How The Geopolitics Incurred in the Philippines’ Energy Security

The Philippines’ energy landscape is susceptible to supply disruption. In 2020, 47% of the Philippines’ total primary energy supply came from imported oil and coal, while the latter contributed 56% of total power generation. The Philippines’ vulnerability got exposed earlier this year when Indonesia, the single largest coal exporter for the country, decided to ban its coal export due to domestic shortages. With Indonesia expected to increase its domestic coal consumption until 2030, it would be risky for the Philippines to maintain the status quo.

The Philippines has planned to diversify its energy sources to reduce its import dependency. The National Energy Plan 2020-2040 outlined where the country is heading, suggesting that it will undergo an incremental growth in the power sector. According to the reference scenario projected within the plan, total power generation will reach 364.4 terawatt-hours in 2040, more than triple the country generated in 2020. To meet this projection, the Philippines intends to increase the share of renewables and natural gas to 75% of total power generation by 2040. Nevertheless, diversifying energy sources is not as easy as turning palms. Apart from technology and financial challenges, the Philippines is now facing geopolitical predicaments to secure its energy supply.

Securing Natural Gas Supply: Confronting China or Competing with Europe?

Natural gas seems to be the priority in the Philippines’ national energy agenda. The reference scenario suggested that natural gas will generate 146.86 terawatt-hours of electricity by 2040, which amounts to 40% of total power generation. The Malanpaya field, currently the primary source of the Philippines’ gas, is expected to dry out in 2027. With no reserves left onshore, the Philippines had to look to the water of the South China Sea to secure its natural gas supply.

The problem with exploring the South China Sea is that any potential gas field is located nearby, if not within, China’s self-proclaimed nine-dashed line. Due to security risks, many energy companies have refrained from bidding on the offshore blocks that the government had offered. Manila then signed an agreement in 2018 with Beijing to cooperate on oil & gas development, hoping that a mutually beneficial deal would lessen the ongoing territorial disputes. The deal turned out not to be as Manila would have hoped as Beijing only wanted to cooperate on their terms. As of now, there is no sign that China would lessen its coercive behaviour in the disputed territory, making it difficult to expect any major progress in finding new gas fields.

Another option that the Philippines has to secure gas supply is to import ship-borne liquefied natural gas (LNG) from the likes of Qatar, Australia, or the United States. But this option entails another geopolitical competition. Given the ongoing war in Ukraine, European countries are trying to reduce their dependency on Russian gas by acquiring LNG contracts worldwide. It is expected that many LNG producers will turn their export to a mature, high-price European market rather than supplying the underdeveloped Philippines market. 

Shall the Philippines wants to proceed with its reference scenario, it will have to explore new gas fields in the South China Sea or acquire LNG import contracts. Either way, the prospect of securing natural gas supply appears to be costly. The Philippines’ choice now lies between addressing territorial disputes with an aggressive regional hegemon or scrambling import contracts with developed economies. 

Pursuing Nuclear Power: Domestic Uncertainty and the US-Russia Rivalry

Nuclear is another energy source the Philippines can tap into. Last February, President Duterte issued a national position on nuclear power -known as Executive Order (EO) 164– outlining the country’s ambition to pursue a nuclear energy programme. A national position is an essential prerequisite for a newcomer to reach the first milestone of building nuclear power infrastructure, as required by the International Atomic Energy Agency (IAEA). In the current nuclear power programme, the Philippines aims to revive the mothballed Bataan Nuclear Power Plant (BNPP) and explore options to build Small and Modular Reactors (SMRs). BNPP is expected to get operated commercially as soon as 2027.

The announcement of EO 164 has received mixed reactions. On the one hand, the country can utilize nuclear power to diversify its power supply with a reliable and low-carbon baseload. On the other hand, there have been so many doubts over the continuation of the nuclear energy programme that would require years to complete. It is worth noting that the mothballed BNPP was closed in 1984 due to political decisions despite being deemed ready to enter operation.

Domestically, the Philippines’ nuclear energy programme is not fully supported. A study from the University of the Philippines suggested that the revival of BNPP would result in a more expensive than other generation sources. Exorbitant electricity prices have been a political issue in the country, with the Philippines having the highest electricity rate in Southeast Asia. Several Non-Governmental Organizations (NGOs) and think tanks have also opposed the decision to go nuclear, taking into account safety issues and nuclear disposal problems. Lastly, there is no guarantee whether or not the next administration will be willing to preserve Duterte’s decision. With Duterte’s presidency coming to an end, the nuclear energy programme will hinge on the decision of the next administration. The country is set to have the presidential election on 9 May 2022.

Domestic uncertainty is just half of the Philippines’ problem in pursuing nuclear power. Two weeks after the issuance of EO 164, Energy Undersecretary Gerrardo Guiza Jr signed an agreement with the US Undersecretary of State for Arms Control and International Security Bonnie Jenkins on Strategic Civil Nuclear Cooperation. This agreement entails cooperation to improve energy security and other non-military use of nuclear power in the Philippines. 

It was no coincidence that the agreement was signed in the aforementioned settings. In 2018, the Philippines signed a deal with Russia’s Rosatom to explore ten business possibilities, including the construction of Small and Modular Reactors (SMR) and the rehabilitation of BNPP, all estimated to be worth $12.57 million. Since then, the Philippines’ Department of Energy has been close with Russia for knowledge exchange regarding nuclear technologies while the government prepares legal infrastructure to proceed with the nuclear power programme. Given the ongoing situation in Ukraine, the US attempt to assert its non-proliferation regime is unavoidable.

A few weeks following the agreement, the Russian ambassador to the Philippines stated that Rosatom would continue its cooperation with the Philippines, stressing that “keeping neutrality should be a very good way to converse our good relations”. This situation has put the Philippines’ nuclear energy programme in jeopardy, as the great power rivalry now comes into the equation. Above all, these circumstances will complicate the Philippines’ attempt to secure its energy supply. 

Way Forward

The road to securing energy supply in the Philippines is challenging. Its energy landscape is too reliant on imported energy sources, while its outlook faces a geopolitical predicament. But this does not mean that there is no way out. The Philippines could prioritize energy sources with sufficient potential and minimum geopolitical risks, the characteristic that can only be found in renewable sources. With the nature of solar and wind potential that can be found across the archipelago, large-scale deployment of renewables should be less costly than the geopolitical cost that the Philippines must bear shall it sticks to natural gas and nuclear energy development. If anything, this situation should have reminded the Philippines’ stakeholders to consider the geopolitical dimension when arranging energy policies. 

[Photo by Elmer B. Domingo, via Wikimedia Commons]

The views and opinions expressed in this article are those of the author.

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