Market Intelligence
Energy Philippines

Philippines Energy Market

The Philippine energy market offers opportunities in LNG, power generation, transmission, distribution and off-grid islands. 

The Philippines is facing a mounting energy crisis as the Malampaya gas fields deplete, supplying 30% of Luzon`s energy consumption, are expected to be depleted by 2024. An ever increasing population, an Administration-mandated infrastructure boom, and some of the highest electricity costs in S.E. Asia all combine to present formidable challenges.
 
The Philippine Government has stated that it envisions the Philippines being energy self sufficient, utilizing a combination of fossil fuels and renewable energy as solutions. About 43 GW of additional capacity will be required by 2040, and the country is clearly behind schedule in developing solutions. The current energy mix is composed of coal (47%), natural gas (22%), renewable energy (hydro, geothermal, wind, solar) (24%), and oil-based (6.2%) with current energy capacity at 23GW. While the country indicated interest in clean energy, this clearly will not come at the expense of development, and no penalties or incentives are in place for utilizing different types of energy sources. The current grid also cannot accommodate any additional input.
 
The electricity sector is fully privatized, with one major utility, Meralco, holding 80% of the market. The remaining 20% is made up of a few regional players, and 100+ electric cooperatives. The need for energy solutions and new equipment exists, but larger players make purely commercial decisions that favor lower cost, and the smaller players often cannot purchase U.S. solutions long-term.  The Government is seeking investors for offshore exploration, but is struggling as current foreign investors face contract sanctity and back tax issues, making new investors extremely hesitant to consider the market. This shows in the lack of offshore exploration in comparison to other ASEAN neighbors.

The Government has put out a call for applications for entities to compete to build the nation`s first integrated LNG import terminal with capacity of 5 MTPA.  The private sector entities managing the terminal will also need to procure gas. Power Generation: Firms are in different stages of power plant rehabilitation, upgrading, and/or regular maintenance work. This presents a range of opportunities for supplying various types of equipment and services. 

Solutions are needed for the main grid and new projects, such as $2 billion Visayas-Mindanao Interconnection Project. Smaller utilities will need to enhance their capabilities. The need for electricity and solutions outside the main islands is critical, but often not commercially profitable. USAID funded projects allow for opportunities in consulting and pilot projects.
 
U.S. firms can expect some share of such business as long as they build relationships with local utilities, and register themselves as potential suppliers. A lack of energy standards does present uncertainties, but as the market is private sector driven, should one`s product/solution be desired by the major utilities, one can expect that it will eventually be endorsed by the Government.
For more information, please reach out to: Thess Sula, Commercial Specialist, U.S. Commercial Service Philippines, Email: Thess.Sula@trade.gov.

04/22/2020