LNG Imports as Transition Fuel
Liquefied natural gas (LNG) is the Philippine government’s designated bridge fuel to fill the supply gap created by the depletion of the Malampaya gas field and to provide dispatchable baseload generation while renewable energy capacity scales up. LNG imports begin in 2023 under both the REF and CES scenarios [PEP 2023-2050 Vol. I, Table 7, 2023].
Why LNG
The Malampaya gas field — the Philippines’ only significant domestic natural gas source — is in terminal decline. Its Gas Sales and Purchase Agreement for the Ilijan power plant expired in June 2022, and total domestic gas production fell to 2.6 MTOE in 2022 (−7.4%). Without a replacement, the 16% of national power generation previously supplied by natural gas would shift entirely to coal, worsening both GHG emissions and energy security [PEP 2023-2050 Vol. I, pp.53–55, 2023].
LNG imports allow existing gas-fired power plants to keep operating and new LNG-capable plants to be built, maintaining natural gas as a dispatchable, lower-emissions alternative to coal while RE build-out proceeds. See Malampaya Gas Field .
Scale of LNG Build-Out
Under the Reference Scenario:
- Natural gas (domestic + LNG) grows from 2.6 MTOE (2022) to 24.82 MTOE by 2050 — an 8.37%/yr increase
- Net LNG imports grow from zero (2022) to 24.3 MTOE by 2050
- Seven (7) LNG projects (storage terminals, import terminals, regasification facilities) expected to be fully operational across the planning period with total capacity of approximately 22 MTPA [PEP 2023-2050 Vol. I, p.77, 2023]
Meanwhile, Malampaya domestic gas falls from 2.6 MTOE to just 0.6 MTOE by 2050 (−5.3%/yr) as the field depletes [PEP 2023-2050 Vol. I, p.79, 2023].
Role in Power Generation
Under REF, natural gas (LNG-fueled) becomes the largest single power generation source by 2050 at 35.0% (158.8 TWh), up from 16.0% (17.9 TWh) in 2022. Natural gas capacity additions reach 21.9 GW between 2022 and 2050, bringing total gas capacity to 25.6 GW [PEP 2023-2050 Vol. I, Tables 16–17, 2023].
Fuel input to gas-fired plants grows at 8.5%/yr from 2.5 MTOE (2022) to 24.8 MTOE (2050), becoming 29.2% of total fuel input to power generation [PEP 2023-2050 Vol. I, p.75, 2023].
LNG Under CES vs REF
Under the CES, OSW and nuclear displace a significant portion of the gas that REF assumes will be LNG-sourced:
| Indicator | REF 2050 | CES 2050 | Difference |
|---|---|---|---|
| Gas fuel input to power (MTOE) | 24.82 | 10.61 | −14.21 MTOE |
| Gas share of fuel input | 29.2% | 13.4% | −15.8 pp |
| Gas GHG (MtCO₂e) | 58.0 | — | significantly lower |
[PEP 2023-2050 Vol. I, Table 25, 2023]
The CES’s 19–50 GW of offshore wind directly substitutes for LNG-fired generation — this is why OSW and nuclear improve energy self-sufficiency while LNG worsens it. Under REF, the Philippines trades one form of import dependency (oil/coal) for a large new LNG import dependency.
GHG Implications
Natural gas GHG emissions grow at 8.4%/yr under REF, rising from 6.1 MtCO₂e (2022) to 58.0 MtCO₂e by 2050 — the fastest-growing GHG source in the energy system. While gas is cleaner per unit than coal, the sheer volume of LNG needed erases the per-unit advantage at scale [PEP 2023-2050 Vol. I, p.80, 2023].
This is the core tension in the PEP transition strategy: LNG is necessary as a near-term dispatchable backup for intermittent RE, but at the volumes required under REF it becomes a major long-run GHG liability. The CES minimizes this by substituting OSW + nuclear + BESS for gas-fired peaking. See Battery Energy Storage Systems (BESS) and Energy Storage System Policy .
The Natural Gas Fleet (2022)
Five gas-fired power plants utilizing Malampaya gas operate as of December 2022, with a combined installed capacity of 3,730.6 MW:
| Plant | Capacity (MW) | Notes |
|---|---|---|
| Avion | 130.8 | — |
| Ilijan | 1,436.5 | GSPA expired June 2022; ~8 months non-operation |
| San Gabriel | 442.9 | — |
| San Lorenzo | 586.5 | — |
| Sta. Rita | 1,133.9 | — |
[PEP 2023-2050 Vol. II, p.13 fn.11, 2023]
The Ilijan GSPA expiry resulted in the immediate loss of 1,200 MW of capacity from the Luzon grid, leaving four plants still utilizing Malampaya gas [PEP 2023-2050 Vol. II, p.13, 2023].
DOE-Approved LNG Projects (as of 7 July 2023)
Seven LNG projects have been approved by the DOE with an aggregate capacity of 21.98 MTPA. Three have proceeded to Permit to Construct (PC); Linseed Field was the first to receive an LNG delivery [PEP 2023-2050 Vol. II, Table 6, 2023].
| Proponent | Project Type | Capacity (MTPA) | Location | Target Operation | Anchor Market |
|---|---|---|---|---|---|
| FGEN LNG Corporation | Interim FSRU | 5.26 | Batangas City | Sept 2023 | Existing gas-fired power plants; proposed FGEN extensions |
| Linseed Field Corporation | FSU + Onshore Regasification | 3.00 | Batangas City | July 2023 | Ilijan 1,200 MW; Batangas Combined Cycle Power Project |
| Energy World Gas Operations Philippines Inc. | LNG Storage & Regasification Terminal | 3.00 | Pagbilao, Quezon | Dec 2023 | Self-owned gas plant |
| Luzon LNG Terminal Inc. | FSRU | 4.40 | Batangas City | Dec 2025 | EGCO Group (small-scale LNG break bulk); 3rd-party open access |
| Vires Energy Corporation | FSRU | 3.00 | Batangas City | April 2026 | Self-owned gas-fired power plant (under construction) |
| Shell Energy Philippines, Inc. | FSRU | 3.00 | Batangas City | Sept 2025 | JG Summit 81 MW + 30–40 MW expansion; BCE 1,100 MW; Ingrid Power 40 MW (diesel→gas) |
| Samat LNG Corporation | Small-Scale LNG Terminal | 0.32 | Mariveles, Bataan | March 2024 | Manufacturing industries within 300-km radius |
| Total | 21.98 |
Anchor markets sourced from PDP 2023-2050 Table 53 (Dec 2022 vintage); target operation dates above reflect PEP Vol. II Sep 2023 data. Both sources agree on the seven proponents [PDP 2023-2050, Table 53, pp.104–106, 2025].
Key milestones:
- Linseed Field received its first LNG delivery in April 2023 via the Ocean Glacier vessel from the UAE. The delivery resumed Ilijan Power Plant operations after ~8 months offline [PEP 2023-2050 Vol. II, p.14, 2023].
- FGEN’s FSRU (BW Batangas) arrived Batangas on 16 June 2023. It can hold 162,524 m³ of LNG and regasify up to 500 MMSCF per day [PEP 2023-2050 Vol. II, p.14, 2023].
- FGEN generated 1,025 jobs during preparation and construction; Linseed hired 880 people [PEP 2023-2050 Vol. II, p.15, 2023].
Statutory Framework (RA 12120, 2025)
The consolidated natural gas bill referenced in PEP 2023-2050 Vol. II was enacted as RA 12120 (Philippine Natural Gas Industry Development Act), signed January 8, 2025. It establishes the statutory Philippine Downstream Natural Gas Industry (PDNGI) framework. See Philippine Downstream Natural Gas Industry (PDNGI) and Digest: RA 12120 — Philippine Natural Gas Industry Development Act for full detail. Key impacts on LNG imports:
- Indigenous gas priority: §23 mandates prioritization of indigenous gas (Malampaya) over imported LNG; DOE sets a minimum percentage of electricity demand to be sourced from indigenous gas [RA 12120, §23, 2025]
- VAT regime: Indigenous gas and aggregated gas (blend with indigenous component) are VAT-exempt; pure imported LNG with no indigenous component is not VAT-exempt [RA 12120, §38, 2025]
- Aggregation: A new statutory mechanism allows aggregators to blend indigenous and imported LNG; DOE sets the minimum indigenous percentage [RA 12120, §4(b), 2025]
- TPA vs Own-Use permits: Third-party access is no longer universally mandatory — two permit tracks exist; Own-Use holders may use entire capacity exclusively [RA 12120, §18, 2025]
- Stranded asset tracking: DOE must publicly track and report stranded asset risk for all natural gas infrastructure, including import terminals [RA 12120, §5(r), 2025]
- All permits via EVOSS: All PDNGI facility permits processed through RA 11234 EVOSS system [RA 12120, §5(d), 2025]
Regulatory Framework (PDNGR)
LNG importation is governed by Department Circular DC 2017-11-0012 or the Philippine Downstream Natural Gas Regulation (PDNGR). It guides investors in building LNG receiving terminals and downstream gas facilities [PEP 2023-2050 Vol. II, p.14, 2023].
The PDNGR was undergoing major revisions as of 2023:
- Third Party Access (TPA) will no longer be mandatory
- Supply accreditation will be split into supplier accreditation and aggregator accreditation (aggregators can source from both local and imported gas)
- Permits clarified: Notice to Proceed (NTP), Permit to Construct (PC), Permit to Expand, Permit to Rehabilitate, Permit to Operate and Maintain (POM)
- Revised PDNGR issued at end of 2023 [PEP 2023-2050 Vol. II, p.14, 2023]
LNG Taxation
LNG benefits from a favorable tax treatment that makes it cost-competitive with other fuels [PEP 2023-2050 Vol. II, p.17, 2023]:
- No excise tax — imported LNG is not among the articles enumerated under Title VI, Chapter V of the NIRC, per BIR guidelines
- No customs duty — exempted under Section V, Chapter 27.11 of the 2017 ASEAN Harmonized Tariff Nomenclature (MFN & ATIGA)
- No mineral product excise — RA 9337 (Reformed Value Added Tax Law, 2005) removed the prior 2% excise tax on locally extracted natural gas and LNG
Legislative History (Natural Gas Bill → RA 12120)
The 19th Congress reviewed several House Bills (HBs 17, 29, 173, 3015, 4097, 4615, 4627) related to natural gas industry development. The HOR Technical Working Group consolidated these on 24 May 2023 into a unified bill [PEP 2023-2050 Vol. II, p.15, 2023]. The Senate version was SB 2783. Both chambers passed the consolidated bill in November 2024; President Marcos Jr. signed it as RA 12120 on January 8, 2025. See Digest: RA 12120 — Philippine Natural Gas Industry Development Act and Philippine Downstream Natural Gas Industry (PDNGI) .
Gas Policy Development Project (GPDP)
The DOE partnered with the University of the Philippines Statistical Center Research Foundation (UP-SCRFI) and UP National Engineering Center (UP-NEC) for the GPDP, funded by the US Department of State, launched December 2018 [PEP 2023-2050 Vol. II, p.16, 2023].
Outputs:
- 3 research papers (June 2022 and May 2022): technical performance of gas facilities; market profiling of natural gas users in economic zones; LNG for powering economic zones
- LNG Investors’ Guide — business permitting process from setup to commercialization
- Financial and Technical Recommendations for LNG Project Applications — viability assessment tool
GPDP 2: Completed the Natural Gas Development Plan (NGDP) covering legal/regulatory framework, industry roles, and development areas [PEP 2023-2050 Vol. II, p.17, 2023].
GPDP 3: Capacity-building for HSSE-IMT agencies on regulatory harmonization; funding still being secured as of 2023 [PEP 2023-2050 Vol. II, p.17, 2023].
Small-Scale LNG (SSLNG)
The DOE promotes small-scale LNG (SSLNG) as a replacement for oil-based generation in missionary (off-grid) areas. Defined by the International Gas Union as a liquefaction/regasification capacity of 0.05–1.0 MTPA and a vessel capacity of 60,000 m³ or less [PEP 2023-2050 Vol. II, p.20, 2023].
Advantages over conventional LNG: lower initial investment, shorter supply lead time, no reliance on gas pipelines, flexible logistics. The DOE-MAN Energy Solutions MOU (signed 22 February 2022) covers a feasibility study for SSLNG for Visayas (Cebu, Iloilo, Bohol) and Mindanao (Davao, General Santos) [PEP 2023-2050 Vol. II, p.17, 2023].
Investment and Employment (from Vol. II)
Five LNG projects (excluding FGEN and Linseed, which are further advanced) represent USD 865.4 million (PhP 43.3 billion) in total construction cost and 4,507 jobs [PEP 2023-2050 Vol. II, Table 8, 2023]:
| Proponent | Jobs | USD Cost (M) | PhP Cost (M) |
|---|---|---|---|
| Energy World Gas Operations Philippines Inc. | 3,115 | 145 | 7,250 |
| Luzon LNG Terminal Inc. | 160 | 480 | 24,000 |
| Vires Energy Corporation | 782 | 123 | 6,150 |
| Shell Energy Philippines, Inc. | 290 | 49.4 | 2,470 |
| Samat LNG Corporation | 160 | 68 | 3,400 |
| Total | 4,507 | 865.4 | 43,270 |
Additional REF capacity requirement: 3.98 MTPA more by 2050. If provided by an onshore LNG terminal: PhP 47.3 billion (907 jobs); if FSRU: PhP 11.1 billion (907 jobs) [PEP 2023-2050 Vol. II, Table 9, 2023].
CES: No additional LNG capacity beyond ongoing projects is required — existing commitments are sufficient [PEP 2023-2050 Vol. II, p.21, 2023].