From oil prices to asset sales, headline-grabbing issues dominated the energy sector in 2008.
In the early part of the year, oil companies started to gradually reflect in their pump prices the impact of soaring international crude prices.
But toward the last quarter of the year, oil prices started to soften.
Consumers who had been clamoring for gradual price adjustments then demanded a hefty one-time price rollback.
Oil prices started their climb on a relatively higher base, even reaching the P60 per liter level in the early part of the year towards the mid-year which caused a lot of uncertainties and concerns among stakeholders.
Domestic gas prices hovered from P44.45 per liter in January 2008 to P60.46 per liter in July 2008 but later went back to an average of P34.96 per liter level in December.
Liquefied petroleum gas (LPG) or cooking gas went up to as high as P650 to P700 per 11-kilogram cylinder towards the middle of the year but had slowly gone down to P464 per 11-kg tank in December.
With these inconsistencies, major oil firms are looking to start the year right. Pilipinas Shell Petroleum Corp. and Petron Corp. both have sounded off the idea of carrying out weekly oil price adjustments for greater transparency.
Transport groups, through a series of stakeholders’ meetings with the Department of Enegy (DOE), believe that Shell and Petron’s idea of carrying out oil price adjustments on a weekly basis may give “a very good reason” for other government agencies to come up with an appropriate policy on fare hike applications.By adjusting oil prices weekly, transport groups believe they could also get corresponding fare adjustments.
“These could be an eye opener to regulators that they should be able to come up with a concrete policy on how to resolve issues related to fare hike adjustments,” says Efren de Luna, president of the Alliance of Concerned Transport Organization (ACTO).
Hounded by these issues, Energy Secretary Angelo Reyes says the volatility of oil prices made 2008 a very challenging year.
“Because of the volatility of oil prices, there were domestic fluctuations that needed to be balanced. There are conflicting ideas and various concerns from stakeholders,” he said.
Reyes said he is proud the DOE managed to provide at least a venue to discuss these varying opinions and points of views.
“A series of meetings were held for stakeholders to air their grievances and exchange views. Through we admit we can not resolve all their concerns, at least they were given an opportunity to present their views,” the energy chief said.
Keeping politics out
Independent Philippine Petroleum Companies Association (IPPCA) chairman Fernando Martinez, for his part, says the biggest challenge is how to keep politics out of a deregulated industry as originally envisioned.
“As long as some high-ranking government officials and some politicians will keep on intervening and making unsubstantiated projections, that will put the industry in a bad light,” Martinez notes.
“Our biggest challenge is how to manage our supplies and how to keep our businesses running amid these interventions.”
“We are supposed to be a deregulated industry. Ironically, regulated industries such as telecoms and utilities are earning more,” the IPPCA chairman said.
Another challenge for the oil sector in 2009 is the implementation of the mandate under the Biofuels Act for a 10 percent blend of bioethanol on gasoline products.
Major oil firms observe that although they have to comply with the law, it would be easier for them if the supply of ethanol would be coming in locally.
Petron chairman Nicasio Alcantara, in an earlier interview, noted that the government has yet to come up with specific and concrete policies on how to go about the implementation of the mandated 10-percent bioethanol blend by February next year as prescribed under the Biofuels Law.
Alcantara admitted they may have to source some of their ethanol requirements abroad or may even consider entering into an agreement with other oil firms for a joint importation of ethanol.
Anna Whitehouse, president and managing director of Total Philippines Inc., says while the industry is ready to comply with the mandate, they are still in a “wait-and-see” mode with regard to the implementation of the 10-percent blend.
“We have invested so much for ethanol blending but we are not certain if people will buy it,” said Whitehouse.
DOE director Zenaida Monzada, on the other hand, said there is no reason for the country to waver on its biofuels development program.
“I would like to believe that we are still on the right track. It has even resulted in being beneficial to the economy. We export sugar, coconut oil and if our export market will contract, then we can use more of those products for our feedstock in our biofuels program. I think at this present time, it would still be beneficial for the country,” she said.
Flawless transition
The power sector also had a share of major twists this year.
“The privatization turnover is our biggest challenge,” says Arthur Aguilar, National Transmission Corp. (TransCo) president.
“At the stroke of midnight (January 2009), National Grid Corporation of the Philippines (NGCP) will take over Tuguegarao to Gensan and Zamboanga, some 5,600 employees and the energy backbone of the national economy,” Aguilar said.
Aguilar said the challenge is to undertake the transition without flaws. “It has to be seamless inspite of hundreds of operating details,” added the TransCo chief.
The takeover of NGCP came seven years after TransCo was spun off as a separate entity from the state-owned National Power Corp. (Napocor).
NGCP is the corporate vehicle formed by the consortium of State Grid of China, Monte Oro Grid Resources Corp. and Calaca High Power Corp. which won the bidding conducted by the Power Sector Assets and Liabilities Management Corp. (PSALM) after it submitted an offer of $3.95 billion.
Recently, Pesident Arroyo signed the franchise of NGCP into law. It is expected that any time soon, the Chinese-led investors would have to start the takeover and put in about $725-million worth of capital until 2010 to upgrade and modernize the facilities of TransCo to be able to sustain the uninterrupted supply of power to its customers.
This early, NGCP may be faced with a possible major transmission constraint due to a Supreme Court ruling which called for the de-energization of the Sucat-Araneta-Balintawak transmission line.
It was feared that there would be rotating brownouts reminiscent of the power crisis in the early 1990s, including higher power rates, once the critical transmission line is decommissioned.
Dasmariñas Village, Makati residents sued TransCo’s predecessor Napocor in 2000, claiming that overhead high tension cables generated an electromagnetic radiation field that allegedly causes cancer, brain tumor, leukemia and other afflictions.
Despite arguments presented by the government, the Makati Regional Trial Court Branch 58 issued an injunction order stopping Napocor-TransCo from utilizing that portion of the overhead transmission line near the posh village in Makati.
The order was subsequently upheld by the Supreme Court, paving the way for the RTC’s issuance of a writ of execution last Oct. 13, 2008.
For his part, Lasse Holopainen, president of the Philippine Electricity Market Corp. (PEMC), said there were a lot of challenges that confronted the power industry in 2008 and he expects more of these trials to come the industry’s way in the new year. PEMC operates the country’s wholesale electricity spot market (WESM).
“That’s a long topic. Overall electricity reform? Visayas problems? The transmission problems? Regulatory issues, no clear policies? Politization of Meralco (Manila Electric Co.). High cost of electricity? Lack of open access? Lack of competition in generation?” he enumerated.
But the PEMC head considers the bogging down of the San Jose transmission line as one of the most critical times for WESM’s operations this year.
Last July 10, the spare transformers at the San Jose substation broke down prematurely after only 10 years of service, as against the normal substation transformer lifespan of 35-40 years.
As a result of the breakdown, the coal-fired plants had limited dispatch and oil fired plants had to be used. Consequently, this caused electricity prices at the WESM to shoot up to as much as P33 per kilowatthour while line rental charges increased by P1 per kwh.
Despite these problems, PSALM claimed it had already reached its privatization target this year and is now ready for open access, wherein big power users will be given a choice of where to source their electricity requirements.
PSALM, an entity created under the Electric Power Industry Reform Act of 2001, said that with the sale of the Amlan hydro plant last Dec. 10 to ICS Renewables Inc., it closed the government’s power privatization program for 2008 on a positive note as it successfully bid out more than its targeted 70 percent of the Napocor’s generating assets in the Luzon and Visayas grids.
The government-run asset management firm claimed its privatization goal had been achieved for this year after successfully selling the 146.5-megawatt Panay and 22-MW Bohol power plant package last Nov. 12.
By next year, PSALM would be very busy getting independent power producer administrators (IPPAs) for Napocor’s contracts. IPPAs are qualified independent entities that will administer and manage the energy output contracted by the Napocor with IPPs operating in Luzon and the Visayas.
PSALM plans to put on the auction block two big coal-fired power facilities, Pagbilao and Sual.
Asset sales
Aside from the privatization efforts of the government, there were also a series of acquisitions among privately-owned power firms.
In January this year, First Gen acquired the 40-percent stake of Netherlands-based Spalmare Holding B.V. which paved the way for the company to own 100 percent of Red Vulcan, which bought the majority stake of PNOC-Energy Development Corp., (EDC), the geothermal arm of the state-owned Philippine National Oil Co. (PNOC).
Through its subsidiary Prime Terracota Holdings Corp., First Gen said it completed the full dilution of Spalmare, its minority partner in Red Vulcan. Spalmare is a joint venture between Icelandic sustainable energy firms Reykjavik Energy Invest hf (REI) and Geysir Green Energy ehf (GGE).
First Gen’s assets includes the 1,000-MW Santa Rita and 500-MW San Lorenzo natural gas-fired power plants, the 225-MW Bauang medium-speed bunker-fired diesel power plant, the 112-MW Pantabangan-Masiway hydroelectric complex, and the 1.6-MW Agusan mini-hydropower plant.
EDC is the largest geothermal producer in the country with an installed capacity of 1,149.4-MW. This represents 60 percent of the country’s total geothermal capacity.
Meanwhile, SEA Refinery Holdings of the UK-based fund manager Ashmore Group recently completed the acquisition of a controlling 90-percent stake in Petron Corp., the country’s largest oil refiner.
Ashmore’s, on the other hand, is in final negotiations with San Miguel Corp. for the sale of the recently-acquired stake of PNOC in Petron.
San Miguel, the largest food and beverage conglomerate in Southeast Asia, has been aggressively venturing into the energy sector. It also recently bought in to Meralco.
Amidst these consolidations and acquisitions, the Energy Regulatory Commission (ERC), the power sector watchdog, had approved the implementation of the power supply option program (PSOP) or the interim open access (IOA) which will allow big power users to choose where to source their electricity requirements.
One more landmark event for the power sector this year was the passage into law of the Renewable Energy Bill.
The government as well as the private sector are looking forward to investments of more than $1.2 billion coming in after the signing of the RE bill which took nearly two decades to materialize.
“The benefits of renewable energy use are considerable. It will foster sustainable growth, energy independence and economic security for the country, and unite us with the global effort to stop climate change,” Reyes opines.
Philippine Independent Power Producers Association (PIPPA) president Ernesto Pantangco believes that this is a big boost to the country’s program for energy self-sufficiency.
“This is a welcome development not only for the industry but also for the country,” he said.
Expecting more challenges in 2009, Reyes believes that the energy sector will be able to survive these trials as long as “we are ready to face them”.
“If we will be facing more challenges next year, well, I think we just have to be brave enough and try much harder to address the issues and find a solution to the problem,” Reyes concluded.–Donnabelle Gatdula, Philippine Star
#WearMask #WashHands
#Distancing
#TakePicturesVideos
