The ISH floating storage unit berths at the AG&P’s Philippines LNG terminal in Batangas. — COMPANY HANDOUT

THE greater use of liquefied natural gas (LNG) will not help achieve the policy goal of lowering power prices, the Institute for Energy Economics and Financial Analysis (IEEFA) said on Monday.

“While some natural gas may be necessary to continue operating the country’s existing fleet of gas plants, a rapid expansion of LNG-to-power facilities is not aligned with energy security and affordability goals,” Sam Reynolds, an energy finance analyst with IEEFA, said in a statement.

“Promoting a wholesale expansion of LNG terminals and power plants sends the wrong signal to investors and risks binding the country to a costly, volatile energy future,” he added.

The Department of Energy (DoE) had issued a draft circular that will require distribution utilities (DUs) to procure a yet-to-be-determined percentage of their power from natural gas-fired power generators.

The DoE considers natural gas to be a “suitable transition fuel” that will keep the supply of power stable as the energy grid transitions to renewable energy.

“With the eventual reduction of capacity from coal-fired power plants, natural gas will be the immediate option for the DUs either for baseload, midrange, and peaking requirements because of its flexibility, and with much less harm to environment,” the DoE said.

The cost of the Philippines’ first LNG shipment from the United Arab Emirates (UAE) in April was $51.77 million, while the second delivery from Indonesia was valued at $35.87 million, the IEEFA said.

It added that the price the Philippines paid was equivalent of $15 per million British thermal unit (MMBtu) for the UAE shipment and $12 per MMBtu for the Indonesian shipment.

Mr. Reynolds said the Philippines could need 3.5 million tons of LNG to operate its five gas-fired power plants.

He said that this translates to an annual LNG bill of more than $2.5 billion, compared to the LNG cost incurred by Pakistan of about $5 billion and the cost paid by Thailand of about $9 billion.

“Importantly, LNG is significantly more expensive than other energy sources. Since January 2021, monthly coal prices have averaged $8.39/MMBtu — nearly three times lower than average JKM (Japan/Korea Marker) LNG price of $22.79/MMBtu,” Mr. Reynolds said.

“IEEFA estimates that LNG costs of $15/MMBtu will likely result in a final generation price of nearly P8 per kilowatt-hour (kWh). As LNG costs fluctuate wildly, so do the prices that Filipino end-users pay for electricity,” he added.

Mr. Reynolds said that domestic gas sources are not immune to global market volatility as Malampaya gas is tied to international fuel prices.

In 2021, gas prices from Malampaya averaged nearly $8 per MMBtu, up from $6.4 per MMBtu in 2016, he said. “Farther offshore, harder-to-extract domestic gas could increase prices further.”

The Malampaya gas field is the country’s only indigenous source of natural gas. It is expected to be commercially depleted by 2027, with supply expected to dwindle starting in 2024. — Sheldeen Joy Talavera