PHL-Indonesia deal may cushion coal, gas shocks

THE PHILIPPINES and Indonesia signed an energy collaboration deal designed to smooth out any supply disruptions in critical fuels like coal and liquefied natural gas (LNG).

The signing of the memorandum of understanding (MoU) between the Philippine Department of Energy and Indonesian Ministry of Energy, which was witnessed by President Ferdinand R. Marcos, Jr. and visiting Indonesian President Joko Widodo. It updates the long-term energy cooperation arrangements between the two countries, Energy Secretary Raphael P.M. Lotilla said in a statement.

“On the part of the Philippines, it is an offshoot of our President’s efforts to achieve higher energy security through energy diplomacy,” he said.

Under the MoU, the two countries will collaborate via their respective business sectors “during periods of critical supply constraints on energy commodities such as coal and liquefied natural gas,” Mr. Lotilla said.

He said bilateral agreements on energy should consider the increasing role of the private sector in the two countries’ energy sectors, noting that previous deals “reflected the dominance of state-owned companies in the power sector in the Philippines and the upstream sector including coal mining in Indonesia.”

The Philippines has been a key market for Indonesian coal, which accounted for 98% of Philippine coal imports in 2022, “consistently increasing from 88% in 2017,” Mr. Lotilla said.

He noted that a coal export ban imposed by Indonesia in January last year following the failure of its coal mines to provide adequate supply for domestic power plants and markets pushed coal prices higher.

“This forced countries like the Philippines to scramble for alternative sources of coal and caused coal prices to spike,” he said. “The Philippines imported more than 80% of its coal requirements in 2023 and even more than 90% in previous years.” —