Fitch issues “bleak” outlook for Ph upstream industry


Citing the steady decline in the Malampaya gas field’s reserves and lack of investments in exploration, global market research firm Fitch Solutions issued a “bleak” outlook for the Philippines’ upstream energy sector.

Fitch described the country’s crude and oil and natural gas production remaining “in freefall” amid the lack of funding for new ventures. This “dire situation,” it added, poses significant risks to the nation’s energy security given the high dependence and oil and gas to fuel the economy.

Output from local upstream endeavors has been “broadly declining” since 2010, not just due to Malampaya’s “accelerating decline,” but also the lack of discoveries. Malampaya accounts for around 30% of Luzon’s power supply and around 20% of the entire country’s.

Gradual reduction from Malampaya has driven electricity prices up on several occasions and has caused rotational brownouts, the report pointed out. It added that “a complete stoppage without replacements in place would prove to be highly damaging for businesses and end-users alike.”

Production restriction from Malampaya was among the factors that led to the Red Alerts and rotating brownouts in Luzon from May 31-June 2.

While Fitch has cited that natural gas production would continue until 2027, it said that the production of crude oil, natural gas plant liquids, and other liquids will likely remain relatively steady until 2030.

Fitch also recognized the government’s lifting of the exploration moratorium in the West Philippine Sea, but said that challenges remain due to the interference of China in waters belonging to the Philippines’ exclusive economic zone.

The report also said that the Philippines has not embarked on any new activity, though a growing number of firms have expressed keen interest. Energy Sec. Alfonso Cusi said in June that his department endorsed the award of four unnamed SCs to Pres. Rodrigo Duterte.