Philippines On Track In Energy Policy - ADB
Monday, February 13, 2006
By Micheline R. Millar
Of DOW JONES NEWSWIRES
MANILA (Dow Jones)--The Philippine government's decision not to cave in to demands for an oil subsidy to cushion it from high oil prices, and its promotion of alternative energy sources, have put the country on the right track, a senior Asian Development Bank official said.
"The Philippines did everything right in response to what was happening to international oil prices, and I think this is something that should be emphasized more by the administration. It should get kudos for what it did right," Thomas Crouch, ADB country manager for the Philippines, told Dow Jones Newswires.
The absence of oil price subsidies has allowed the Philippines to avoid pitfalls that have bedeviled some of its Asian neighbors, said Crouch.
Faced with political pressure to reintroduce oil subsidies scrapped in the late 1990s, President Gloria Macapagal Arroyo last year formed an independent committee to review the Philippines' oil deregulation law and abandonment of subsidies in 1998.
That committee recommended not rolling back oil industry liberalization, and it noted that it would prove costly for the government to subsidize domestic oil prices.
It said high domestic oil prices had been caused by a weak peso and higher global crude prices, not deregulation.
The committee was reacting to allegations made by consumer groups and the political opposition that oil industry deregulation had done more harm than good, and that it had led to higher petroleum product prices.
The government is grappling with a widening budget deficit caused by weak revenues.
Prior to deregulation, the government had an oil price stabilization fund, which was used to subsidize oil companies to avoid sharp increases in domestic prices.
Since deregulation, the Philippines has been hammered by sharply higher oil prices as well as a big fall in the peso versus the dollar, which further increased its oil bill.
The dollar is now trading around PHP56, from PHP38-PHP40 in 1998.
"Although that means that end-consumers pay high prices, the whole point is that consumers are forced to react to international market forces, to recognize that this is a scarce resource, that it has a high price and therefore their decisions on consumption and investment should reflect those realistic market forces. That's a very, very important consideration," said Crouch.
Some of the Philippines' Asian neighbors provide oil price subsidies, including Indonesia and Malaysia, and these have been a heavy financial burden on those governments.
Thailand scrapped gasoline subsidies in 2004 and diesel subsidies last year. Govt Seeks Alternative Energy Sources
Crouch also lauded the government's efforts to seek alternative sources of energy.
The Philippines imports about 96% of its oil needs, holding the country hostage to what is happening in the international market place, he said.
"But the Philippines again is doing things right in trying to insulate itself, protecting itself from the vagaries and the vulnerabilities that it faces in the international energy market," said Crouch.
Philippine National Oil, or PNOC, the key institution tasked with ensuring an adequate and stable supply of oil in the country, last year projected national average daily oil consumption between 2005 and 2009 of 346,270 barrels of oil per day, up from an average of 324,430 b/d in 2004.
In 2004, the Philippines produced an average 191,500 b/d or refined oil products, and imported a further 144,700 b/d.
Crouch said one good example of the Philippines' efforts in tapping new energy sources had been the development of the Malampaya natural gas field near the island of Palawan, which was inaugurated some four years ago.
This now supplies fuel via a 540 km subsea pipeline to three power plants in Matangas province that together generate 2,700 megawatts of electricity, or 30% of the country's power needs.
The government is now working to improve transmission capacity from the power plants to Manila.
"Malampaya has a lot of things going for it. First of all it is a domestic resource, secondly it is a clean resource. It has huge environmental advantages and huge energy security advantages," he said.
Government forecasts put the country's hydrocarbon potential as equivalent to 8.9 billion barrels of oil.
Around 57% of this is natural gas, 41% is oil and the rest is condensate, according to official estimates.
Crouch said the ADB hopes to see more rapid development to allow end users better access to Malampaya's output.
Under the Philippines' current energy plan, the government aims to double renewable energy capacity by 2013 to 9,148 MW in 2013 from last year's 4,450 MW, to counter rising oil prices.
It wants to make the Philippines into the world's leading producer of geothermal energy, Southeast Asia's top wind power generator and a hub for solar power equipment manufacturing.
Renewable energy now accounts for 33% of the primary energy mix, with 18% of this geothermal and 15% hydropower.
The Philippines is the world's second largest user of geothermal energy for power generation, feeding 11 power plants with a total installed capacity of 1,932 MW.
The government is also pushing expansion in hydropower, which now supplies 2,518 MW. It wants this to rise to 5,468 MW by 2013.
posted by philpower @ 9:39 AM,
