New Asian Tiger Philippines Still Struggling With Power Woes & Corruption

New Asian Tiger Philippines Still Struggling With Power Woes & Corruption

By Tim Daiss

There is a new Asian Tiger, one whose economy is becoming resilient and whose GDP is beating forecasts amid slower regional growth. No its not Singapore, nor Malaysia, nor debt-plagued Japan nor even China. It’s the Philippines.

The Southeast Asian nation that has historically lagged behind most of its Asian neighbors has a booming stock market, Standard & Poor’s just upgraded the country’s credit rating and the World Bank has raised its growth forecast to 5 percent despite a projected regional slowdown. And, on October 9 the Philippine Daily Inquirer reported that the country grew 6.1 percent in the first semester hitting the upper end of the government’s 5-6 percent growth target for the period.

To fuel its growth the Philippines is looking for power deals. Earlier this month, Meralco (the country’s largest power company) and Shell signed a Memorandum of Understanding (MoU) for the possibility of supplying liquefied natural gas (LNG) for a proposed power plant in Batangas, on the country’s main island of Luzon. Under the MoU, Meralco will conduct a power plant feasibility study, with facilities to be located near the (Department of Energy) DOE’s proposed Batangas-Manila pipeline near a Shell-Philippines refinery in Batangas.

These developments fall in line with the Philippines New Master Gas Plan set to be released at the end of the year. The Japan International Cooperation Agency (JICA) and World Bank are offering technical assistance for the plan. In June, Philippine Energy Undersecretary Jose Layug Jr. said that after the master plan was completed and if the results were favorable, the DOE would conduct public bidding for infrastructure programs next year.

The master plan involves building pipeline infrastructure, and a LNG hub that will include regasification and storage units, including putting up compressed natural-gas terminals for transport. The entire natural-gas master plan will cost $2.1 billion. The plan’s last phase will involve putting up a 600-megawatt power plant running on gas to serve as the anchor load for the pipeline.

Speaking by phone, Laura Saguin, with the DOE’s natural gas management division, said that the Batangas-Manila pipeline will be the “backbone of the country’s gas infrastructure.” Saguin added that the DOE has set 2015 as the date for commercial operation of the pipeline.

However a preliminary JICA report on the Philippine gas sector that was released in March sites problems for the country’s energy sector. The report states, “there is a concern about the depletion of the Philippines’ Malampaya gas field in the future and a new LNG terminal is expected to serve alternative function of natural gas supply.”

Approximately 40 percent of Luzon’s power is generated by power plants using Malampaya gas.

It is hoped that implementation of the master gas plan can remedy the country’s lack of natural gas supply and rotating brownouts. However some analysts doubt if the gas plan will be finished on time and if so, if it will ever be implemented. This is not the first gas plan devised for the Philippines.

In 2002, the JICA also developed a master gas plan for the country, but the proposed infrastructure projects were never realized because they were considered too investment-intensive, the regulatory environment was not conducive, and because of natural gas supply limitations.

John C. Morris an analyst with International Energy Consultants in Perth told Energy Tribune that you can have a master gas plan but also must have the gas coming in to make it work. Morris said that there are just two sources of gas, domestic gas and imports, and imports must be LNG. He added that the Philippines lacks the domestic supply and may have trouble securing LNG imports even if the plan is put into place.

Beni Suryadi, an energy policy and planning analyst for the ASEAN Centre for Energy, offered a different analysis on gas supply. By email he said that in several ASEAN Council on Petroleum (ASCOPE) meetings that he attended the Philippines had LNG supply guarantees from neighboring Indonesia, Malaysia and Brunei.

Growing demand for gas is strong in the Philippines because the country has begun making an effort to replace the oil it uses with gas, according to Wiley-Blackwell’s Oil and Energy Trends. The report stated that the Philippines has been considering ways of importing gas for several years, but its physical distance from potential exporters rules out the possibility of building a pipeline, leaving LNG as the only option.

Morris added that there have been a number of reports of building LNG terminals in the Philippines and that all of them run into the same problems of capital and finding suppliers as well as finding credit-worthy off-takers to pay for it for ten to 20 years.

Added to this is the fact that projects in the Philippines have been historically slow to implement due to ambiguous government regulations, local government demands and corruption across business and government sectors. On a scale of one to 10 (with 10 being the worst) the country garnered a 8.9 corruption score last year in Hong Kong-based Political & Economic Risk Consultancy’s Asian Intelligence Report.

Often as soon as foreign corporations try to implement its plans, they are stopped dead in their tracks. A recent case in point is Australian based Energy World

Energy World disclosed in March that it was investing $210 million to put up a LNG hub in Luzon. Now that plan has run into a typical Philippine stalemate. In late September the firm announced it put on hold plans for its terminal due to concerns by the Quezon provincial government over the company’s application for an environmental clearance certificate. How long the clearance will take and how much it will cost has not be disclosed.

While not naming the Philippines directly, Suryadi voiced frustration when offering analysis for several ASEAN countries’ energy plans. “In the end, when we try to point out recommendations, we are facing a dead wall, and internal political problems,” he said

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