THE Philippines is pursuing oil reserve partnerships with Saudi Arabia, Japan and the United Arab Emirates (UAE) as it seeks to expand its emergency fuel stockpiles, with a proposed Saudi-backed facility potentially holding 50 million barrels of oil.
“Our plan is to keep on expanding up to 15 million [barrels],” Energy Director Rino E. Abad told the Senate Energy Committee on Thursday. “And the initial discussion with Saudi Arabia, it is bigger. They are targeting a capacity of 50 million barrels.”
He said the Department of Energy (DoE) has held preparatory talks with Japan’s Ministry of Economy, Trade and Industry and Saudi Arabia, resulting in the submission of concept notes. Negotiations with the UAE are expected to follow.
He said the proposed Saudi facility would give the Philippines access to the reserve during emergencies.
“These two countries [Saudi Arabia and the UAE] have been our continuous suppliers in the Persian Gulf because they have exit pipelines that bypass the Strait of Hormuz,” Mr. Abad said. “Accordingly, we will be having the talks with the UAE next.”
The discussions come as Senator Erwin T. Tulfo, chairman of the Energy committee, urged the DoE and the Philippine National Oil Co. (PNOC) to pursue reserve partnerships while moving ahead with a planned government-owned oil depot in Bataan.
“We are already requesting the budget, and we are already doing the site preparation for our Bataan property to be conducted this year,” PNOC Department Manager Antonio G. Buenviaje told senators.
He said the state-owned depot is targeted for completion within one-and-a-half years and would proceed regardless of developments in talks with Saudi Arabia, Japan and the UAE.
He said the facility is expected to become operational by 2028.
Energy Undersecretary Riolita C. Inocencio said the agency has requested P8 billion to build the country’s first government-owned petroleum reserve, which would initially hold up to one million barrels.
“We are relying on the reserve or the minimum inventory of our participants, our private sector,” she said. “It’s high time that we already have a government-owned reserve so that we can have the necessary buffer.”
Mr. Tulfo noted that the Philippines consumes about 460,000 barrels of oil daily, meaning a one-million-barrel reserve would cover only about two to three days of demand.
In response, Mr. Abad said the government aims to expand reserve capacity to as much as 15 million barrels, while Saudi Arabia is considering a 50-million-barrel storage hub in the country.
“Saudi Arabia will shoulder all the costs,” he said. “[For the UAE] it’s the same, which is good because those two countries, up to now, are the ones supplying us with crude oil.”
The Budget department earlier said local government units (LGU) may use their development funds to build oil storage facilities, renewable energy projects and related infrastructure under new rules aimed at strengthening the country’s energy security.
Under Joint Memorandum Circular No. 1 dated Aug. 4, the Departments of Budget and Management, Finance and Interior and Local Government authorized LGUs to use their 20% development funds for capital-intensive projects that address the national energy emergency.
The 20% development fund refers to the portion of the annual national tax allotment that local governments must earmark for development projects under the Local Government Code.
Eligible projects include oil storage facilities, solar photovoltaic systems, renewable energy expansion projects and smart-grid and green-grid infrastructure.
LGUs may also acquire electric vehicles and charging stations for health services, uniformed personnel and disaster-response operations.
The circular bars the use of development funds for recurring operating expenses such as fuel, petroleum products, electricity, water and other administrative costs.
The government said LGUs may continue using the funds for projects intended to lessen exposure to fuel supply disruptions and reduce long-term energy costs.
President Ferdinand R. Marcos, Jr. declared a state of national energy emergency through Executive Order No. 110 following supply disruptions linked to the Iran war.
Since fighting erupted in late February, Philippine inflation has remained elevated, reaching 7.2% in April, while economic growth slowed to 2.6% in the first half.
The authority allowing LGUs to finance projects directly related to the energy emergency will expire one year after the issuance of the executive order unless extended by the President. — Kaela Patricia B. Gabriel