THE PHILIPPINE NATURAL GAS INDUSTRY

THE PHILIPPINE NATURAL GAS INDUSTRY Jesus T. Tamang Officer-in in-charge, Natural Gas Office Department of Energy

Presentation Outline Birth of the Industry Upstream Sector Downstream Sector Development and Growth Energy Sector Goals and Gas Policy Framework Expanded Use of Natural Gas Downstream Infrastructure Prospects and Opportunities Upstream Downstream

Birth of the Industry

Birth of the Industry Upstream Sector San Antonio Gas Field, 2.7 BCF Malampaya Gas Field, 3.7 TCF

Birth of the Industry Upstream Sector 30 km 504 km Gas dehydration Gas dewpointing Condensate stabilisation Export compres sion Ups tream Catenary Anchored Le g Mooring (CALM) buoy for tanker loading of condensate Sulphur Recovery H2S removal Metering Supply bas e Downs tream - 0 m Batangas Power Stations Alternative Fuel Manila - 43 m 3rd flo wline (2021) Condens ate storage Co ndensate export 24" Dry gas pipeline S an L o re n z o Santa R it a Tabangao Refinery Batangas Ilija n (N P C ) Subsea manifold 2 x 16 CRA wet gas - 820 m Malam p aya PLATFORM 9 9 Development wells wells 1 Contingency well Camago-Malampaya Deep-Water Project Draw. No.: P97-1541

Birth of the Industry Downstream Sector SAN LORENZO POWER PLANT First Gas Corp, 560 MW Operating October 2002 ONSHORE GAS PLANT SC 38 Consortium Operating Oct 2001 STA. RITA POWER PLANT First Gas Corp. 1,000 MW Operating Jan 2002 ILIJAN POWER PLANT KEILCO, 1200 MW Operating June 2002

Birth of the Industry Downstream Sector PNOC CNG-Refilling Station and 3-MW 3 Plant

Development and Growth

Development and Growth Energy Sector Goals Stable and secure energy supply Wider access to energy supply Fair and reasonable energy prices Clean and efficient energy fuels and infrastructures Enhanced consumer welfare and protection Technology transfer and manpower development Job creation from energy activities

Development and Growth Gas Policy Framework Policies Objectives Promote natural gas as an environment-friendly, secure, stable and economically efficient source of energy Promote competition by liberalizing entry into the industry and adopting procompetitive and fair trade measures Ensure compliance with Philippine environmental laws and regulations and international safety standards Competitive natural gas prices vis-à-vis other fuels Increased utilization of natural gas as fuel in power and nonpower sectors Increased share of natural gas in the energy mix Adoption of state-of-theart technology, development of experts and increased employment Enhanced economic benefits to consumers

Development and Growth Gas Policy Framework Developments Executive Order No. 66 designated DOE as lead agency for development of Philippine natural gas industry Interim Rules and Regulations Governing the Transmission, Distribution and Supply of Natural Gas promulgated August 27, 2002 to provide basic framework to guide investments and operations in downstream gas industry

Development and Growth Gas Policy Framework Developments Philippine Energy Plan provides framework for development of the Natural Gas Industry along with other energy sub-sectors Natural Gas Policy and Regulatory Framework embodies the policies, objectives, programs and strategies for developing the Natural Gas Industry

Development and Growth Gas Policy Framework Structure Downstream gas industry divided into transmission, distribution and supply Vertical integration/cross-ownership in different industry segments allowed Third Party Access to essential facilities mandatory but deferment may be allowed during initial years

Entry DOE to issue permits for construction, operation and maintenance of pipelines and related facilities and for supply of natural gas Congressional franchise for transmission and distribution systems required except for own-use facilities Pricing Development and Growth Gas Policy Framework Transmission, distribution and supply prices to be regulated in markets without effective competition Competition Cartels/collusion prohibited per se, other anti-competitive conduct as provided for in existing laws also prohibited

Development and Growth Expanded Use of Natural Gas

Development and Growth Primary Energy Mix Forecast, 2003-2012 2012 MMBFOE 450 13.47% 400 350 300 250 200 150 0% 6.24% 3.90% 8.71% 30.18% 39.75% 0.69% 7.90% 3.98% 7.53% 27.43% 40.09% 6.10% 3.06% 5.76% 23.82% 40.65% Others Ngas Hydro Geothermal NRE Oil Coal 100 50 11.21% 12.47% 7.12% 0 2003 2007 2012

Development and Growth Power Forecast (Generation) POWER GENERATION FORECAST Total Philippines, In TWh Base Case GDP Scenario 120 100 80 60 40 20-2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Oil-Based Coal Natural Gas Hydro Geothermal NRE Others

Development and Growth Power Forecast (Luzon Grid) SUPPLY-DEMAND PROFILE (Existing & Committed) In MW, Base Case GDP Scenario 18000 16000 14000 12000 10000 8000 6000 4000 2000 Exis ting Committed Additions Luzon Peak 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

San Lorenzo (560 MW) Sta. Rita (1000 MW) Ilijan (1200 MW) MW 8000 7000 6000 5000 4000 3000 2000 1000 0 Development and Growth Power Forecast (Capacity Additions) Base Load (600 MW) Base Load (900 MW) Mid Range (300 MW) Mid Range (300 MW) Malaya (600 MW) Sucat 2 (600 MW) Limay (620 MW) Sucat 1 (300 MW) 2002-2007 2008 2009 2010 2011 2012

Development and Growth Gas Demand Forecast Gas demand of existing facilities estimated to increase from 103 BCF (2003) to 198 BCF (2012) assuming 5.4% average annual GDP growth rate (High Growth) Additional gas demand expected Power - Gas-fired power plants could fill new capacity requirements by 2008 including the conversion of 500 MW Sucat, 300 MW Malaya and 620 MW Limay plants Transport - up to 1300 public transport vehicles running on CNG by 2003 Industrial - over 20 industrial parks located along Batangas-Metro Manila corridor are potential industrial gas markets Residential - natural gas can potentially replace LPG as cooking fuel

Development and Growth LNG Importation Options Additional gas demand to increase from 23 BCF in 2008 to 194 BCF in 2012 to meet demand for power and non-power uses Importation Options LNG from Brunei, Indonesia or Malaysia Piped gas thru possible pipeline interconnection with the Trans-ASEAN Gas Pipeline (TAGP)

Development and Growth LNG Importation Options The Philippines sits in the middle of Asian LNG Trade

Development and Growth Upstream Profile Resource Class Total Oil Gas Condensate Million Million Billion cf Million bbl bbl o. e. bbl (Mean) (Mean) (Mean) (Mean) Total Resources 8,895 3,629 28,531 165 Discovered Resources 973 168 3,841 109 Reserves 836 43 3,772 109 Potential Recoverable Resources 137 125 68 0 Undiscovered Resources 7,922 3,461 24,690 56 Hypothetical (Mapped) Resources 2,848 1,341 8,112 55 Speculative (Unmapped) Resource 5,074 2,120 16,578 0 Source: DOE, Report of DOE-NORAD Phil. Petroleum Resources Assessment Project As of January 2002

Development and Growth Upstream Profile Recent studies show hydrocarbon resource potential larger than previously projected Philippine Sedimentary Basins Petroleum resources found in 16 sedimentary basins representing an area of over 700,000 sq. km.

In Megawatts 8000 Development and Growth Downstream Infrastructure 7000 6000 5000 4000 3000 2000 1000 Capacity Additions Ilijan (1200 MW) Sta. Rita (1000 MW) San Lorenzo (560 MW) Ilijan Pipeline Sta. Rita-San Lorenzo Pipelines Sucat 1(300 MW) Limay (620 MW) Malaya (600 MW) MidRange (300 MW) Sucat 2 (600 MW) BatMan 1 (Sucat) LNG Terminal/Batcave (Limay) Base Load (600 MW) Base Load (900 MW) MidRange (300 MW) BatMan 1 Pipeline Pipeline Pipeline (MidRange) and Sucat-Malaya (Malaya) Transport Infrastructure 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Development and Growth Downstream Infrastructure Limay 620 MW (2008) Conversion Sucat 300 MW (2008) 600 MW (2009) Additional Capacity Requirement in Luzon BATAAN PENINSULA MANILA QUEZON CITY Malaya 600 MW (2010) Conversion 300 MW (2010) 1,200 MW (2011) 600 MW (2012) Santa Rita 1000 MW (2002) San Lorenzo 560 MW (2002) TAAL LAKE BATANGAS Ilijan 1200 MW (2002)

Development and Growth Downstream Infrastructure

Development and Growth Downstream Infrastructure Proposed Trans-ASEAN Gas Pipeline System, TAGP MYANMAR LAOS CHINA TAIWAN Gas Reserves Tcf Existing or u/c Gas Pipeline Proposed ASEAN Gas Grid THAILAND Bangkok CAMBODIA VIETNAM South China Sea Luzon 3-4 PHILIPPINES 0 250 Km 500 Pacific Ocean Minas / Duri oil Fields Natuna Sea 46 MALAYSIA Singapore Batam SABAH BRUNEI 6-8 10 28 SARAWAK Samarinda Asamera Corridor Blocks fields INDONESIA Surabaya Indian Ocean Jakarta

Prospects and Opportunities

Investment Opportunities Upstream 25 TCF of natural gas in undiscovered resources in 16 petroleum basins Additional Gas Requirement 23 BCF in 2008 to 194 BCF in 2012

Investment Opportunities Downstream 80-100-km Batangas - Manila Pipeline (Batman 1) 130-150-km Bataan - Manila Pipeline (Batman 2) 40-km Bataan-Cavite undersea pipeline (BatCave) Spur lines such as the 35-km Sucat Malaya pipeline LNG Terminals in Bataan and Batangas Conversion of thermal power plants to natural gas

Investment Opportunities Downstream Natural gas demand of 20 Industrial parks along the pipeline route Potential natural gas demand of large commercial buildings and complexes in Metro Manila area. Refilling Stations in Metro Manila for Natural Gas Vehicles CNG Vehicles

Investment Opportunities Year Plant Capacity Gas Transmission LNG Refilling DEMAND (MW) Vehicle (1) Pipeline Terminal Stations (1) (in BCF) 2002 Ilijan (1200) (3) OGP (2) - Ilijan 0.07 Sta Rita (1000) (3) OGP - First Gas San Lorenzo(560) (3) OGP - First Gas 2003 117 3 103.24 2004 155 3 222.47 2005 195 4 348.47 2006 235 4 485.47 2007 390 Batman 1 4 630.47 2008 Limay (620) 545 Batman 2/BatCave Bataan 5 822.47 Sucat 1 (300) Batman 1 2009 Sucat 2 (600) 700 Batman 1 6 1,035.47 2010 Mid Range (300) 855 Batman 2 Batangas 7 1,073.47 Malaya (600) Sucat/Malaya 2011 Base Load (900) 1105 Batman 2 8 1,390.47 Mid Range (300) Batman 2 2012 Base Load (600) 1355 Batman 2 9 1,754.47 Note: (1) On cumulative b asis (2) On-shore Gas Processing Plant (3) Existing

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