High power rates seen next year as gas plants shift to imported LNG

Ilijan SMC

Some of the country’s gas plants are set to shift to imported liquefied natural gas (LNG) next year, which could lead to higher power rates amid uncertainties in global gas markets, the Department of Energy (DOE) said. 

In a report by the Manila Bulletin, DOE Oil Industry Management Bureau director Atty. Rino Abad said that while there will be LNG supply that can be sold to local companies, these would be “undeniably expensive because of what’s happening in the international market.” 

As fuel procurement prices rise, power generation companies will be passing on the upward adjustment to the electricity bills of consumers. 

The shift to imported LNG comes in the wake of the depletion of the Malampaya gas project and the expiration of its Service Contract (SC) 38 in February 2024. 

Five of the country’s gas plants, totaling an aggregate capacity of 3,211 megawatts (MW) may shift to LNG by next year until 2024. These include the 1,200 MW Ilijan gas-fired power plant,  the 1,000 MW Santa Rita plant, the 500 MW San Lorenzo plant, the 414 MW San Gabriel plant, and the 97 MW Avion Plant.

The government is looking to secure a 15-year license extension for SC 38, intending to arrest the production decline in Malampaya. 

The International Energy Agency (IEA) said that global gas consumption is seen to grow by only 0.4% next year, which is subject to a “high level of uncertainty, particularly in terms of Russia’s future actions and the economic impacts of sustained high energy prices.” 

IEA added that the current global gas crisis will also cast longer-term uncertainty on the prospects for natural gas, “, especially in developing markets where its use was expected to rise at least in the medium term as it replaced other higher-emission fossil fuels.”