First Gen Corp. said incentives to supply agreements and a mandated fuel mix can accelerate the development of the country’s natural gas sector.
However, Manila Electric Co. (Meralco) warned incentives may result to increased power rates.
At a Senate hearing on Tuesday on the proposed Midstream Natural Gas Industry Development Act, First Gen vice president Jerome Cainglet said allowing long-term power supply agreements for power plant offtakers would ensure the viability of liquefied natural gas (LNG) terminal projects in the country.
“We are also proposing for industries that… transition from their current energy supply to natural gas also be given incentives such as allowing their investments to convert their facilities from…coal-fired, LPG-fired or oil-fired to natural gas-fired be tax deductible for example,” Cainglet said.
He noted the importance of an improved shipping and ports ecosystem to make the Philippines become a LNG trading and transhipment hub within Asia-Pacific.
Meralco vice president and head of utility economics Lawrence Fernandez noted incentives may push up power rates.
“There are more cost effective options available, long term take or pay mechanisms can prevent the industry from pursuing more efficient options. We are also extremely wary of mandates like fuel mixes as it overrules market and competitive forces,” Fernandez said.
He added the proposed natural gas law must also “delineate” the powers and authority of involved agencies to avoid overlaps and gaps.
He said the creation of an agency solely focused on natural gas resource can also help as industry participants for the said resource will multiply over time.
At present, there are six companies are actively pursuing the development of a LNG terminal in the country including First Gen and its partner Tokyo Gas; Excelerate Energy; Batangas Clean Energy led by the Lucio Tan Group; Vires Energy; AG&P; and Shell Energy Philippines, a subsidiary of Royal Dutch Shell.