Chevron – After crash of markets, energy sector sees investments revival – Manila Bulletin
Today, I give you pain. Tomorrow, who knows?
For industry players in the energy sector, that’s their tale of woe this year given decimated top and bottom lines with demand crash on energy commodities. Onward, uncertainties hold sway.
At the height of the lockdown period in March-May, the Department of Energy (DOE) announced that fuel demand plummeted by 60 to 70%; and the sector is still on sluggish recovery. Homogeneously, power demand also went down by up to 30% at the height of the pandemic’s whip during the summer months.
On investments’ terrain, it wasn’t a comfortable narrative for this administration to see the exodus of deep-pocketed investors in the sector. In March, it was American energy giant Chevron Corporation’s disengagement in the multi-billion Malampaya project after unloading its 45% stake to Udenna Corporation of businessman Dennis Uy. Coming in next is the anticipated exit also of Shell Philippines Exploration B.V. (SPEX), the project operator, in the gas field venture.
Gone were the days really when global energy giants – the likes of trillion-dollar company Saudi Aramco; as well as multinationals Chevron, Royal Dutch Shell, BP, ExxonMobil and BHP Billiton – were physically in our shores and had found the Philippines an attractive economy to pump their capitals in. Chevron and Shell are still in the country’s downstream oil sector, but it’s a big question if their interests will be revived in the upstream segment, especially with the Philippines’ frenzied quest for its next Malampaya field.
In the downstream petroleum segment, this pandemic-beaten year had fomented the demise of the country’s oil refining operations – with Shell shutting down its Tabangao refinery last August and turning it into a world-class import terminal; and Petron’s refinery is currently grasping at straws – and while it has been frantically appealing for help so it can be saved from inevitable closure, the government is not even lifting a finger yet to aid the company.
West Philippine Sea ‘re-opened’
With Malacañang’s imprimatur, Energy Secretary Alfonso G. Cusi boldly declared in October that the ‘oil and gas exploration moratorium’ at West Philippine Sea (WPS) was finally lifted – that’s after seven years of inactivity in that disputed territory because of the country’s diplomatic tussle with China.
The energy chief stipulated it was a “unilateral decision” on the part of the Philippines, but it will not preclude any ongoing and forward discussion that the government will be pursuing with China for targeted joint exploration activities.
“We need to explore, so we may address the country’s energy security,” Cusi asserted; justifying that “the lifting of the moratorium was arrived at in good faith and with full regard to the ongoing negotiations between the Philippines and China, and CNOOC.”
Investors who have already expressed interests to carry out seismic surveys and targeted petroleum drillings at West Philippine Sea include PXP Energy Corporation/Forum Energy of businessman Manuel V. Pangilinan; and the other is Uy-led Udenna Corporation.
But even Pangilinan-led PXP Energy emphasized that it will need a foreign investor-partner with deeper pockets if it will eventually advance the development of its targeted field at the Recto Bank, especially if the yield will eventually be established to be of commercial scale.
State-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) is similarly setting its sight on prospects straddling WPS, but company president Rozzano D. Briguez admitted that discussion with potential partner China National Offshore Oil Corporation (CNOOC) is still ongoing.
Cusi indicated that since the exploration moratorium lifting, investors have yet to show appetite in the petroleum blocks being offered by the government. And while investment flow had been realistically lethargic this year because of the health crisis, the DOE is hoping for better outcomes next year.
Coal sector on ‘lockdown’
Embracing a forced yet ‘de rigueur’ energy transition, Cusi also blazoned the energy department’s “coal moratorium policy” in November, wherein the government announced that it will no longer accept new applications for coal plant projects – but with exemptions for coal plant projects that are already classified as “committed” and those indicative projects that have so far started on permitting processes as well as on site preparation activities.
The energy secretary qualified the coal moratorium was “for the country to shift to a more flexible power supply mix,” primarily the targeted investment re-positioning to massive scale renewables in the country’s energy mix.
From a technology neutral approach that the DOE had constantly defended in the last four years – with obvious leaning then for coal plants, Cusi highlighted that the policy transformation “would help build a more sustainable power system that will be resilient in the face of structural changes in demand and will be flexible enough to accommodate the entry of new, cleaner and indigenous technological innovations.”
Cusi’s moratorium had drawn cheers from RE investors and clean energy advocates – but even in that investment landscape, the government has yet to address host of concerns – the likes of: rate hikes with massive RE installations; intermittency predicaments of wind and solar while battery storage has yet to reach affordable price points; colossal land use for solar farm developments that may gobble up areas dedicated for agriculture; and the need for efficient RE integration to power grids, among others.
Discernibly, one investment area that has been begging for more attention is “energy efficiency” or what experts classify as “the low hanging fruit” which can be readily reaped if policies are seriously and urgently implemented. With energy efficiency, it is estimated that the country could save billions of pesos of investments for megawatt-capacity additions, while putting savings on the pockets of consumers and will likewise be creating jobs especially for workers displaced by the pandemic.
Whether or not the energy sector’s investments redux will flourish – that’s a continuing story worth keeping tabs on. Foremost though – energy policymakers and planners may need to give a sobering thought to this observation of investors: that the laws, policies and rules of the sector are so quick in penalizing and making things difficult for everyone; but they are very slow and rapacious in implementation and incentivizing investments.
SIGN UP TO DAILY NEWSLETTER
CLICK HERE TO SIGN-UP