Exploring land-based natural gas fields in Southern Mindanao --[Reported by Umva mag]

In the energy plan of the last administration, the country targeted a 35% share of renewables in the country’s power mix by 2030. Coal, regarded by all as having the largest carbon footprint, accounted for over 50%.  Authorities have conveyed to producers that coal’s share must be reduced to attain a 12% reduction of greenhouse gases (GHG).  The Department of Energy (DoE) has resisted capping fossil fuel’s share, letting the market come up with a blend that supports clean energy targets while stabilizing the power supply.

Renewables account for nearly a fourth of the electricity produced in the country. Of these, geothermal and hydropower account for over 80% of all renewable energy (RE) sources. Contributions from both sources, however, have recently slowed down or declined. After the largest geothermal plants were installed in Leyte, recent capacities have been smaller. Hydropower output growth was observed to have declined recently.

Solar and wind power are observed to have stronger growth among the REs. According to its recent pronouncements, the DoE plans to double solar power’s share in the energy mix to 5.6% and to quadruple that of wind power to nearly 12% of the country’s energy mix by 2030. President Ferdinand “Bongbong” Marcos, Jr., a few months back, got confirmation from officials of GmbH, a wind and solar power farms developer in Berlin, of their intent to invest in offshore wind projects (OWP) in Cavite and Negros to generate 3.2 gigawatts of electricity.

Solar energy attracts more investors due to the following. It produces clean energy, is inexpensive to maintain, uses the most abundant energy resource, and where these facilities are installed, usually in otherwise unused space, the investments create jobs and small businesses. It is, however, costly to install its solar panels and related infrastructure.  These facilities displace other uses of space, most likely agriculture.

At their best performance, REs will account for only 35% of total electricity output in 10 years or so. Until the technology further increases the efficiency of wind and solar power farms, reduces the cost of batteries for electricity storage, and improves their grid integration, which may likely happen over 10 years or so, coal-fed power plants will continue to have critical roles in securing the energy needs of the country.  However, there are coal plants that must be retired due to old age, and authorities resist introducing new coal plants due to the country’s obligation to reduce greenhouse gases from the generation of electricity.

Natural gas can help. It has a carbon footprint that is 60% smaller, and has no by-products harmful to our health and to the environment, compared to coal. Thanks to the offshore Malampaya gas field in northeast Palawan, the country has sourced about a fifth of its energy requirements from natural gas for decades. The Malampaya gas reserves are, however, reaching exhaustion. Malampaya will be ready for decommissioning in a few years.

From the Malampaya gas field, liquid natural gas is piped to Batangas to fuel five gas-fired power plants. It is a relatively inexpensive power resource for us since it is indigenous gas.  The gas is first liquefied in order to be transported to Batangas in a 500-kilometer pipeline, and upon reaching Batangas is converted back to gas to generate electricity.

First Gen owns four natural gas-fired power plants, producing nearly 2,000 megawatts (MW). These are the Santa Rita (1,000 MW), San Lorenzo (400 MW), Avion (97 MW) and San Gabriel power plants (450 MW). Santa Rita, San Lorenzo, and San Gabriel deliver baseload power, while Avion capitalizes on the growing demand for peaking power in the Luzon grid. The fifth power plant, Ilijan, also in Batangas, is owned by the National Power Corp.

With the impending exhaustion of Malampaya’s gas reserves, these gas-fired plants recently started importing liquefied natural gas (LNG). Last year, the country completed its capacity to receive and re-gasify LNG which will be fed to the five gas-fired plants. The capacity of the two LNG import terminals is 8.2 million tons per year (mtpa), and last year the country began importing about 0.6 mtpa of LNG.

It may still take more years before actual LNG imports can fill up the combined capacity of the two LNG terminals commissioned last year. More such terminals are going to be constructed to feed the nearly 2,000-MW gas-fired plants of the country. In the meantime, the Malampaya gas field may have a few more years left to meet the requirements of the Batangas gas plants.

The outlook for the LNG import trade is positive. The Philippines has started to join other East Asian countries, like Japan, in importing LNG from the Middle East and North America. The imports last year were transacted in spot markets, but long-term import contracts are likely to be made through the years.

There are however downsides in the way we avail ourselves of this cleaner fossil fuel, natural gas. The country has no choice but to import LNG, since gas has to be liquefied to be transported inexpensively. However, there is the additional cost of liquefaction and regasification, and these will be added to the price the country pays to avail itself of natural gas. Liquefaction cost can range from $2 to $4 one million British thermal units (MMBtu), which is about the price of natural gas. To be able to import LNG, the country pays about double what gas plant operators of an exporting country pay.

The other disadvantage is that the country will be vulnerable to the fluctuation of gas prices in the world market. With indigenous gas, the price of gas is protected from such price volatility. It is to the country’s advantage to explore other sources of indigenous gas.

There is a possibility of finding one in the West Philippine Sea, which can be expensive. It is offshore, and exploration and development costs, including liquefaction and regasification, can be high. There is the added problem of friction with China, which claims it owns the West Philippine Sea.

Another idea is looking for land-based natural gas sources, particularly in the southern Philippines. Gilbert Clarete, a graduate of UP in electrical engineering who emigrated to the United States, has a great deal of experience in exploring for and mining oil and natural gas in the United States and Canada. He informed me that Lake Buluan (see map) meets the geological characteristics of an area that may have natural gas to mine. Lake Buluan is in Sultan Kudarat in the Bangsamoro Autonomous Region in Muslim Mindanao or BARMM.

Exploration costs can be significantly less compared to offshore exploration in the West Philippine Sea. Mr. Clarete said that the explorer may drill a wildcat/exploratory well of about 5,000 feet deep. Brine found in the well can be analyzed by professional companies to determine if there is natural gas in the sample. One such company, Schlumberger, can be hired to do the analysis. With an office in nearby Indonesia, the company can bring their sensors to measure a few indicators to verify if natural gas is available. A geologist may then analyze the indicators to determine the amount of gas reserves. The whole exploration cost can run in just in few million pesos.

It is possible that the drilling will reveal a lack of natural gas.  But the exploration cost is relatively low compared to the benefit the explorer/developer obtains if the gas supply is verified. If reserves are verified to be in commercial quantities, this gas can be a highly competitive, cleaner fossil fuel. Since it is land based, it is possible to transport the gas without the need of liquefaction and regasification. The gas-fired plant can be set up nearby so as to reduce transport costs.

The BARMM Minister of Energy can develop a program of exploring land-based gas fields in partnership with private sector investors.  Subsidies from the National Government to encourage the BARMM to develop such a program can be worthwhile investments. 

Why not try this?

Ramon L. Clarete is a professor at the University of the Philippines School of Economics.

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