Philippine Downstream Natural Gas Industry (PDNGI) Development Act

The measure seeks to promote natural gas as the primary energy fuel to help the country reach its potential of becoming a liquified natural gas (LNG) trading and transship hub within the Asia-Pacific region. Moreover, the measure establishes comprehensive guidelines for the safe and responsible growth of the natural gas industry. It actively encourages the transition of existing facilities to natural fas, facilitatinff s moother shift towards a cleaner energy future.

The House version of the measure, House Bill (HB) 8456, was approved on third reading on August 02, 2023. It is otherwise known as the proposed Philippine Downstream Natural Gas Industry (PDNGI) Development Act, and is certified by President Ferdinand “Bongbong” Marcos Jr. as a priority measure. According to the Head of the Technical Working Group (TWG) that crafted the substitute bill, it is based largely on HB 17 filed by Representative Ferdinand Romualdez.

Key Provisions of the Bill

Salient provisions of HB 8456 are as follows:

Chapter IV: Public Operation of LNG Facilities

Sec. 23, Transmission and Distribution System and Related Facility: “The DOE will issue a license or authorization to operators of Philippine Downstream Natural Gas (PDNG) Transmission Systems and PDNG Distribution Systems that operate as public utilities.” Such can be done if the operators meet the following requirements stipulated in this section:

(1) “if the operator is fit, willing and able to perform such service properly in conformity with the provisions of this Act and its Implementing Rules and Regulations; and

(2) “such service is required by the public convenience and necessity. The rate of charges and fees for their services shall be non-discriminatory, transparent and competitive.”

Sec 24, LNG Storage and Regasification Terminals: “The operation of an LNG Storage and Regasification Terminal shall not be considered as a public utility operation.” 

For reference, LNG Storage and Regasification Terminal refers to “all component facilities used to receive, unload, load, store, regasify LNG.” Meanwhile, the Philippine Downstream Natural Gas Transmission System or PDNG Transmission System refers to “a system of conventional pipelines and their related facilities extending from the delivery points where the system receives the natural gas from the indigenous upstream source or from LNG Storage and Regasification Terminal to the point of connection where the PDNG Distribution System receives gas.” 

On August 20, 2024, the Senate consolidated several bills related to the LNG industry development into Senate Bill (SB) 2793. This measure aims to prioritize indigenous gas development and incentivize investments in the domestic LNG sector. Specifically, SB 2793 combines the provisions of the SBs 152, 1944, 1991, and 2247, as well as HB 8456. The Committee Report No. 304 outlines the rationale for merging these bills into a single piece of legislation. PSA notes that SBs 152 and 1991 specifically target the midstream natural gas industry, which plays a crucial role in the LNG value chain.

According to Senator Pia Cayetano, the sponsor of SB 2793, the bill seeks to enhance the Philippines’ energy security and sustainability by promoting natural gas as a reliable, efficient, and environment responsible fuel source.

The development of the PDNGI through SB 2793 The following list below are the key objectives of the bill:

• Prioritize the use of domestically produced natural gas over imported sources
• Encourage a competitive market environment to attract private sector investment
• Support construction of essential infrastructure such as LNG terminals and pipelines
• Ensure strict environmental regulations and practices to minimize the impact of natural gas operations

Both bills consider transmission systems as public utilities. However, HB 8456 stipulates that storage, specifically, LNG Storage and Regasification Terminals, is not considered a public utility operation. This specific differentiation was not present in the Senate bill.

On May 2023, Representative Rodante Marcoleta said added that “the substitute bill (HB 8456) mandates more incentives, foremost of which is that the sale of natural gas to locators inside ecozones shall be subject to 0% value-added tax.”

gulations designed to facilitate the growth of this sector.

Likehood of Passage

PSA notes that the passage of the measures in the 19th Congress is likely. On July 05, the LEDAC had its 2nd meeting presided over by President Ferdinand “Bongbong” Marcos Jr. The Enabling Law for the Natural Gas Industry is among the 20 measures approved during the meeting. It is also part of the 42 priority legislative measures listed during the 1st LEDAC meeting last year.