Although the Philippines has 3.8 trillion cubic feet (Tcf) of proven natural gas reserves, the country had no significant natural gas production until late 2001. In recent years, the government has made expanding natural gas use a priority, particularly for electric power generation, in an effort to cut oil import expenses.
A major impetus for changes in the countrys natural gas sector has been the Malampaya offshore field. Malampaya is the largest natural gas development project in Philippine history, and one of the largest-ever foreign investments in the country. Shell Philippines Exploration (SPEX, operator, with a 45% stake), Texaco (45%), and the PNOC (10%) have come together to form the $4.5 billion Malampaya Deepwater Gas-to-Power Project.
Malampaya is located in the South China Sea, off the northern island of Palawan, and contains an estimated 2.6 Tcf of natural gas. A 312-mile (504-kilometer) pipeline links the field to three power plants in Batangas. The pipeline is among the longest deep-water pipelines in the world, with half of its length more than 600 feet deep. With completion of the sub-sea pipeline and conversion of the first of three power stations, (San Rita, operated by British Gas and Philippines 1st Gas Corp.), the Malampaya project was officially inaugurated on October 16, 2001. Natural gas from Malampaya eventually will fuel three power plants, with a combined 2,700-megawatt (MW) capacity, for the next twenty years, displacing 26 million barrels of fuel oil. The BG/Philippines 1st Gas Corporation partnership converted a second power plant at San Lorenzo to natural gas in 2003. The Philippine government currently is considering a sale of half of PNOCs stake to an outside investor, and has reportedly held talks with Korea Gas (Kogas).
A $100 million expansion pipeline from Batangas to Metro Manila ("Bat-Man") has been under consideration. This pipeline would supply gas to additional power plants as well as the industrial and commercial sectors. Negotiations on the financial aspects of the project are ongoing.
Exploration continues is other parts of the country, but no major discoveries have been reported. Three small natural gas fields were closed down in 2001. Fields in the Tukankuden and the Cotabato Basin were shut down due to security problems, while another field in Victoria, Tarlac, was closed because the natural gas discovered was too saturated with water for commercial production.
The Philippine government is developing a policy framework for the countrys emerging natural gas industry that foresees the governments role as that of facilitator. Domestic development is to be encouraged, but competition from imported gas also is to be allowed. Gas supply to wholesale markets will have market-set prices, while prices for captive markets and small consumers will be regulated.
Liquefied natural gas (LNG) has begun to receive added attention as a potential source of natural gas supplies. PNOC has been considering the construction of an LNG regasification terminal in Bataan, which would serve the Manila area. A letter of intent has been signed for natural gas imports into the Philippines from BPs Tangguh LNG project in Indonesia, but no binding contract has been signed.
A pilot program began in mid-2004 for the use of natural gas as a transportation fuel in the Manila area. Four bus companies have vehicles running on compressed natural gas (CNG).