Congress, DOE craft new law on LNG

By Lenie Lectura – September 2, 2018
from Business Mirror

TO entice private-sector investment, lawmakers and the Department of Energy (DOE) are working together to craft a law on liquefied natural gas (LNG) that will include, among others, an improved energy mix.

“We are now in the process of working with the DOE in coming up with a comprehensive LNG law that will become the ultimate framework of the LNG industry,” said Sen. Sherwin T.  Gatchalian, chairman of the Senate energy committee.

He said a law is needed to “make sure the future of LNG will be viable and sustainable” because a department circular issued by the DOE may not be enough.

“The DOE is agreeable to the creation of a law because we don’t have a law now that governs LNG. We just have a circular. With a law, we will have a framework to regulate the importation of LNG, the terminal activities of LNG, and also the liquefaction of LNG,” he said.

Interested LNG investors have been saying that a capital-intensive project, such as LNG, would require a clear direction from the government since investment on LNG is estimated to cost at least $1 billion.

The DOE’s circular on the Philippines Downstream Natural Gas Regulation (PDNGR), which spells out the rules governing the downstream natural gas industry, have so far attracted 15 foreign and local firms. However, none of them has so far submitted a formal proposal to the DOE.

This prompted the DOE to suggest it can take the lead in the development of an LNG hub in the country in the event that none of the interested private firms pursues their interest in LNG.

“They all expressed interest, but at the end of the day, we can’t force them to invest. We have no choice then, but to find a way to do it,” said DOE Assistant Secretary Leonido J. Pulido III. “I think we’re going to be needing a law where the government can come in and be proactive. We have no guarantees the private sector would be willing to make a risk for us.”

Pulido said in July that any law being considered by the Senate should have a provision for the government being able to step in. When asked if this is being considered, Gatchalian instead raised a counter proposal. He said the proposed LNG measure could strengthen the DOE’s power to dictate on the energy mix.

“For example, if I want the energy mix to be 20-percent LNG, then the industry will follow that policy. That, by the way, is just a random number. Now, the market will be dictated and guided by the energy mix. So instead of the government spending taxpayer’s money on the project, you are actually creating space for the investors to come in. That’s our counter proposal so that there will be no cost to the government.”

Gatchalian earlier cautioned the government about its proposal.

“Personally, I am not confident the government can operate it properly. We have a bad history of operating if you look at the MRT [Metro Rail Transit], the LRT [Light Rail Transit] and the airport.  As an observation, the government is not a good operator. Do we have the technical capability? That’s one thing to consider.”

Gatchalian also said this could result in a monopoly since the government will construct the LNG facility and supply the gas.

“Inadvertently, we are creating a monopoly because we’re only allowing one entity to construct and to supply. In effect, it will now control the terminal and the supply,” the senator commented earlier.

For the energy mix, the senator said it is best that the DOE craft this. “That’s a policy question so we will leave that to the DOE to determine. But that framework will be the best option because we don’t have to spend government money to put up LNG facilities. That’s my proposal. For me, the risks are high if the government will spend money for this LNG project.”