MANILA, Philippines — The Department of Energy (DOE) has issued a formal directive requiring all power plants and natural gas consumers in the country to prioritize the use of indigenous natural gas over imported liquefied natural gas (LNG). This move aims to strengthen the nation’s energy security and promote self-reliance.
Signed by Energy Secretary Sharon Garin on September 1, Department Circular No. DC2025-09-0013 sets the framework for sourcing, pricing, and aggregating local natural gas, as mandated by the Philippine Natural Gas Industry Development Act (RA No. 12120). Officials reported that the circular clearly states, “All users of natural gas shall first utilize available quantities of indigenous natural gas.”
Indigenous Natural Gas Use: Prioritizing Local Supply
The circular allows importation of LNG only under specific conditions. If local gas prices, including taxes and regasification fees, exceed imported LNG prices for three consecutive months, importation may be permitted temporarily for up to three months, subject to existing contracts. Community members said this is designed to minimize dependence on unpredictable international markets, reduce transportation costs, and support domestic exploration.
However, the policy must be implemented without breaching any existing contracts, a condition emphasized both in the law and DOE guidelines. The new rules currently apply only to the capacity of local gas producers as of the circular’s effective date, thus focusing initially on the supply from existing indigenous gas fields.
Pricing Mechanism and Conditional LNG Imports
The pricing of indigenous natural gas remains a matter between contracting parties but must adhere to a formula indexed to global benchmarks such as crude oil or LNG prices. The formula requires six-month averaging and quarterly price adjustments. Local leaders noted that if indigenous gas prices rise above those of imported LNG, buyers may temporarily import LNG, complying with their contracts. The DOE will review each case, also factoring in government revenue from local gas production.
Introducing Gas Aggregation for Supply Flexibility
The circular also introduces the concept of gas aggregation, allowing designated entities called aggregators to procure indigenous natural gas and combine it with imported LNG. These aggregated supplies can then be sold domestically or abroad. The DOE will designate these aggregators but will first declare when aggregation is necessary and release detailed guidelines covering qualification criteria, minimum indigenous gas percentages in aggregated supplies, and pricing methods.
According to the circular, the decision to start aggregation depends on three main factors: (a) availability of local gas supply, (b) current market conditions, and (c) anticipated consumer benefits in reliability, efficiency, affordability, and sustainability.
Monitoring Compliance: The Oversight Committee
To ensure proper implementation, the DOE is establishing the Indigenous Gas Prioritization – Review and Evaluation Committee (IGP-REC). This committee will include senior officials from the Energy Resource Development Bureau, Oil Industry Management Bureau, and DOE Legal Services. The IGP-REC will be chaired by the supervising undersecretary overseeing ERDB and OIMB, with a supervising assistant secretary as vice chair and directors from the three units as members.
The committee’s responsibilities include reviewing suppliers’ pricing methods, addressing clarifications raised by the Energy Secretary, and enforcing the circular’s provisions. Supporting the committee is a Technical Working Group led by the Assistant Director of ERDB, including representatives from petroleum, natural gas management, and legal divisions. This group will provide technical and administrative assistance.
Ensuring Fair Access and Penalties for Violations
The circular mandates that indigenous natural gas suppliers and aggregators must offer fair, transparent, and non-discriminatory access to their supplies. This includes physical delivery, administrative or financial contracts, or other DOE-approved arrangements. Under Section 23 of RA No. 12120, suppliers must offer gas at uniform prices to all qualified customers, allocate supply proportionally based on generation capacities, and conduct transactions transparently and competitively, considering technical and operational factors.
Additionally, open access to midstream infrastructure such as transmission and storage facilities is required to promote equitable market participation. Officials reported that violations of the circular can lead to penalties under Section 57, Rule IX of Department Circular No. DC2025-04-0005.
Sanctions include fines of ₱500,000 for breaching industry standards, ₱1,000,000 for disregarding lawful DOE orders, ₱200,000 for late report submissions, and ₱100,000 for failing to meet specified responsibilities under the implementing rules.
For more news and updates on indigenous natural gas use, visit Filipinokami.com.
