PNOC-EDC is the largest producer of geothermal energy, supplying 12 power plants

Oil costs fuel drive to use alternatives
As the price of imported oil continues to soar, the Philippines is developing alternative sources of energy in pursuit of greater self-sufficiency

Currently importing around 100 million barrels of oil per year, the Philippines is seeking ways of reducing its fuel bill. Last year the cost of oil imports rose to $6.8 billion – a 20 per cent increase, despite a slight reduction in consumption.

The government wants to achieve 60 per cent self-sufficiency in energy by 2010. Thus far, indigenous fuels account for around 50 per cent of the total energy mix. Conservation is being encouraged along with the increased use of natural gas and alternative energy sources.

The largest source of natural gas in the Philippines is located about 50 miles northwest of the island of Palawan. The state-run Philippine National Oil Company (PNOC) has a 10 per cent stake in the $4.5 billion (£2.21 billion) Malampaya deepwater natural gas project through its oil and exploration subsidiary, PNOC-EC.

Led by Shell Philippines Exploration and Chevron Texaco, each with a 45 per cent share, the project supplies three gas-fired turbine power plants on Luzon Island, designed to generate a total of 2,700 megawatts of electricity. Last year, total daily production from Malampaya averaged 296 million cubic feet of natural gas and 14,000 barrels of condensate.

There are plans to raise around $500 million from selling an almost 60 percent stake in PNOC-EDC before the end of 2007. The money will be used to fund domestic and overseas exploration. Various domestic oil and gas exploration sites are being looked at, particularly in Mindoro and Palawan, and projects in West Africa, the Middle East, Brunei, East Timor and Indonesia are also being investigated.

“Our main concern right now is to find new sources for oil and gas for the country,” says Pedro Aquino, PNOC’s President and CEO, emphasising at the same time that PNOC is “a total energy company” also involved in power generation and alternative energy.
Mr Aquino is pushing hard for PNOC and its subsidiaries to be transferred entirely to the private sector to enable it to become more competitive. “In order to compete globally, PNOC has to get out of the hands of the government. As a 100 per cent government-owned corporation its budget and plans have to be submitted to congress for approval and it is subject to bureaucracy. I am trying to get PNOC and all its companies privatised and independent within three years time.”

Privatisation is in line with the government’s efforts to get private investors to put funds into the energy sector. The hugely successful initial public offering last December of 40 per cent of PNOC’s geothermal arm, PNOC Energy Development Corporation (PNOC-EDC), raised 16.7 billion pesos (£1.8 billion). This was followed in July with a secondary offering that reduces the government’s stake from 60 per cent to 47 per cent, ending its control of the company. A further 40 per cent stake is likely to be offloaded onto the market within the year.

PEDRO AQUINO President and CEO of PNOC	PAUL AQUINO President and CEO of PNOC-EDC

As a producer of geothermal energy, the Philippines is second only to the United States and is on course to surpass it. “In the next two years it is predicted that the Philippines will be ahead of the US as the leading geothermal producer in the world,” says Mr Aquino.

PNOC-EDC is the country’s largest geothermal producer and the acknowledged global leader in wet steamfield technology. The company accounts for about 60 per cent of the country’s total installed geothermal energy capacity, supplying fuel to 12 power plants. One out of every eight households gets its electricity from the firm.

As a privatised company, PNOC-EDC will have greater flexibility in fast tracking projects. There are plans for a 330 to 380 MW expansion programme that involves expanding its four existing geothermal fields and developing new fields over the next 3-8 years.
New opportunities in the renewable energy market are also being explored by PNOC. This year, for example, it will be spending 1.35 billion pesos on the first phase of a wind farm project in Ilocos Norte, expected to be completed by the first quarter of 2009.

“Our goal is not only to make the company profitable but the country profitable as well, and to make the Filipino proud,” says Paul Aquino, PNOC-EDC’s President and CEO. “We have grown in leaps and bounds since the 1970s when the energy crisis came in. We grew almost to a thousand megawatts in only 10 years and that made us number two right away. In five to ten years, I would hope we will be at the 1,500 megawatt level.”

PNOC-EDC is considered a green company because its production is more environmentally friendly than that of coal-fired plants. “When coal-fired plants are used, they produce a lot of CO2, and a lot of warming effect happens, with all the environmental hazards that go along with it,” says Dr Aquino. “We don’t fire any coal to get the steam. We get it from the ground.

“During the night when the consumption is low, we have to let the steam out into the atmosphere. It then comes down as rain and the surrounding areas around our plants become very green.”