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The U.S. Push for LNG in the Philippines Is Based on Dubious Assumptions

September 01, 2021
Sam Reynolds
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Key Findings

A recent white paper sponsored by the U.S. Agency for International Development (USAID) promotes the benefits of liquefied natural gas in the Philippines. The report, however, is based on questionable assumptions about global LNG prices, long-term demand and market viability of U.S. exports to price-sensitive countries in Asia.

The idea that LNG can serve as a flexible ‘bridge fuel’ for power generation is based on technical and contractual circumstances that are not present in the Philippines market.

For the Philippines and other emerging importers in Asia, LNG should represent a fuel of last resort only.

Executive Summary

The United States continues to play an active role in the development of the Philippines’ natural gas industry by promoting imports of liquefied natural gas (LNG) to offset declining domestic gas production. American companies are involved in LNG regasification projects in the Philippines, while officials from various U.S. agencies have advised policymakers on legal reforms to govern the country’s emerging natural gas industry.

A recent white paper sponsored by the U.S. Agency for International Development (USAID) lays out the sales pitch for U.S. LNG.

Although the report claims only to provide “a summary of observations within the LNG market and its impact in the Philippines,” it presents an overly optimistic case for LNG prices, long-term domestic demand, and market viability of U.S. exports to price-sensitive emerging markets in Asia.

Many of the assumptions underlying the report’s findings are ill-timed and seemingly ignore current dynamics in the global LNG market and recent developments in the Philippines’ energy industry, as well as findings from the international scientific community regarding the incompatibility of greenhouse gas-intensive fossil fuels like natural gas with global climate goals.

These overly optimistic assumptions distort the financial, economic, and environmental case for LNG imports.

While small amounts of LNG will likely be necessary in the Philippines to compensate for declining production from the Malampaya offshore development, the country’s only large producing indigenous field, the situation should not justify a wholesale expansion of the Philippines’ LNG-to-power fleet. Doing so would risk locking in dependence on a foreign imported fuel known for its extreme volatility, to the detriment of cleaner, cheaper domestic energy sources.

Sam Reynolds

Sam Reynolds, an energy finance analyst with the Institute for Energy Economics and Financial Analysis (IEEFA), focuses on the economic, financial, and climate risks associated with natural gas and liquefied natural gas (LNG) infrastructure developments in emerging Asia. 

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