THE Department of Energy (DOE) is pushing for VAT-exemption on the purchase and sale of indigenous natural gas, and sale of power using indigenous natural gas, as part of the fiscal incentives to be granted under the proposed law developing the Philippines’ natural gas industry.
Energy Undersecretary Sharon Garin raised the matter at the conclusion of the fourth meeting of the Senate Committee on Energy Technical Working Group on Senate Bill 2247, which aims to develop the country’s natural gas industry.
Senate Bill 2247 filed by Senator Raffy Tulfo seeks to promote the development of a comprehensive and integrated legislative policy that aids in the rapid development of the Philippines’ natural gas sector.
Garin called on the Department of Finance to agree fiscal incentives for natural gas investors, saying “the risks are too high and the competition is there.” The government should provide key players of natural gas with incentives to ensure the objective of achieving a robust commercial transaction and promote investment in the indigenous natural gas industry.
Donnabel Kuizon Cruz, Managing Director and General Manager of Prime Energy, said indigenous gas exploration to production takes seven to ten years and is a high risk and high cost activity. Prime Energy, operator of the Malampaya natural gas facility, estimates that the current Malampaya Phase 4 two (out of three) well drilling and tie-back campaign will cost approximately US$859m. Prime Energy targets delivery of new gas from Malampaya Phase 4 by 2026.
Cruz said the objective is to increase indigenous gas production and provide access to more customers, which will then reduce the cost of electricity, noting that, historically, indigenous gas has always been more stable and competitive compared to imported gas.
Undersecretary Garin said tapping indigenous natural gas resources will address the overall concern on energy security and the high cost of energy.
“There is a very slim chance that indigenous will be more expensive than LNG,” she said.
“We need to protect the (indigenous natural gas) industry and we are hoping to have more projects like Malampaya,” added Garin, noting that the Malampaya consortium remits 60 percent of its gross proceeds to the national government.
Lawyer Gareth Tungol, special legal counsel of Sen. Raffy Tulfo said urgency of the bill is geared towards the need to augment the natural gas sources in the country, since the existing Malampaya gas reserve is depleting.
He said the concerns and issues raised during the TWG meeting will be taken into consideration at the Committee report.