MANILA, Philippines — The Petroleum Association of the Philippines (PAP) urged power generation companies to maximize the use of domestic natural gas to help stabilize electricity prices, saying the country still has untapped indigenous capacity that could reduce dependence on costly fuel imports.
Speaking during a Senate hearing on March 11, PAP Chairman Donnabel Kuizon Cruz said fully utilizing locally produced gas could significantly lower electricity generation costs for consumers.
“There is an opportunity to fully implement the downstream Natural Gas law by maximizing the use of indigenous gas,” Cruz said. “We still have capacity there that we can use and push into our power generation companies so we can help reduce the price.”
Cruz also serves as president and chief executive officer of Prime Energy, the operator of Service Contract No. 38 covering the Malampaya Deep Water Gas-to-Power Project, the country’s largest indigenous natural gas source and a critical supplier of fuel to several power plants in Luzon.
The group called for the complete implementation of Republic Act 12120, or the Philippine Natural Gas Industry Development Act, which aims to strengthen the country’s downstream natural gas industry and encourage greater use of local gas resources.
PAP noted that Section 38 of the law exempts the sale of indigenous natural gas and electricity generated from it from value-added tax (VAT), a provision that could deliver additional savings for electricity consumers if fully implemented.
The group made the appeal as policymakers consider proposals to temporarily suspend petroleum taxes in response to rising global fuel prices and geopolitical tensions in the Middle East.
Industry leaders say maximizing domestic natural gas use would provide a more sustainable and long-term solution to price volatility than temporary tax relief.
Local gas cheaper
Cruz said that electricity generated from gas supplied by Malampaya costs around ₱4.80 per kilowatt-hour, significantly lower than the ₱10.30 per kilowatt-hour cost of power generated from imported liquefied natural gas (LNG).
“That’s how big the difference between our own fuel in the country is, compared to imported gas today,” Cruz told senators.
Malampaya has been supplying natural gas to major Luzon power plants since 2001, providing fuel for facilities that account for a significant share of the island’s electricity supply. However, as the field matures and domestic production fluctuates, the Philippines has increasingly relied on imported LNG to meet growing energy demand.
Cruz said recent geopolitical developments, including the war in Iran, highlight the need for the Philippines to strengthen domestic fuel supply and reduce vulnerability to global market shocks.
“The Iran conflict underscores the importance of having our own resources—our own indigenous or domestic fuel sources such as indigenous gas, oil, and indigenous coal,” she said.
She added that the government’s decision in 2022 to extend the Malampaya service contract enabled new upstream exploration efforts.
“The government’s move to extend the license was very timely. This allowed us to start drilling for new wells, and we already had one discovery—with hopefully more to come.”
Cruz also credited the Department of Energy for continuing efforts to expand the country’s indigenous energy resources, including awarding additional petroleum service contracts aimed at boosting domestic production and reducing reliance on imported oil and gas.
Energy stakeholders are now coordinating with the DOE to manage the country’s fuel mix as global energy markets remain uncertain.
“Under the leadership of the DOE, members of the energy sector have started to coordinate in this crisis and see how we can balance the fuel mix to help consumers during this time,” Cruz said.
