Gatchalian: New law on LNG will make it sustainable

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The Department of Energy (DOE) is working together with Congress in drafting a new law that will invite private investors and develop the potential of liquefied natural gas (LNG) in the country’s 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,” Sen. Sherwin T.  Gatchalian, chairman of the Senate energy committee said in a report by Business Mirror.

Gatchalian said that a department circular released by the DOE may not be enough and a law is needed in order to “make sure of the future of LNG will be viable and sustainable.”

“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 told Business Mirror.

Interested investors expressed the need for a clear direction from the government before they can proceed since the estimated cost of LNG investments are at least $1 billion.

Despite the department’s circular on the Philippines Downstream Natural Gas Regulation (PDNGR) having attracted 15 foreign and local firms, no one has submitted a formal proposal to the DOE.

As a result, the Energy department suggested they take the initiative to lead the development of the country’s LNG hub in case investors don’t pursue their investments.

“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 that any law that is being reviewed by the Senate should have a provision for the government being able to step in, which Gatchalian opposed. In a counter proposal, he said the proposed LNG law 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 taxpayers’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 warned the government about its proposal, saying that there is a risk in having the government operate as a monopoly given its track record of other projects.

“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.”

“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 added.

Gatchalian said it is best that the department craft the energy mix it needs.

“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.”

 

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