GAS POLICY DEVELOPMENT PROJECT Completion Report SEPTEMBER 2018-JANUARY 2020
This document is made possible by the generous support of the American people through the United States Department of State-Bureau of Energy Resources (USDS-ENR). The contents are the responsibility of the GPDP Team and do not necessarily reflect the views of the USDS-ENR, the United States Government or the UPSCRFI.
*A supplementary report covering the details of activities for February to June 2020 will be submitted to USDS. ABOUT GAS POLICY GPDP Management and Staff DEVELOPMENT PROJECT Ramon Clarete Project Director The Gas Policy Development Project (GPDP) aims to provide technical assistance to the Philippine Department Dennis Mapa Project Director for of Energy (DOE) in implementing the Philippine Finance and Administration Downstream Natural Gas Regulation (PDNGR) Department Majah-Leah Ravago Project Director for Circular (DC) 2017-11-0012. The Project includes capacity- Research building activities, provision of technical advice and Belyn Rafael Deputy Project Director guidance to implement the PDNGR, conduct of research J. Kathleen Magadia Research and on natural gas industry in the Philippines, and assistance Communications Specialist in the improvement of PDNGR-related policies. Jennylene Layaoen Capacity Building Specialist Renzi Frias Project Technical Officer Specifically, the Project aims to: Maribel Testa Finance and Administration Coordinator 1. Strengthen the capacity to implement the Circular with particular focus on best practices and lessons learned to Alfred Recio Accountant evaluate natural gas-related project applications; Helen Santos Administrative Officer Duchees Alvarez Project Assistant 2. Recommend technical, economic, and financial Raul Fabella Research Fellow guidelines, criteria, and systems that could be used as a Karl Jandoc Research Fellow reference to evaluate project proposals for LNG facilities;
3. Extend technical support to the DOE on the review of Department of Energy – Oil Industry proposals, following guidelines developed under number 2 above; Management Bureau - Natural Gas Management Division 4. Provide an improved understanding of the LNG Donato Marcos Undersecretary industry through research on key topics; and Leonido Pulido III Assistant Secretary Rino Abad Director 5. Provide policy recommendations on the PDNGR, Rodela Romero Assistant Director Downstream Natural Gas Industry Act, and related bills Ma. Laura Saguin Chief Science Research such as the Senate Bill 172 and House Bills 1193 and 1266 Specialist (Establishment of the Philippine Energy Research and Don Honor Jacob Supervising Science Policy Institute). Research Specialist Charlene Dacumos Senior Science Research Specialist Ronald Dee Senior Science Research Specialist Jessol Salvo Senior Science Research Specialist Rea Cortezano Senior Science Research Specialist Erwin Domingo Science Research Specialist II April Joy Sibal Science Research Specialist II Anita Capate Science Research Specialist II Pretzel Advincula Administrative Aide VI Alicia Reyes Executive Technical Assistant, Top, L-R: Ronald Dee, Erwin Domingo, Don Honor Jacob, Ramon Clarete, Rino Abad, Jessol Salvo, Renzi Frias Office of the Undersecretary Bottom, L-R: Alicia Reyes, Grace Merrera, Rodela Romero, Ma. Laura Saguin, Charlene Dacumos, Belyn Rafael, April Joy Sibal, J.Kathleen Magadia, Jennylene Layaoen Athena Grace Merrera Executive Assistant, Office of the Assistant Secretary 2 GAS POLICY DEVELOPMENT PROJECT Completion Report
SEPTEMBER 2018-JANUARY 2020
This document is made possible by the generous support of the American people through the United States Department of State-Bureau of Energy Resources (USDS-ENR). The contents are the responsibility of the GPDP Team and do not necessarily reflect the views of the USDS-ENR, the United States Government or the UPSCRFI.
*A supplementary report covering the details of activities for February to June 2020 will be submitted to USDS. 3 GPDP and DOE Implementing Team
4 Photo courtesy of First Gen Corporation
Contents
1 EXECUTIVE SUMMARY 9
2 HIGHLIGHTS OF ACCOMPLISHMENTS 12
A. Technical Assistance to Implementation of the Philippine Downstream Natural Gas Regulation (PDNGR) 12 1. Organization of the Special Evaluation Committee (SEC) 12 2. Verification of Permit, Licenses, and Requirements 13 3. Investors’ Guide and Evaluator’s Guide 13
B. Capacity Development 14 1. GPDP Launch and Inception Workshop 15 2. Training Activities 15 3. Workshops for the Philippine Inter-Agency Health, Safety, Security and Environment Inspection and Monitoring Team (PIA HSSE IMT) 17 4. Site Visits and Policy Exchange 18 5. Co-organization of Relevant Capacity Development Activities 19 6. Participation in the JOGMEC-Organized Training 20
C. Research 20 1. Technical Report on Primary Survey on Market Profiling 20 2. Research Study 20
D. Policy Development and Advisory 21 1. Downstream Natural Gas Industry Act 21 2. Philippine Energy Research and Policy Institute Bill 22 3. Input to Strengthening the Philippine Downstream Natural Gas Industry Regulation 22
3 ANNEXES (Available Online)
Annex A. Training on Basic LNG Annex B. Financial, Economic, and Legal Aspects of LNG Projects Annex C. Technical Training on LNG HSSE Management Annex D. Training on Technical and HSSE Document Requirements for Notice to Proceed Permits of Liquefied Natural Gas Project Proposals Annex E. Site Visits Annex F. Research Study
5 LIST OF ACRONYMS
CLDP Commercial Law Development Program CREC Centralized Review and Evaluation Committee DC Department Circular DENR-EMB Department of Environment and Natural Resources-Environmental Management Bureau DILG-BFP Department of Interior and Local Government-Bureau of Fire Protection DOE Department of Energy DOE-CREC Department of Energy-Centralized Review and Evaluation Committee DOE-OIMB Department of Energy-Oil Industry Management Bureau DOF-BOC Department of Finance-Bureau of Customs DOH-BOQ Department of Health-Bureau of Quarantine DOLE-BWC Department of Labor and Employment-Bureau of Working Conditions EMA Energy Market Authority GPDP Gas Policy Development Project HSSE Health, Safety, Security, and Environment JOGMEC Japan Oil, Gas, and Metals National Corporation LNG Liquefied Natural Gas MARINA Maritime Industry Authority NTP Notice to Proceed PCERM Permit to Construct, Expand, Rehabilitate, and Modify PCG Philippine Coast Guard PDNGR Philippine Downstream Natural Gas Regulation PERPI Philippine Energy Research and Policy Institute PEZA Philippine Economic Zone Authority PHMSA Pipeline and Hazardous Materials Safety Administration PIA HSSE IMT Philippine Interagency Health, Safety, Security, and Environment Inspection and Monitoring Team PNOC Philippine National Oil Company POM Permit to Operate and Maintain PPA Philippine Ports Authority SEC Special Evaluation Committee UP NEC UP National Engineering Center UPSCRFI UP Statistical Center Research Foundation, Inc. UREO University Research Ethics Office USDS United States Department of State
6 Message from the GPDP Project Director
Launched in December 2018, the Gas Policy Development Project (GPDP) provided the DOE with technical assistance in the implementation of the Philippine Downstream Natural Gas Regulation (PDNGR) Department Circular (DC) 2017-11-0012.
I am pleased to share with you the GPDP’s completion report. It describes the Project’s accomplishments in its 16-month run. The GPDP strived to provide not only the DOE but also other partner government agencies necessary assistance to facilitate the development of the LNG sector. However, GPDP has only scratched the surface and more still needs to be done to put a functioning LNG regulatory system in place. It is our hope that the Project’s efforts and outputs will serve their purposes and pave the way to the creation of a thriving and efficient LNG industry.
Our sincerest appreciation to our key partners: the Department of Energy (DOE), especially to the Oil Industry Management Bureau-Natural Gas Management Division; agencies part of the Philippine Interagency Health, Safety, Security, and Environment Inspection and Monitoring Team (PIA HSSE IMT); and the Congress’ Committees on Energy, for being gracious and valuable collaborators in all the Project’s endeavors.
GPDP would not have been possible without the funding and technical support from the U.S. Department of State’s Bureau of Energy Resources under its Asia EDGE program. Through the State Department, the Project was fortunate to have partnered with the U.S. Department of Commerce’s Commercial Law Development Program (CLDP). CLDP provided GPDP with the LNG project experts it needed. Other experienced LNG resource speakers, both from the private and government sectors of countries with well-developed LNG industries, such as Japan and the United States, eagerly shared their invaluable time and expertise in the conduct of the Project’s trainings and workshops.
Through the DOE, the Project was able to successfully organize study tours and policy exchanges in LNG countries in the region, particularly Singapore and Indonesia.
To the DOE, our donor, and all our partners, we in GPDP extend our gratitude.
I want to thank the GPDP team—proof that when it comes to efficiency, quality trumps quantity. This small staff of eight members adapted to any task presented to them and displayed unwavering commitment in delivering each of these undertakings.
I thank the UP Statistical Center Research Foundation, Inc. (UPSCRFI) for giving us the opportunity to serve our country by contributing to ensure our access to a cleaner and more dependable source of energy – LNG.
Ramon L. Clarete Project Director
7 Message from the Secretary of Energy
The Department of Energy (DOE) remains staunchly at the forefront of ensuring energy security, access, equity, and sustainability throughout the entire archipelago.
For the past 19 years, the Malampaya gas field has been supplying a huge chunk of the Luzon grid’s power requirements. As we anticipate its impending depletion by around 2022, the DOE has been eyeing the importation of natural gas as a way to help stabilize national energy supply levels.
To do this successfully, however, the DOE needs to strengthen its capacity to implement Department Circular 2017-11-0012, prescribing the Rules and Regulations Governing the Philippine Downstream Natural Gas Industry. In this regard, we tapped the technical expertise of the Gas Policy Development Project (GPDP).
Since the GPDP’s launch in 2018, it has been an active partner of the DOE in implementing the country’s natural gas regulations. The Project has supported the Department through the provision of technical advice, capacity-building programs, research endeavors, and policy recommendations throughout its 16-month run. Among the GPDP’s invaluable contributions are the establishment of a review mechanism for liquefied natural gas applications, the conduct of training programs, and the provision of technical data that helped the DOE formulate relevant policies for industrial users of natural gas as well as ensuring the safe operation of the existing and emerging natural gas facilities.
It was our great pleasure at the DOE to have closely worked with such a competent team as the GPDP, and we appreciate all the assistance the Project has provided.
Likewise, we also thank the United States Department of State for all of its supervisory and financial support to the GPDP. We are highly hopeful that this partnership will be sustained, and made even stronger through future collaborations.
Let us not view the conclusion of this Project as the end of all our undertakings. Rather, let it mark the beginning of a new chapter, wherein we are all better equipped to face rising energy challenges in our quest to fully enrich the natural gas industry of the Philippines.
Congratulations to all!
Mabuhay!
ALFONSO G. CUSI Secretary
8 EXECUTIVE SUMMARY
The Gas Policy Development Project (GPDP) was launched in December 2018 to provide technical assistance to the Philippine Department of Energy (DOE) in implementing the Philippine Downstream Natural Gas Regulation (PDNGR) Department Circular (DC) 2017-11-0012. During its 16-month implementation, the Project carried out four sets of activities. One, it helped build up the capacity of the DOE and other government agencies in regulating the impending importation of LNG into the country and other potential related businesses through LNG-related training events, study tours, and workshops. Two, it assisted the
DOE Secretary Alfonso Cusi DOE and the Health, Safety, Security and Environment and UPSCRFI Director Dr. (HSSE) regulators of other agencies of the government put Gervacio Selda, Jr. signing the MOA for GPDP up a governance structure for evaluating applications for permits to set up and operate LNG projects. It provided the regulators the international standards and best practices in regulating LNG projects. Three, it helped the DOE conduct a potential market profile for LNG, particularly in select economic zones of PEZA. Fourth, it extended support to the Congress in policy formulation and analysis for the energy sector.
PH government officials, representatives from US government, and management committee of GPDP and UPSCRFI
9 As part of the technical aspect of the HSSE Inspection and Monitoring team members participate in discussion and activities during the GPDP workshops Project, the GPDP assisted the DOE in organizing the Special Evaluation Committee (SEC), which is responsible for the review of permit applications, and provided financial and technical recommendations in the review of applications. The GPDP likewise spearheaded four (4) workshops with the Philippine Interagency Health, Safety, Security, and Environment Inspection and Monitoring Team (PIA HSSE IMT) to clarify the permitting and licensing process of LNG facilities and to map out the process and sequence of permits. As a result of the workshop discussions, the GPDP was able to produce two reference documents: 1) Philippine Downstream Natural Gas Industry: LNG Investors’ Guide, to help investors navigate the business permitting processes in setting up facilities, and 2) GPDP’s Financial and Technical Recommendations for the Review of LNG Project Applications deemed important for evaluators in assessing technical and financial soundness of LNG project applications.
The GPDP also organized four (4) training events to strengthen the competence of and collaboration among interagency regulators and evaluators, particularly on the review of LNG project application, inspection, and enforcement. Site visit participants at the EWC LNG terminal at Pagbilao, Quezon
As part of the policy exchanges, the Project also organized meetings among executives and technical staff with counterpart agencies such as the Singapore’s Energy Market Authority (EMA) and Indonesia’s Directorate General of Oil and Gas, Ministry of Energy and Mineral Resources to learn about their natural gas policies and implementation. Site visits to LNG terminals both local and international were arranged and supported by
10 FGD sessions with the manufacturing company locators in SEZs
the Project to provide participants further information Site visit participants at the EWC LNG terminal at on specific technical and commercial operations of LNG Pagbilao, Quezon import terminals.
The Project also completed a research study that determines the viability of LNG use among company locators within manufacturing and agro-industrial Special Economic Zones (SEZs). Through several focus group discussions and an online survey, the Project was able to gather evidence and thus identify specific characteristics of companies with the greatest likelihood of switching to natural gas. The findings of the study are detailed in two research outputs: 1) Technical Report on Primary Survey on Market Profiling and 2) Research Study on Market Profiling with Emphasis on the Use of Liquefied Natural Gas (LNG) to Power Economic Zones.
Apart from assisting the DOE in implementing the PDNGR, the Project continually provided technical assistance and policy advice to the Congress on energy-related bills including the Downstream Natural Gas Industry Act and the bill on the establishment of the Philippine Energy Research and Policy Institute (Senate Bill 172 and House Bills 1193 and 1266). Representatives of GPDP participated as resource persons in various Technical Working Group (TWG) meetings called upon by the Committees on Energy of both Houses. Separate meetings with Senator Sherwin Gatchalian, Chairman of the Senate Committee on Energy, were also organized to discuss in-depth policy recommendations on the natural gas bill.
Overall, the GPDP had a successful and efficient run, accomplishing the objectives it has set to do. All of the Project’s outputs are envisioned to contribute to the development of the Philippine LNG sector and provide ready reference to energy stakeholders even beyond the Project. Site visit participants at Perta Arun Gas Terminal, Indonesia
11 HIGHLIGHTS OF ACCOMPLISHMENTS
The GPDP responded to the needs of the DOE and other partner agencies in improving the regulatory and policy space of the LNG sector. In collaboration with its partners and other energy stakeholders here and abroad, the GPDP successfully completed several activities related to technical assistance in the review of applications, capacity development, research, and policy support. Details of these activities are provided in this section.
A. TECHNICAL ASSISTANCE TO THE IMPLEMENTATION OF THE PHILIPPINE DOWNSTREAM NATURAL GAS First Special Evaluation Committee Meeting on 07 December 2018 at UP BGC, Taguig City REGULATION (PDNGR) 4th Workshop of the PIA HSSE IMT on 16 December 2019, UPSS, Quezon City. The GPDP had undertaken several activities and produced outputs critical to the implementation of the Philippine Downstream Natural Gas Regulation (PDNGR). It facilitated the creation of the Special Evaluation Committee that provided needed support in the review of LNG project permit applications; determined the permitting and licensing process and requirements with the help of the PIA HSSE IMT; and came out with a comprehensive Investors’ Guide and Evaluators’ Guide as a ready reference for energy stakeholders with particular interest in the LNG sector.
1. Organization of the Special Evaluation Committee (SEC)
The GPDP assisted the DOE in organizing the Special Evaluation Committee (SEC)—a team of experts, mostly from the academe, which will help the DOE-Centralized Review and Evaluation Committee (DOE-CREC) attain informed action on private sector applications for business permits in the downstream natural gas sector. The SEC covers both the technical and financial/economic aspects of the evaluation process. Upon its creation, it has immediately worked on the following tasks:
• Setting up of the mechanism for review of permit applications including assessment criteria and The SEC members were determined through a series of evaluation forms consultations with representatives from various colleges • Development and delivery of training modules specific in the University of the Philippines Diliman. To date, it is to the specialization of the SEC member composed of eight (8) faculty members from the Colleges • Development of the guidebook for applications of Engineering, Business Administration, and Economics. • Review of permit applications A retired management professor from the University of Oregon was also included in the pool of experts.
12 HSSE Workshops discussing processes and requirements for setting up LNG terminals.
2. Verification of Permit, Licenses, and Requirements
In line with the objective to encourage LNG investments in the country, the GPDP staff interviewed key agencies involved in the process of granting business permits and clearances for setting up an LNG regasification terminal. Processes and requirements from the regulators were identified during the four (4) workshops with the PIA HSSE IMT (see Section B3 for details). The regulators were consulted regarding the permits, inspection procedures, and requirements that their respective agencies necessitate. The process flow and checklist of requirements developed based on the workshops form part of the Investors’ Guide and Evaluators’ Guide.
3. Investors’ Guide and Evaluators’ Guide
The GPDP produced two reference documents: 1) Philippine Downstream Natural Gas Industry: LNG Investors’ Guide and 2) GPDP’s Financial and Technical Recommendations for the Review of LNG Project
Applications. Cover of GPDP’s reference documents: LNG Investors’ Guide and GPDP’s Financial and Technical Recommendations for the Review of LNG Project Applications
13 The Investors’ Guide includes Table 1 shows the activities completed from November 2018 to December 2019. global and national LNG outlook, trends, and policies; LNG Table 1. GPDP Activities (November 2018 - December 2019) investment opportunities in the ACTIVITY DATE/VENUE country; permitting and application TRAININGS process and requirements; and the Training on Basic Liquefied 25-26 March 2019, Bayleaf Hotel, financial, commercial, economic, Natural Gas Cavite and technical aspects of LNG— 28–30 May 2019, Taal Vista Hotel, all of which can be useful for Tagaytay City potential investors. Meanwhile, Training on the Financial, Legal, and Economic Aspects of LNG Projects GPDP’s Financial and Technical 18 July 2019, UP School of Recommendations contain legal Statistics, Diliman, Quezon City and technical parameters for Technical Training on LNG HSSE 5–6 September 2019, F1 Hotel, the review of applications and Management Bonifacio Global City, Taguig City corresponding assessment forms Training on Technical and HSSE 11–13 November 2019, UP School of that will aid the DOE and the SEC Document Requirements for Notice Statistics, Diliman, Quezon City in the conduct of their review. to Proceed Permits of LNG Project Proposals Both guides are envisioned to WORKSHOPS 07 December 2018, Shangri-la at provide DOE and LNG investors GPDP Launch and Inception the Fort Hotel, Bonifacio Global with information that will promote Workshop City, Taguig City the development of a dynamic, competitive, and thriving LNG 28 June 2019, Department of Energy sector in the country. Philippine Interagency Health, 19 July 2019, UP School of B. CAPACITY DEVELOPMENT Safety, Security, and Environment Statistics, Diliman, Quezon City Inspection and Monitoring Team The GPDP focused its efforts on Workshops 31 July 2019, Department of Energy organizing and conducting various 16 December 2019, UP School of capacity building activities for Statistics, Diliman, Quezon City key regulators of the natural gas SITE VISITS industry. These activities were carried out through different Site Visit – Energy World 14–15 March 201, Pagbilao, Quezon Corporation LNG Terminal learning platforms to enhance participants’ comprehension and Policy Exchange and Site Visit: 05–09 August, 2019 (Batch 1), - Energy Market Authority (EMA) Singapore and Indonesia appreciation of the LNG industry Singapore and build competence among the - Directorate General of Oil & Gas, 20–23 August 2019 (Batch 2), regulators and evaluators of LNG Indonesia Indonesia projects. To this end, the GPDP - Pertamina Subsidiaries, Indonesia accomplished four trainings, four FORUM AND PANEL SESSION workshops, two site visits, one Panel session at the 56th Philippine 8 November 2018, Novotel Hotel, panel session on the development Economic Society (PES) Annual Quezon City of LNG industry in the country, and Meeting and Conference co-organized one regional forum 10–12 December 2019, Taal Vista Asia EDGE Regional LNG Forum on LNG. The GPDP also engaged Hotel Tagaytay City in other knowledge sharing PARTICIPATION IN OTHER RELATED EVENTS and learning opportunities by Participation in the JOGMEC- 28–29 August 2019, Seda Hotel, participating in training and other organized training Bonifacio Global City, Taguig City learning sessions.
14 1. GPDP Launch and Inception Workshop c) Special Evaluation Committee (SEC); and d) DOE Natural Gas Management Division and other The GPDP Launch and Inception Workshop held on 7 relevant units of the DOE December 2018 at the Shangri-La Bonifacio Global City gathered over 100 stakeholders from the government, These teams, through the issuance of PDNGR, have the private sector, and the academe. At the launch, a the mandate to review, inspect, monitor, and regulate Memorandum of Agreement (MOA) was signed between existing and future LNG projects. The training activities the DOE and the UPSCRFI to assist the government in were therefore essential in familiarizing them with the the implementation of the PDNGR. Topics presented technical, financial, economic, and legal aspects of during the workshop include LNG market development LNG projects. The Project also recognized the roles of in the Philippines; an overview of the country’s natural policymakers and other agencies in the development gas industry; and trends and fundamentals in the global of the LNG industry and, as such, the Senate Committee LNG market. on Energy, House Committee on Energy, Energy Regulatory Commission (ERC), Philippine Electricity Market Corporation (PEMC), and the Philippine Competition Commission (PCC) were also invited to the trainings and workshops.
The training activities are briefly discussed below.
a) Training on Basic LNG, 25–26 March 2019, Bayleaf Hotel, Cavite. The training provided an overview and basic understanding of the PDNGR, global outlook on the LNG industry, introduction to the LNG value chain, and essential HSSE standards and practices to consider in onshore LNG terminals. Representatives from private sector companies such as Cheniere Energy, Inc., Japan’s Energy for New Era, Golar LNG, and Osaka Gas generously shared their time and expertise, serving as resource persons during the training. Training program and materials (Annex A) can be accessed via this link: https://drive.google.com/drive/u/5/folders/1KqEJKSxD- FJXVGIYec4Ctm7xnyw7tb1n
Participants and speakers at the GPDP Launch and Inception Workshop on 07 December 2018 at the Shangri-La The Fort, Taguig City.
2. Training Activities
GPDP successfully completed four (4) trainings specifically designed to orient the following teams:
a) DOE Centralized Review and Evaluation Committee (DOE CREC); b) Philippine Interagency Health, Safety, Security, Participants of the Training on Basic LNG on 25–26 March 2019 at Bayleaf Hotel, Cavite Environment Inspection and Monitoring Team (PIA HSSE IMT);
15 can be accessed via this link: https://drive.google.com/ drive/u/5/folders/12oaiebddebyig4HwYtwu1tmQwlFekvV9
c) Technical Training on LNG HSSE Management, 5–6 September 2019, F1 Hotel, Bonifacio Global City, Taguig City. The training informed the participants on the federal safety standards, industry standards, performance-based regulation, best practices for managing operator risk, and inspection and enforcement for LNG. LNG experts from the U.S. Department of Transportation-Pipeline and Hazardous Materials Safety Administration (PHMSA) shared their experiences in the application of codes and regulations in assessing LNG project proposals as well as inspection and monitoring of LNG facilities. Training program and materials (Annex C) can be accessed via this link: https://drive.google.com/drive/u/5/ folders/1NkoYqHOrL2YW3diwOWacxbOpbLIOyhWY
Participants of the Financial, Economic, and Legal Aspects of LNG Projects training on 28-30 May 2019 at Taal Vista Hotel, Tagaytay City.
b) Financial, Economic, and Legal Aspects of LNG Projects, 28–30 May 2019, Taal Vista Hotel, Tagaytay City. The training delved into the financial, economic, and legal aspects of LNG projects with resource persons from the UP Virata School of Business, Commercial Law Development Program-U.S. Department of Commerce, and Latham and Watkins. The training covered topics on project structures and contracting arrangements, costing and pricing mechanisms, project evaluation, budget analysis, and financial modelling. The GPDP organized a follow-up training on 18 July 2019 at the UP School of Statistics to ensure that the participants would have a better appreciation of the topics. The follow-up session was devoted for group exercises on the applications of the financial concepts on reviewing LNG project proposals. Training program and materials (Annex B) Participants of the Technical Training on LNG HSSE Management on 5-6 September 2019 at F1 Hotel, Bonifacio Global City, Taguig City.
16 3. Workshops for the Philippine Inter Agency Health, Safety, Security and Environment Inspection and Monitoring Team (PIA HSSE IMT)
The GPDP organized four workshops for the PIA HSSE IMT to discuss and improve the mechanisms for review and application of permits as well as to encourage potential investors in LNG. The series of workshops were conducted from June to December 2019 at the DOE and the UP School of Statistics.
The workshops served as a platform to discuss the roles and responsibilities of the HSSE members in facilitating investments and in the subsequent conduct of monitoring and inspections of LNG facilities.
Topics include the permitting process, inspection and monitoring procedures, and the requirements of each agency on LNG project applications. Workshop outputs on the permitting process served as an input to the Philippine Downstream Natural Gas Investors’ and Evaluators’ Guide.
The workshops were participated in by representatives from the Batangas City Engineering Office, Batangas City Health Office, Department of Environment and Natural Resources - Environmental Management Bureau (DENR- Participants of the Training on the Technical and HSSE Document Requirements for Notice to Proceed Permits of Liquefied Natural Gas Project Proposals on 11 – 13 November 2019 at UP School EMB), Department of Interior and Local Government of Statistics. - Bureau of Fire Protection (DILG-BFP), Department of d) Training on the Technical and HSSE Document Finance - Bureau of Customs (DOF- BOC), Department of Requirements for Notice to Proceed Permits of Labor and Employment - Bureau of Working Conditions Liquefied Natural Gas Project Proposals, 11-13 (DOLE-BWC), Department of Transportation - Maritime November 2019, UP School of Statistics. The training Industry Authority (DOTr- MARINA), Department of aimed to familiarize evaluators with the document Transportation - Philippine Coast Guard (DOTr-PCG), requirements for the application of Notice to Proceed Department of Transportation - Philippines Port (NTP) Permits. The UP National Engineering Center (UP Authority (DOTr-PPA), and the Department of Energy - NEC) delivered six modules: Oil Industry Management Bureau (DOE-OIMB).
• Structural and Civil Engineering Document Requirements; • Process Engineering Document Requirements; • Mechanical Engineering Document Requirements; • Electrical Engineering Document Requirements; • Health, Safety and Security Management System Reports; and • Environmental Management System Reports.
Training program and materials (Annex D) can be accessed via this link: https://drive.google.com/drive/u/5/ Various HSSE Workshops to discuss and improve the mechanisms for review and application of permits as well as to encourage potential investors in LNG folders/1JhS-3rAom3B6aRioPGbqe6q5yZQHhlCl
17 4. Site Visits and Policy Exchange GPDP and DOE representatives met with the team of PT Perta Arun Gas in Indonesia (top photo) and Energy Market Authority in Singapore (bottom photo). The GPDP organized two site visits for the technical staff of DOE, PIA HSSE IMT, and SEC for an on- site learning session on technical and commercial operations of local and international LNG import terminals. These complement the training activities and provide an understanding on the actual operations of LNG facilities.
a) Local Site Visit
The first site visit was conducted at the Energy World Corporation’s (EWC) LNG terminal and Combined Cycle Gas Turbine (CCGT) power plant in Pagbilao, Quezon on 14–15 March 2019. The EWC provided a presentation on the Pagbilao LNG and regas terminal and its planned operation. A site tour was also done to show the various components of the LNG facilities that the EWC will maintain and operate upon completion. To date, only the Pagbilao LNG terminal is being constructed in the country and will possibly be the first one to be fully operational.
Participants of the site visit at the EWC LNG terminal b) International Site Visit at Pagbilao, Quezon Two batches of site visits (05–09 August 2019 [Batch 1] and 20–23 August 2019 [Batch 2]) to Singapore and Indonesia were organized for the DOE and GPDP officials and staff. The site visits aimed to improve the knowledge and skills of DOE through observation of fully operational LNG facilities and interaction with government counterparts abroad. Site visits and interactions were held with the following:
• Energy Market Authority (EMA) in Singapore • Directorate General of Oil and Gas, Ministry of Energy and Mineral Resources in Indonesia • Perta Arun Gas Terminal* • PT Nusantara* • PGN Lampung Onshore Receiving Facility (ORF)* • PT Badak LNG* • PT Perusahaan Gas Negara (Persero)*
*These facilities and companies are all subsidiaries of PT Pertamina, a 100% Indonesian state-owned oil and gas corporation based in Jakarta, Indonesia.
Presentations and program of the site visits (Annex E) can be accessed via this link: https://drive.google.com/ *These facilities and companies are all subsidiaries of PT Pertamina, a 100% Indonesian state-owned oil and gas open?id=1jWC1uWwVFxayEYt872HNGcgEdFvQiQtY corporation based in Jakarta, Indonesia.
18 5. Co-organization of Relevant Capacity Development Activities
The GPDP co-organized and participated in two knowledge-sharing activities to engage regulators, policy makers, and the private sector on LNG:
a) 56th Philippine Economic Society (PES) Annual Meeting and Conference, 08 November 2018, Novotel Hotel, Quezon City. The session focused on the theme, “Avoiding Power Shortage
After Malampaya,” and discussed the Philippines’ Speakers and participants have a dynamic discussion during the Asia EDGE Regional LNG Forum on 10 – 12 December at the Taal Vista Hotel, Tagaytay City readiness in taking on the challenge of addressing potential energy shortage and the prospects of further developing the country’s LNG industry.
GPDP organized a session at the PES Conference with the theme “Avoiding Power Shortage After Malampaya”. Panel speakers include representatives from the government, academe, and the private sector.
b) Asia EDGE Regional LNG Forum on 10–12 December 2019 at the Taal Vista Hotel, Tagaytay City. The three-day workshop was co-organized with the U.S. Department of Commerce-Commercial Law Development Program (CLDP) and participated in by 53 delegates from Vietnam, Sri Lanka, Bangladesh, Pakistan, and the Philippines. Regulatory practices and industry experiences on operations of Floating Storage Regasification Units (FSRUs); offshore and near-shore LNG facility permits; maritime traffic from LNG cargoes; third party access; and other regulatory practices were among the topics discussed by experts from the U.S. Maritime Administration, U.S. Coast Guard, and the U.S. Department of Commerce. The U.S. Embassy in the Philippines, Commercial Services, Cheniere, and representatives from the private sector also joined the second day for the private sector panel. The panel reaffirmed the need for a clear guideline for investors in terms of the business processes for LNG investment in the Philippines, including permits and licenses necessary to set up and operate LNG facilities.
19 6. Participation in the JOGMEC-Organized Training C. RESEARCH
The GPDP and DOE-OIMB participated in a two-day The GPDP conducted a research study based on training program on LNG at the Seda Bonifacio Global the request of the DOE to improve the general City Hotel on 28-29 August 2019 hosted by the Japan understanding of the LNG industry. The study focused Oil, Gas, and Metals National Corporation (JOGMEC) on the manufacturing and agro-industrial special in partnership with Tokyo Gas. The speakers shared economic zones (SEZs), recognizing how their distinct best practices and strategies to efficiently manage facilities and technologies contribute to their high risks and operate and maintain LNG import facilities. energy demand and intensity. The research analyzed Topics also included Japan’s LNG regulatory system, the willingness of the company locators within these including government criteria and technical standards SEZs to shift from their current energy source to in regulating LNG businesses. Recent developments LNG. Two research outputs resulted from the study: (1) in the LNG market and various types of LNG contracts Technical Report on Primary Survey on Market Profiling were also presented to give participants a better and (2) Research Study on Market Profiling with understanding of the agreements entered into by LNG Emphasis on the Use of Liquefied Natural Gas (LNG) to businesses. Power Economic Zones.
Research activities conducted during the Project’s implementation are highlighted in Table 2.
Table 2. Research Activities
ACTIVITY DATE/VENUE Presentation of Research Concept to DOE and PEZA 18 March 2019, PEZA Office Focus Group Discussions (FGDs) 10-11 June 2019, Batangas and Laguna Presentation of FGD Results to DOE and PEZA 16 July 2019, PEZA Office Survey Dissemination 08 August-07 September 2019 Presentation of Survey Results and Research Study to 04 December 2019, DOE and PEZA Department of Energy
1. Technical Report On Primary Survey On Market 2. Research Study Profiling The research study identifies the likelihood of switching Through the assistance of the Philippine Economic Zone to natural gas among company locators. The study finds Authority (PEZA), the Project was able to conduct focus that company locators that use intensive heat in their group discussions (FGDs) and an online survey among production processes have the greatest likelihood of SEZs under PEZA. Five (5) FGDs with 23 select ecozone switching to natural gas when it becomes available. On locators were conducted to pretest the survey instrument, the other hand, company locators that are heavily reliant gather feedback, and refine the questionnaire. The insights on electric utilities for power are the least likely to switch gathered from the FGDs were used to improve the accuracy to natural gas. The presence of heating in production and comprehensiveness of the survey instrument. processes (e.g., boiler operation, smelting, etc.); perceived cost-competitiveness of natural gas relative to other fuels; An online survey profiled 115 locator companies that are and extent of knowledge on LNG highly determines the mostly situated in economic zones in Batangas and Laguna. likelihood of switching to natural gas. For the complete The profile includes company information including findings of the study (Annex F), visit this link: production fuels, electricity use and sources, and aptitude on alternative fuels such as natural gas.
20 The results of the study provide an insight on how natural D. POLICY DEVELOPMENT AND ADVISORY gas awareness and information dissemination strategies can be improved. Information, education, and communication The GPDP assumed a proactive role in helping (IEC) campaigns can be more focused on areas where there strengthen the policy space of the energy sector. It is limited knowledge on natural gas. Campaigns can also extended policy advice and recommendations to the particularly target companies using intensive heat as they Congress on the Downstream Natural Gas Industry are the most likely users of natural gas as a complementary Act and the bill on the establishment of the Philippine fuel in production. Price competitiveness relative to other Energy Research and Policy Institute (Senate Bill 172 fuels such as diesel and liquefied petroleum gas (LPG) will and House Bills 1193 and 1266). Through its policy input, also be a key determinant on how the market will react to the GPDP hoped to contribute to the development of a LNG’s entry. transparent, competitive, and resilient LNG sector.
Activities related to policy advisory and development are enumerated in Table 3.
Table 3. Policy Development and Advisory Activities
1. Downstream Natural Gas Industry Act
The GPDP, with assistance from Atty. Mohamed Badissy of the Commercial Law Development Program (CLDP), provided technical inputs on the natural gas bill to the Senate Committee on Energy chaired by Senator Sherwin Gatchalian. To this end, meetings and discussions were organized with the DOE and the Senate and House Committees on Energy on the current version of the bill. Empirical evidence as well as lessons learned from the experiences of other countries were also shared to the Committee with the aim of refining the framework and components of the bill.
The Research Team conducting FGDs with manufacturing locator companies in SEZs in Batangas and Laguna
21 Meetings with the Senate Committee on Energy regarding the Natural Gas Bill
2. Philippine Energy Research and Policy 3. Input to Strengthening the Philippine Downstream Institute Bill Natural Gas Industry Regulation
The GPDP sent resource persons to the various GPDP’s technical experiences in the implementation of Technical Working Group meetings organized by the the Project are being documented and will be provided Committees on Energy of the Congress regarding as input to further strengthen the implementation of the the Philippine Energy Research and Policy Institute PDNGR. The GPDP also identified technical and financial (PERPI) bill. The GPDP team, being the same group considerations for the evaluation of LNG project involved in the implementation of the Energy Policy applications. These will be particularly useful to the DOE and Development Program (EPDP), was able to share as applications for LNG projects are submitted to the valuable lessons and experiences that can be used to Department. enhance the structure and substance of the bill. The said bill was refiled in the Senate as Senate Bill 172 and in the House of Representatives as House Bills 1193 and 1266 and is hoped to be passed by the end of the 18th Congress.
22 Prepared by: Renzi Frias Jennylene Layaoen J. Kathleen Magadia Belyn Rafael
Layout by: Mems Gamad
23 The Gas Policy Development Project (GPDP) is implemented by the U.P. Statistical Center Research Foundation Inc. (UPSCRFI). GPDP is funded through a cooperative agreement with the U.S. Department of State under the U.S. Asia EDGE (Enhancing Development and Growth through Energy) initiative.
The U.S. Department of State, Bureau of Energy Resources leads efforts to forge international energy policy, strengthen U.S. and global energy security, and respond to energy challenges from around the world that affect U.S. economic policy and energy security.
The Asia EDGE initiative is a U.S. whole-of-government effort to grow sustainable and secure energy markets throughout the Indo-Pacific. Asia EDGE seeks to strengthen energy security, increase energy diversification and trade, and expand energy access across the region.
The U.P. Statistical Center Research Foundation Inc. is a non-stock, non-profit corporation established in 1985 to initiate, sponsor, promote, assist or conduct programs and projects geared towards research in theoretical and applied statistics and other related fields of endeavor.
The Department of Energy is mandated by RA 7638 (Department of Energy Act of 1992) to prepare, integrate, coordinate, supervise and control all plans, programs, projects and activities of the Government related to energy exploration, development, utilization, distribution and conservation.
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