PLATTS CRUDE OIL MARKETS ASIA 2013 Goodwood Park Hotel, Singapore September 18-19, 2013 Developing New Supply Opportunities with Russia: The Philippines’ Perspective ATTY. JOSE M. LAYUG, JR. Senior Partner , Puno & Puno Law Offices Philippine Energy Expert, University of the Philippines College of Law
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PLATTS
CR
UD
E OIL
MA
RK
ETS A
SIA
20
13
G
oodwood P
ark Hotel, S
ingapore S
eptember 1
8-1
9, 2
01
3
Developing New Supply Opportunities with Russia:
The Philippines’ Perspective ATTY. JOSE M. LAYUG, JR.
Senior Partner , Puno & Puno Law Offices Philippine Energy Expert, University of the
TOTAL SUPPLY 88.30 89.90 90.70 91.60Note: 1) Total supply and demand taken from the Oil Market Report of IEA dated 13 May 2013. 2) Balance of Total Supply vs Total Demand : stock change and miscellaneous
3) Non-OPEC Supply includes w orld biofuels production including fuel ethanol from US and Brazil. 4) IEA's call for OPEC crude in 2013 is 29.6 mil b/d.
Coal Million Metric Tons (@10,000 BTU/lb) 6.7 6.9 7.4 2.9
Philippine Energy Contracting Round (PECR) 4 Results 11 Coal Operating Contracts awarded 3 Petroleum Service Contracts awarded and 1 awaiting Office of the
President authority
Supervised and monitored 24 operating service contracts for petroleum and 71 for coal exploration and development
2010-2012 ENERGY RESOURCE PRODUCTION
LUZON SUPPLY-DEMAND OUTLOOK 2013-2020
Notes a. Demand curve as plotted includes total of peak demand and required Reserve Margin (RM) i.e. 4%
regulating reserve and contingency and dispatchable reserve requirement b. 4.2 % peak demand growth rate resulted from observed 0.6 elasticity ratio of demand for electric power
with national economic growth applied to 7 percent GDP growth rate (GR) target for 2013-2015. c. 4.8 % peak demand growth rate resulted from observed 0.6 elasticity ratio of demand for electric power
with national economic growth applied to 8 percent GDP growth rate (GR) target for 2016-2020. d. Assumed 6.6 percent average forced outage of the total dependable capacity
On Available Capacity: • Apr-May 2015: Projected Deficit of 184 MW • Mar-Jul 2016: Projected Deficit of 240 to 635 MW
On Available Capacity + Committed: • Apr-Jun 2017: Projected Deficit of 104 to 339 MW • Mar-Dec 2018: Projected Deficit of 157 to 833 MW
Southwest Luzon 2 (150 MW) Mar 2015 Isabela Biomass (18 MW) Mar 2015
Putting Bato Phase 2 (135 MW) Nov 2015
APC CFBC (82 MW) Mar 2016
LUZON OUTLOOK
1600
1800
2000
2200
2400
2600
2800
3000
3200
May
13
Jul 1
3
Sep 1
3
Nov 1
3
Jan 14
Mar
14
May
14
Jul 1
4
Sep 1
4
Nov 1
4
Jan 15
Mar
15
May
15
Jul 1
5
Sep 1
5
Nov 1
5
Jan 16
Mar
16
May
16
Jul 1
6
Sep 1
6
Nov 1
6
Jan 17
Mar
17
May
17
Jul 1
7
Sep 1
7
Nov 1
7
Jan 18
Mar
18
May
18
Jul 1
8
Sep 1
8
Nov 1
8
Jan 19
Mar
19
May
19
Jul 1
9
Sep 1
9
Nov 1
9
Jan 20
Mar
20
May
20
Jul 2
0
Sep 2
0
Nov 2
0
Projected Demand Available Capacity Available+Committed
VISAYAS SUPPLY-DEMAND OUTLOOK 2013-2020
Notes a. Demand curve as plotted includes total of peak demand and required Reserve Margin (RM) i.e. 4%
regulating reserve and contingency and dispatchable reserve requirement b. 7 % peak demand growth rate resulted from observed 1 elasticity ratio of demand for electric power with
national economic growth applied to 7 percent GDP growth rate (GR) target for 2013-2015. c. 8 % peak demand growth rate resulted from observed 1 elasticity ratio of demand for electric power with
national economic growth applied to 8 percent GDP growth rate (GR) target for 2016-2020. d. Assumed 7 percent average forced outage of the total dependable capacity
On Available Capacity: • Nov-Dec 2014: Projected Deficit of 30 to 90 MW • Apr-Dec 2015: Projected Deficit of 80 MW to Max 220 MW
On Available Capacity + Committed: • Dec 2015: Projected Deficit of 60 MW • Apr-Jun 2016: Projected Deficit of 70 to 100 MW • Dec 2017-Dec 2018: Projected Deficit of 120 to 305 MW
Villasiga HEP(8 MW) Mar 2014 Nasulo Geo (50 MW) Jun 2014
Notes a. Demand curve as plotted includes total of peak demand and required Reserve Margin (RM) i.e. 4% regulating reserve and contingency
and dispatchable reserve requirement b. 5.6 % peak demand growth rate resulted from observed 0.8 elasticity ratio of demand for electric power with national economic
growth applied to 7 percent GDP growth rate (GR) target for 2013-2015. c. 12.8 % peak demand growth rate resulted from observed 1.6 elasticity ratio of demand for electric power with national economic
growth applied to 8 percent GDP growth rate (GR) target for 2016 d. 8 % peak demand growth rate resulted from observed 1 elasticity ratio of demand for electric power with national economic growth
applied to 8 percent GDP growth rate (GR) target for 2017-2020 e. Assumed 3.41 percent average forced outage of the total dependable capacity
On Available Capacity: • 2013: Projected Deficit of 50 to 110 MW • 2014: Projected Deficit of 50 to 190 MW • 2015: Projected Deficit 120 to 280 MW
Critical Periods
Mapalad (15 MW) Oct 2013 Therma South (300 MW) Mar 2015
TOP CONTRIBUTORS TO GROWTH OF MFG.First Quarter 2013
Food Manufactures 5.1
Manufacturing(Contribution to Growth, in percentage point)
Manufacturing(Contribution to Growth, in percentage point)
Radio, television and communication equipment and apparatus 4.0Chemical & chemical products 1.0Basic metal industries 0.8Machinery and equipment except electrical 0.3
! No government intervention – laissez-faire economics
! Market share determined by competition
! There were 4 refiners and 6 marketing companies
Refiners Marketing Companies
Bataan Refining Corp. Esso Phils. Inc.
Filoil Filoil
Caltex Phils. Inc. Caltex Phils. Inc
Pilipinas Shell Corp. Pilipinas Shell Corp.
Getty Oil
Mobil Phils. Inc.
DOWNSTREAM OIL INDUSTRY
The Dawn of Regulation
! RA 6124 (1970) – created the Price Control Council to set
maximum selling prices of essential commodities
! RA 6173 (1971) – created the Oil Industry Commission (OIC); oil
price regulation was introduced
! PD 334 (1973) – formed the Philippine National Oil Company;
entry of the government in the oil industry
! PD 1206 (1977) – abolished OIC but created 2 separate agencies:
(1) Board of Energy to regulate domestic oil prices and (2) Dept.
of Energy, later renamed to Ministry of Energy, to formulate
energy policies and programs
DOWNSTREAM OIL INDUSTRY
The Subsidy Regime: CPEF and OPSF
! In 1979, a Consumer Price Equalization Fund (CPEF) was established to avoid frequent oil price movements; CPEF was abolished in June 1983
! PD 1956 (1984) – created the Oil Price Stabilization Fund (OPSF) to stabilize the domestic price of petroleum products
! Letter of Instruction No. 1441 (1984) – directed BOE, in consultation with MOE, to review and reset domestic oil prices every 2 months starting January 1985 to reflect prevailing price of crude oil and petroleum products
! Executive Order No. 172 – created the Energy Regulatory Board (ERB) to replace BOE
DOWNSTREAM OIL INDUSTRY
Sinking OPSF: Deficit, Rising Oil and Supply Crunch
! OPSF deficit reached P16.6B in November 1990 ! ERB adjusted OPSF impost; prices increased substantially
resulting in reduced OPSF deficit at P49M in August 1991 ! Highest OPSF surplus in June 1992 at P8.3B ! RA 7639 - mandated the use of the OPSF (P3B) as payment in
part to the capital stock of the National Power Corp. ! OPSF remained positive until April 1995 and deficit continued ! In 1996, Congress, through the 1996 General Appropriations
Act, provided a special provision in the PNOC budget allocating P10B to partly wipe-out OPSF deficit
DOWNSTREAM OIL INDUSTRY
-18 -16 -14 -12 -10
-8 -6 -4 -2 0
2 4 6 8
Jan-87 Jun
Nov
Apr
Sep
Feb
Jul
Dec
May
Oct Ma
r
Aug
J 92
Jun
Nov
Apr
Sep
Feb
Jul
Dec
May Oc
t
Mar
Aug
J 97 Jun
Nov
Apr
Sep
Billio
n Pes
os
P5Bn Petroleum
Price Standby
Fund (RA 6952)
P3Bn equity infusion to NPC
(RA 7639)
P5Bn Remitted by
PNOC
P4Bn Remitted by
PNOC
APM implemented mid-Aug 1996
*
DOWNSTREAM OIL INDUSTRY
Onset of Deregulation
! Oil industry left with three refiners: (1) Caltex, which acquired Mobil; (2) Shell, which acquired Getty; and (3) PNOC, which bought Filoil and Esso
! OPSF had a P2.5B deficit when RA 8180 was passed into law in March 1996; oil price became highly politicized
! With rise in international oil prices, government decided to
relax regulatory functions and let market forces take over.
! RA 7638 (1992) – created the DOE with mandate to encourage free and active private sector participation
! Supreme Court declared RA 8180 unconstitutional in 1997
DOWNSTREAM OIL INDUSTRY
Transition Phase to Full Deregulation
! RA 8479 – New Downstream Oil Deregulation Law signed in
February 1998
! Automatic pricing mechanism - adjusted the wholesale posted prices of petroleum products based on the changes in Singapore Posted Prices. APM enabled adjustments in domestic prices to approximate closely and reflect promptly the movement of international prices of oil
! Executive Order No. 471 (1998) declared full deregulation of
the downstream oil industry
DOWNSTREAM OIL INDUSTRY
DUBAI CRUDE PRICES/FOREX March 1984 – MTD August 2011
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
M-84
J-85
N-85
S-86
J-87
M-88
M-89
J-90
N-90
S-91
J-92
M-93
M-94
J-95
N-95
S-96
J-97
M-98
M-99
J-00
N-00
S-01
J-02
M-03
M-04
J-05
N-05
S-06
J-07
M-08
M-09
J-10
N-10
S-11
0
5
10
15
20
25
30
35
40
45
50
55
60
Dubai US$/bbl Dubai P/li Forex P/1$
$/bbl P/$
I. Energy Reform Agenda II. Renewable Energy Resources
III. Upstream Oil and Gas Resources
IV. Coal Resources V. Downstream Oil and Gas Resources
DISCUSSION OUTLINE
Scenes in the International Market
Middle East Unrests ! Crude oil price remained above $100 per barrel with political
situation in Egypt, Libya, Bahrain, Yemen, Iran, Iraq ! Saudi Arabia, largest producer, is “main risk in the region” as
far as oil supply
Economic Uncertainties ! Spain debts, Greek default, Euro tanks ! US weak economy outlook
OPEC Discord and IEA Strategy ! OPEC abandons 24.845M b/d but Saudi boosts output ! IEA releases 60M barrels over 30 days or 2M b/d
DOWNSTREAM OIL INDUSTRY
Scenes in the International Market Japan�s Tsunami and Earthquake ! Japan shutdown nuclear power plants and lost substantial
refining capacity
! For the lost nuclear capacity, Japan demand for oil (diesel),
coal and LNG increased
World Oil Demand and Asian Economies Increase ! China’s population and thirst for energy
! Increase purchase of diesel for power generation