THE PHILIPPINE NATURAL GAS INDUSTRY THE PHILIPPINE NATURAL GAS - PDF - PDF by po2378

VIEWS: 24 PAGES: 51

									THE PHILIPPINE NATURAL GAS INDUSTRY:
Vision, Strategy and Policy Vision, Strategy Policy
Supported by the Supported by the Partnership for Reforms in Partnership for Reforms in the Energy-Environment the Energy-Environment Sector Management Sector Management (PREESM), a joint DOE(PREESM), a joint DOEUSAID Program USAID Program

A Briefing for the A Briefing for the Proponents of House Bill No. 4754 Proponents of House Bill No. 4754

Prime Contractor: Prime Contractor: Academy for Educational Academy for Educational Development Development

February 5, 2003 February 5, 2003 Quezon City, Philippines Quezon City, Philippines

Briefing Outline

• • • • •

Importance of Nat Gas Industry Industry Status Regulatory Concepts Proposed Framework Potential issues on HB 4754

Why Should We Care?
• Security of Supply • Energy Self Sufficiency • Eco Social Benefits • Foreign Exchange Savings of $ 4.5 B

STATUS

Birth of the Gas Industry Upstream Sector
San Antonio Gas Field, 2.7 BCF

Malampaya Gas Field, 3.7 TCF

Birth of the Gas Industry Malampaya Gas-to-Power Project
30 km Up s tre a m
Gas dehydration Gas dewpointing Condens ate s tabilisation Expo rt compr sion es Catenary Anchored Leg M ooring (CALM) buoy for tanker loading o f co ndensate Sulphur Recover y H2S removal M etering Supply bas e

504 km Do wn s tre a m

- 0m

Batangas

Power Stations

Alternative Fuel

M a n li a

- 43 m 3rd flo wline (2021)

Condens ate storage

Condensate export

24" Dry gas pipeline

S an L o re n z o S a n ta R it a T a b a n g a o Re fi n e ry B a ta n g a s Ili ja n (N P C )

Subs ea manifold - 820 m 9 9 Development wells Develo pment wells 1 Contingency well

2 x 16” CRA wet gas
M alam p aya P LA T FOR M

D raw N o : P97-1541

Birth of the Gas Industry Downstream Sector
Gas Pipelines and 2700-MW Gas Fired Power Plants
San Lorenzo Power Plant
First Gas Corp, 560 MW Operating October 2002

Sta. Rita Power Plant
First Gas Corp. 1,000 MW Operating Jan 2002

Onshore Gas Plant
SC 38 Consortium Operating Oct 2001

Tabangao 504 km. 24-inch Pipeline
SC 38 Consortium

Ilijan Power Plant
KEILCO, 1200 MW Operating June 2002

Birth of the Gas Industry Downstream Sector
PNOC CNG-Refilling Station and NGVs

Natural Gas Production and Consumption of Asian Countries*
3000 2500

Billion cubic feet

2000 1500 1000 500 0
Ja pa n M al ay si a Pa ki st Ph an ili pp in es Si ng ap So or e ut h K or ea Ta iw an Th ai la nd
Consumption Bcf

na

i

gl ad e

Ch i

Ba n

Production Bcf

In

do ne

Br u

In

di a

ne

si a

sh

*Phil- 2002 data; all other countries- 2000

Source of Data: BP Amoco Statistical Review

Development and Growth

Development and Growth Policies and Objectives
Policies
Promote natural gas as an environment-friendly, secure, stable and economically efficient source of energy

Objectives
Competitive natural gas prices vis-à-vis other fuels Increased utilization of natural gas as fuel in power and non-power sectors Increased share of natural gas in the energy mix Adoption of state-of-theart technology, development of experts and increased employment Enhanced economic benefits to consumers

Promote competition by liberalizing entry into the industry and adopting pro-competitive and fair trade measures Ensure compliance with Philippine environmental laws and regulations and international safety standards

Development and Growth Natural Gas Share in Energy Mix (In %)
2001 2007 2012

GDP growth p.a. Oil Coal Indigenous Gas Other RE Local Coal Hydro Geothermal Local Oil Others (unidentified)

3.2 45.3 9.2 45.5 0.6 31 1.5 4.9 7.2 0.1

5.2 38.6 9.7 51 7.0 27.9 1.9 4.1 7.7 2.4 0.7

5.2 39.6 5.3 44.4 6.0 24 4 3.1 5.8 1.4 10.7

Development and Growth Gas Resources
Total Resources: 28,531 BCF (Mean)

Undiscovered 24,690 BCF

Discovered Undiscovered

Discovered 3,841 BCF

Development and Growth Location of Petroleum Resources
Found in 16 sedimentary basins with an area of over 700,000 sq. km. Ilocos Cagayan Central Luzon West Luzon Southeast Luzon Bicol Shelf Mindoro - Cuyo Northwest Palawan Southwest Palawan East Palawan Reed Bank West Masbate / Iloilo Visayan Cotabato Agusan - Davao Sulu Sea

Projected Demand and Possible Importation of Natural Gas
400 350 300 250

BCF 200
150 100 50 0
20 09 20 03 20 04 20 10 20 11 20 05 20 06 20 07 20 08 20 12

Possible importation Projected demand

Year

Development and Growth Proposed Gas Pipeline Infrastructure
BatMan 2

? ?

BatCave

BatMan 1

Malampaya
Assumed Pipeline Route

Development and Growth Potential Gas-Fired Power Plants
Limay 620 MW (2008) Conversion Sucat 300 MW (2008) 600 MW (2009)

Additional Greenfield Capacity Requirement in Luzon
300 MW (2010) 1,200 MW (2011) 600 MW (2012)
Santa Rita 1000 MW (2002) San Lorenzo 560 MW (2002)

Malaya 600 MW (2010) Conversion

Ilijan 1200 MW (2002)

Development and Growth Potential Commercial Gas Markets
1 2 3 4 5 Gotesco Mall Commonwealth Center SM North Edsa Araneta Center Greenhills Mall
EDSA Monumento

N
2 1 5 3 4 6 7 8

17 Fiesta Mall (Duty Free) 18 SM Southmall 19 Alabang Town Center 20 Festival Mall / Metropolis

6 SM Megamall 7 Shangri-la Plaza 8 EDSA Central 9 Tutuban Mall 10 Robinson’s Place 11 SM Manila 12 Harrison Plaza 13 Coastal Mall 14 Rockwell 15 Greenbelt Mall 16 Ayala Center 13 17 18 9 11 10 12

14 Fort 16 Bonifacio 15

20 19

Existing Shopping Malls

Source: FS on CNG Development for Public Utility Vehicles in Metro Manila

Development and Growth Proposed CNG Infrastructure
EDSA Monumento

Refilling Station in 2005

Refilling Station in 2003 Manila Gas Corp. Pipeline Fort Bonifacio

Proposed EDSA Gas Pipeline Proposed Sucat to Fort Bonifacio Gas Pipeline
Batman 1

Large Refilling Stations2 Metro Manila Bus Routes

Stations (L): 1 EDSA Monumento 2 Fort Bonifacio

GAS INDUSTRY REGULATION

• • • •

Basic Concepts Industry Structure Stages of Gas Market Development International Experience

Natural Gas Industry Fundamentals

What is natural gas?

Source: Australian Gas Association

Natural Gas Industry Fundamentals

Source: Australian Gas Association

Natural gas was formed from the remains of plants and animals which lived on the Earth many millions of years ago. Over time the remains were covered by layers of sand, rock and ice. Heat and pressure eventually changed them into fossils. The gaseous form of these fossils is natural gas

Natural Gas Industry Fundamentals

To reach natural gas we have to drill through layers of rock.

Sandstone

Shale

Natural gas Oil Granite

Coal, oil and gas are hydrocarbons (compounds made up mostly of hydrogen and carbon).
Source: Australian Gas Association

Natural Gas Industry Fundamentals How does natural gas get to town?

1

1 drilling rig 2 extraction unit to clean gas 3 compressor station to maintain pressure in the pipeline 4 facility where an odour (or smell) is added 5 town - factories, houses, hospitals and hotels etc

Transmission pipelines

3
Transmission pipelines

2

5

4
Distribution and reticulation pipelines

Source: Australian Gas Association

How is natural gas used?
Household use cooling manufacturing water heating cooking power generation

fuel for cars

heating

Source: Australian Gas Association

fuel for buses and trucks

Natural Gas Industry Fundamentals

Why is natural gas better for the environment?
Natural gas is a clean and efficient fuel. Natural gas can help reduce emissions that contribute to the greenhouse effect, because it burns more cleanly than other fossil fuels. For example, when used to make electricity, natural gas only produces around half the greenhouse emissions of other fossil fuels.
Source: Australian Gas Association

The Natural Gas Industry Chain
Upstream Downstream

Production

Transmission

Distribution

Wholesale contracts Wholesale contracts Wholesale contracts Aggregators/ Suppliers Retail tariffs Residential and commercial customers The gas transport chain The gas marketing chain Industrial and power generation customers

Source: Australian Gas Association

Rationale for Gas Industry Regulation
Gas industry Gas industry characteristics characteristics
Natural Natural monopoly monopoly Large sunk Large sunk costs costs

Role of Role of Regulation Regulation
Prevent abuse of Prevent abuse of market power market power Minimize Minimize risks risks

Objective Objective
Competition and Competition and Efficiency Efficiency Encourage Encourage investments investments

Public Public good good

Protect public Protect public interest interest

Security and Security and affordability of affordability of gas supply gas supply

Concepts and International Experience Key Elements of Gas Regulatory Regime
What to What to regulate regulate

Structure

• Ownership- State/Private sector role • Vertical integration/cross-ownership • Stage of Gas Market Development

How to How to regulate regulate

Approaches

• • • • •

Entry Regulation Price Regulation Access Regime Public Service Obligations Promotion of Competition

Who to Who to regulate regulate

Institution/ Authority

• Law- and Policy/Rule-making • Economic Regulator • Competition Authorities • Arbitration/Dispute Resolution

Stages of Gas Market Development
Market Creation Market Development Mature Market

Undeveloped gas reserves, small market Limited infrastructure Integrated Structure; monopolymonopsony operations Heavy regulation or state ti i ti

More supply options; rapid demand growth Heavy investments in infrastructure Producers sell some gas directly to buyers; third party access and large market competition

Abundant supplies and demand saturation Developed infrastructure Unbundled supply chain; gas spot market; Retail competition

Regulation manages Minimal government competition; assists intervention to entry of new players sustain competition

Stages of Gas Market Development
Stage: Gas Market Creation Structure: Vertically Integrated Monopoly

PRODUCERS/ TRANSMISSION DISTRIBUTION IMPORTERS COMPANY COMPANY

END USERS

Gas Transportation Gas Supply Transaction

Stages of Gas Market Development
Stage: Gas Market Development Structure: Open Access And Wholesale Competition
PRODUCERS/ IMPORTERS TRANSMISSION COMPANY DISTRIBUTION COMPANY

Residential

Commercial

Industrial

TRADERS AND SUPPLIERS Gas Transportation Gas Supply Transaction

Power Plants

Stages of Gas Market Development
Stage: Mature Market Structure: Unbundled Industry and Retail Competition
Residential PRODUCERS/ IMPORTERS TRANSMISSION COMPANY DISTRIBUTION COMPANY

Commercial

Industrial SPOT MARKET TRADERS AND SUPPLIERS

Power Plants

Gas Transportation Gas Supply Transaction

Gas Market Development in Selected Countries
Market Creation Market Development Mature Market

PHIL
Proven Reserves (TCF)* 3

IND
72

THAI MAL
12 82

MEX
30

ARG
26

US
167

UK
27

32 19 52 24 20 9 R/P Ratio (Years)1 % NGas in 4.6 28 30 47 25 55 26 Energy (2002) Mix* Pipeline 526 4,469 377 1,753 12,000 >100,000 1.84 (1998) MM Km*
1

7 38

278,650

Ratio of year-end reserves to annual production Source of basic data: WB, BP Amoco, APERC

* 2000 data

Evolution of Regulatory Reforms in Mature Gas Markets – United States
600 In million tons of oil equivalent 500 400 300 200 100 0
19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98
Voluntary open access Mandatory open access, Unbundling, Capacity release, wholesale price decontrol Retail competition in some states Partial wellhead price deregulation Total wellhead price decontrol

Heavy Regulation

Managed Competition

Deregulation

Production

Prodn + Imports

Consumption
Source: F. M. Andres, unpublished thesis

Evolution of Regulatory Reforms in Mature Gas Markets - United Kingdom
90 80

In m n to s o o eq ivalen illio n f il u t

70 60 50 40 30 20 10

TPA to BG pipelines BG creation

BG privatization, large market competition

Retail market competition

BG unbundling

Nationalization
0

Managed Competition
19 90 19 82 19 86 19 92 19 84 19 88

Competition
19 98 19 96

19 72

19 76

19 74

19 78

Consumption

Prodn + Imports

Production

Source: F. M. Andres, unpublished thesis

19 94

19 70

19 80

Evolution of Regulatory Reforms in Mature Markets - Argentina
35 30

Inm nto so o e u a n illio n f il q iv le

25

Gas del Estado restructuring and privatization , open access, YPF privatization

Wellhead price deregulation

20

15

Capacity release market YPF divestment

10

5

Nationalization
0

Managed Competition
19 91 19 87 19 89 19 93 19 85 19 95 19 97

Compe tition

19 75

19 77

19 73

19 81

19 71

Production

Prodn + Imports

19 83

19 79

Consumption

Source: F. M. Andres, unpublished thesis

Lessons Learned from International Experience
US and UK experience are “experiments” – piecemeal approach to deregulation/liberalization Latter reformers (e.g., Argentina, Victoria) took a more proactive, quicker path to gas reform No single entity should have excessive market power for competition to work Regulation needs complementary measures to work – e. g., TPA and unbundling Electricity market deregulation hastens gas market competition but drives reintegration

POLICY AND REGULATORY FRAMEWORK
• Existing Legal and Policy Framework • DOE Gas Circular

Existing Policy and Regulatory Framework Recent Developments

• DOE Charter • E.O. No. 66 • DOE Gas Circular
Regulations

–

Interim

Rules

and

• Philippine Energy Plan 2003-2012

Interim DOE Gas Circular Policy Declaration

• Promote Natural Gas as an efficient and
economical source of energy

• Facilitate private sector participation • Promote competition by liberalizing entry
and adopting pro-competition/fair trade measures

• Ensure compliance with international safety
standards and relevant Philippine laws and regulations

Interim DOE Gas Circular Key Provisions
Industry Structure Downstream Natural Gas Industry: Transmission (T), Distribution (D) and Supply (S) Vertical integration allowed Entry Regulation Franchise and other legislative authorizations required to operate T& D as public utility Permits required for T, D and S Own-use permit allowed for end-user facilities

Interim DOE Gas Circular Key Provisions
Access Liberalization Third Party Access to T, D and related facilities required Deferment allowed on new facilities Access conditions negotiated Price regulation Prices of T, D, and S deregulated for competitive markets. ERC to regulate prices charged by distribution utilities Promotion of Competition DOE to enforce measures to restore competition

Proposed Natural Gas Bill

Natural Gas Bill TWG Meetings and Participants
Meetings
11 meetings since September 2002

Participants
Committee on Energy Secretariat Government – DOE, ERC, DOF, DENR, NEDA, PNOC, PNOC-EC. PNOC-EDC Industry – SPEX, FGHC, PAP, BP Amoco, GN Power, Chevron-Texaco, Caltex, Price-Waterhouse NGO – Freedom from Debt Coalition

Major Issues
•Regulatory Agencies •Franchise •Price Regulation •TPA •Promotion of Competition

Natural Gas Bill Key Recommendations of the TWG
Industry structure Downstream gas industry: T, D and S Vertical integration allowed Entry regulation Franchise to operate T & D as public utility Permit required to operate T, D & S Own-use permit allowed for end-user facilities

Natural Gas Bill Key Recommendations
Access Liberalization
TPA mandatory for T, D and related facilities Deferment allowed on new facilities Access conditions negotiated

Price Regulation
Prices for captive markets regulated Market-based prices for contestable markets

Natural Gas Bill Issues to be resolved
Regulatory Agencies Division of price and non-price functions between DOE and ERC or single regulatory agency Franchise Whether Service Contractors need a franchise to engage in T & D PNOC Charter in lieu of a franchise Price Regulation Classifying markets as contestable or captive for pricing purposes

Natural Gas Bill Issues to be resolved
Third Party Access Whether to require T, D utilities capacity expansion to accommodate third party users Negotiated versus regulated access charges Promotion of Competition What competition measures to be imposed Whether to identify measures in the legislation or empower regulator to determine

THANK YOU!
www.doe.gov.ph


								
To top