With the ever-increasing population and fast changing economic environment, the limited amount of oil reserves both in the local and international market poses a great strain on our power sources. The continuous hike in the world market prices of crude oil can be detrimental for any importing country like the Philippines. From 1996-1998, the country was greatly dependent on oil as its major source of fuel wherein more than 40% of electrical power (in Gwh) was generated by oil-based power plants. Its share gradually diminished, however, from 1999 onwards and by 2005, total power generation from oil-based fuel accounted for only 10.86 percent. Likewise, power generation share of hydroelectric power plants declined from 19.15% in 1996 to 14.83% in 2005. Meanwhile, the share of geothermal power plants expanded from 1996 to 2000 after which it contracted. The share of coal and natural gas in the power generation mix followed the same pattern. The reduced dependency on oil and other conventional sources of energy for power generation is welcome news - an achievement in line with the government’s thrust of promoting energy independence through enhanced resource development.

Philippine Power Statistics (In Percent)

Source: Department of Energy

The Philippine Energy Plan 2005 Update (PEP 2005 Update) emphasizes the call for the development of the country’s indigenous energy resources by increasing the use of alternative and fossil fuels. Beginning 2001, the production of indigenous energy sources, particularly natural gas and coal has been on the uptrend. This is seen to remain on track as the government targets massive displacement of oil-based power plants by 2009.

Philippine Production of Alternative Energy Sources, 2001 - 2005

Source: Department of Energy

Natural gas, along with condensate as its by-product, is being produced from the Malampaya Gas Field in Palawan and the San Antonio Gas Field in Isabela. From a meager production of 112 mmscf that was generated from the San Antonio Gas Field in 2001, the production of natural gas significantly increased as the Shell Philippines Exploration BV (SPEX) started its commercial operation in the Malampaya Gas Field in 2002. The production of natural gas registered double-digit growths in 2003 and 2005 but declined in 2004. Since the entry of SPEX in the industry, the company accounts for more than 99% of the country’s production of natural gas. The major purchasers of this natural gas are the following power plants: KEPCO-Ilijan Corporation; First Gas Power Corp.-Sta. Rita; and First Gas Power Corp.-San Lorenzo.

Coal production, on the other hand, continued to increase but at a decelerated pace, growing by 44.4% in 2002 to 16.0% in 2005. Coal produced locally is generally classified as lignite or sub-bituminous coal and is of poor quality. However, higher grade imported coal is blended with indigenous coal to improve its burning characteristic for use as steaming coal in electrical power generation as well as fuel for the furnaces of cement producing companies. The Semirara Mining Corporation dominates the coal mining industry in the Philippines, with more than 90% share in the country’s total coal production. Currently, about 77% of the coal production is being utilized in the electrical power generation activities while the remaining 23% is consumed for cement making and other industrial activities.