By: Atty. Gregorio B. Austral, CPA
Promoting natural gas as a reliable fuel
The “Philippine Natural Gas Industry Development Act” (Act No. 12120) aims to promote natural gas as a safe and efficient energy source and to establish the Philippine Downstream Natural Gas Industry (PDNGI). The Act seeks to develop natural gas as a reliable fuel for power plants, while also transitioning to renewable energy sources and establishing the Philippines as a Liquefied Natural Gas (LNG) trading hub. It also encourages the conversion of existing fossil fuel facilities to natural gas and prioritizes the use of indigenous natural gas resources. The law aims to create a conducive environment for the PDNGI through regulatory policies and standards, while ensuring the industry’s safe, secure, and environmentally responsible operation. The Act emphasizes private sector participation, transparent pricing, and the development of technical expertise to support the PDNGI.
The Act outlines the scope of the PDNGI, encompassing the permitting, construction, operation, and maintenance of facilities for both “Own-Use” and “Third-Party Access” (TPA). It defines key terms such as “Aggregation,” which involves combining indigenous natural gas with imported LNG, and “Aggregated Gas,” which is a blend containing a minimum percentage of indigenous gas. The Act also defines various facilities like LNG Storage and Regasification Terminals, and systems for transmission and distribution of natural gas. It sets standards for operations and safety, and addresses decommissioning and abandonment procedures. The law also defines “Participants” in the natural gas trade, such as suppliers, aggregators, bunker traders, and resellers. The Act mandates a comprehensive plan for the PDNGI, incorporating natural gas supply, transmission, and distribution development.
The Department of Energy (DOE) is designated as the primary agency for supervising and monitoring the PDNGI. The DOE’s responsibilities include preparing the PDNG Development Plan, establishing industry standards, and enforcing compliance. The DOE also approves permits for PDNGI facilities, accredits participants, and can review or revoke permits for non-compliance. The DOE is also tasked with issuing codes for transmission, distribution, LNG terminals, and third-party access. Other government agencies like the Energy Regulatory Commission (ERC), Department of Environment and Natural Resources (DENR), and the Philippine Coast Guard (PCG) also have roles in the PDNGI, focusing on regulation, environmental standards, and marine safety respectively. The DOE is also empowered to assess and mitigate the risk of stranded assets related to natural gas infrastructure development.
The Act promotes competition within the PDNGI and ensures fair access to capital and markets. It prohibits anti-competitive behaviors and empowers the Philippine Competition Commission (PCC) to investigate and penalize such practices. The law emphasizes the importance of transparency, non-discrimination, and safe practices for third-party access to PDNGI facilities. The DOE has the authority to direct the release of unused capacity by TPA permit holders. The Act also sets standards for product quality and safety, requiring adherence to both Philippine and internationally accepted standards. Permit holders are mandated to align their operations with the policies of the Act, maintain standards, and prioritize local talent in hiring.
The Act provides fiscal incentives for PDNGI facilities, including potential inclusion in the Strategic Investment Priority Plan (SIPP). It also exempts the purchase and sale of indigenous natural gas and aggregated gas from Value-Added Tax (VAT). The Act establishes administrative fines and penalties for violations of the Act’s provisions, including the suspension or revocation of permits. The Act also outlines transitional provisions for existing systems and pending applications. The law includes provisions for amicable settlement of disputes and congressional oversight. The DOE is tasked to create implementing rules and regulations for the Act to take full effect. (Source: cdasiaonline as processed by NotebookLM by Google)