The document provides an overview of the global and Philippine energy outlook, detailing recent trends in the resources industry, particularly focusing on China and unconventional energy sources like shale gas. It highlights challenges facing the Philippine resources industry, such as investment constraints and environmental issues, while emphasizing the government's commitment to energy security and transparency through initiatives like the Extractive Industries Transparency Initiative (EITI). The conclusion stresses the need for a transparent and predictable regulatory framework to optimize indigenous energy resources.

1. Overview
of
Global
and
National
(Philippines)
Energy
Outlook
Atty. Fernando S. Penarroyo
Asian
Ins(tute
of
Technology
Design
and
Delivery
of
a
Professional
Development
Course
on
Effec9ve
Nego9a9on
and
Strategic
Management
for
Gas,
Oil
and
Coal
Industries
Manila,
Philippines
22
January
2015
Puno
&
Peñarroyo
Law
Of@ices

2. Contents
• Recent
Global
Trends
• Energy
Resources
Industry
Philippine
Update
-­‐
oil,
natural
gas,
coal,
renewables,
power
• Developments
in
the
Philippine
Resources
Industry
• Development
Constraints
• Conclusion

3. RECENT
TRENDS
IN
THE
RESOURCES
INDUSTY

4. Recent
Trends
in
the
Resources
Industry
China
• Despite
a
slowing
economy,
China
remains
Asia’s
largest
and
one
of
its
fastest-­‐growing
economies.
• China’s
rapid
economic
growth
has
posi(oned
it
as
the
world’s
second
largest
economy
and
it
is
likely
to
overtake
the
US
around
2021
to
become
the
world’s
largest
economy
(The
Economist,
2014)
• The
“old”
China
of
low-­‐cost
labor,
low-­‐value-­‐
intensive
industries
and
a
coastal-­‐based
export
economy
is
fading
away
• China’s
goal
is
to
shiT
away
from
an
investment-­‐led
model
of
growth
to
a
more
stable
model
driven
by
domes(c
consump(on,
advanced
technology
and
environmental
efficiency.

5. Recent
Trends
in
the
Resources
Industry
China
• China
has
recently
become
the
world’s
largest
importer
of
oil
but
its
per
capita
oil
consump(on
lags
behind
the
levels
of
the
developed
world.
• As
China’s
consump(on
of
oil
ballooned,
it’s
state-­‐
owned
oil
and
gas
enterprises
have
developed
into
global
players
in
tapping
unconven(onal
resources
by
collabora(ng
with
other
interna(onal
firms.
• China’s
climb
in
the
global
value
chain
assures
steady
rise
in
demand
for
mineral
products
and
advanced
mining
technologies.

6. Recent
Trends
in
the
Resources
Industry
China
• Chinese
companies
are
also
increasingly
becoming
one
of
the
industry’s
leading
sources
of
capital.
Chinese
acquisi(ons
make
headlines
and
Chinese
companies
are
some
of
the
more
ac(ve
deal
makers
in
the
industry.
• In
addi(on
to
direct
equity
acquisi(ons,
Chinese
companies
are
also
inves(ng
in
resources
development
and
construc(on
and
suppor(ng
infrastructure.
• According
to
the
China
Mining
Associa(on,
up
to
80%
of
China’s
overseas
mining
investments
since
2005
has
failed.

7. Recent
Trends
in
the
Resources
Industry
Petroleum
new
fron1ers
• Tight
oil
-­‐
hydraulic
fracturing
(US)
hZp://youtu.be/VY34PQUiwOQ
• Arc(c
offshore
• Presalt
deepwater
(Brazil)
• Oil
shale
–
shale
contains
kerogen
that
has
to
be
mined
and
then
reheated
to
separate
oil
from
shale
(US)
• Oil
sands
–
loose
sand
or
sandstone
saturated
with
bitumen
that
are
exploited
through
open
pit
mines
(Alberta,
Canada)

8. Recent
Trends
in
the
Resources
Industry
Unconven1onal
gas
resources
• Shale
gas
–
natural
gas
contained
in
low
permeability
shale
forma(ons;
gas
that
has
remained
trapped
in,
or
close
to,
its
source
rock
• Coalbed
methane
–
coal
seam
gas,
natural
gas
contained
in
coal
beds
• Tight
gas
–
low
permeability
gas
reservoirs
that
cannot
be
produced
economically
without
the
use
of
technologies
to
s(mulate
flow
of
the
gas
towards
the
well,
such
as
hydraulic
fracturing

10. GRAPHIC
OF
HYDRAULIC
FRACTURING

11. Recent
Trends
in
the
Resources
Industry
World
Energy
Outlook
(IEA,
2013)
• China
dominates
the
picture
within
Asia,
before
India
takes
over
from
2020
as
the
principal
engine
of
growth.
• China
is
about
to
become
the
largest
oil-­‐impor(ng
country
and
India
becomes
the
largest
importer
of
coal
by
the
early
2020s.
The
United
States
moves
steadily
towards
mee(ng
all
of
its
energy
needs
from
domes(c
resources
by
2035.
• Unconven(onal
gas
accounts
for
nearly
half
of
the
increase
in
global
gas
produc(on
to
2035,
with
most
of
the
increase
coming
from
China,
the
United
States
and
Australia.

12. Recent
Trends
in
the
Resources
Industry
World
Energy
Outlook
(IEA,
2013)
• The
role
of
OPEC
countries
in
quenching
the
world’s
thirst
for
oil
is
reduced
temporarily
over
the
next
ten
years
by
rising
output
from
the
United
States,
from
oil
sands
in
Canada,
from
deep-­‐water
produc(on
in
Brazil
and
from
natural
gas
liquids
from
all
over
the
world.
But,
by
the
mid-­‐2020s,
non-­‐OPEC
produc(on
starts
to
fall
back
and
countries
in
the
Middle
East
provide
most
of
the
increase
in
global
supply.
Overall,
na(onal
oil
companies
and
their
host
governments
control
some
80%
of
the
world’s
proven-­‐plus-­‐probable
oil
reserves.

13. Recent
Trends
in
the
Resources
Industry
World
Energy
Outlook
(IEA,
2014)
• By
2040,
the
world’s
energy
supply
mix
divides
into
four
almost-­‐equal
parts:
oil,
gas,
coal
and
low-­‐carbon
sources.
• While
coal
is
abundant
and
its
supply
secure,
its
future
use
is
constrained
by
measures
to
tackle
pollu(on
and
reduce
CO2
emissions.
• Fossil-­‐fuel
subsidies
totalled
$550
billion
in
2013
–
more
than
four-­‐(mes
those
to
renewable
energy
–
and
are
holding
back
investment
in
efficiency
and
renewables.
• Policies
concerning
nuclear
power
will
remain
an
essen(al
feature
of
na(onal
energy
strategies,
even
in
countries
which
are
commiZed
to
phasing
out
the
technology
and
that
must
provide
for
alterna(ves.

14. Recent
Trends
in
the
Resources
Industry
BP
Sta1s1cal
Review
of
World
Energy
2014
• Driven
by
massive
investment
in
shale
and
other
‘(ght’
forma(ons,
the
US
saw
the
world’s
largest
increase
in
oil
produc(on
last
year,
offselng
the
numerous
disrup(ons
seen
elsewhere
and
keeping
prices
stable.
• Coal
was
the
fastest-­‐growing
fossil
fuel,
with
China
and
India
combined
accoun(ng
for
88%
of
global
growth,
while
natural
gas
consump(on
growth
decelerated
and
grew
at
a
below-­‐average
rate.
As
was
the
case
for
total
energy,
gas
consump(on
growth
was
below
average
in
all
regions
except
North
America,
which
con(nues
to
enjoy
the
cheapest
prices
among
interna(onal
markets.

15. Recent
Trends
in
the
Resources
Industry
Resource
Governance
Index
• Measures
the
quality
of
governance
in
the
oil,
gas
and
mining
sector
of
58
countries.
• Revenue
Watch
Ins(tute
calls
on
governments:
-­‐
Disclose
contracts
with
extrac(ve
companies
-­‐
Ensure
regulatory
agencies
publish
(mely,
comprehensive
reports
on
opera(ons
-­‐
Control
corrup(on,
improve
rule
of
law
and
guarantee
respect
for
civil
and
poli(cal
rights
-­‐
Accelerate
the
adop(on
of
interna(onal
repor(ng
standards
for
gov’t
and
companies
• Philippines
ranks
23

16. Emerging
Challenges
Oil
and
Gas
Report,
Ernst
and
Young
(2013)
• Access
to
finance
and
capital
market
constraints
-­‐
Developments
are
becoming
increasingly
challenging,
complex
and
expensive.
The
risks
associated
with
raising
capital
are
likely
to
intensify.
• Increasingly
(ght
local
content
requirements
-­‐
It
would
have
implica(ons
including
labor
costs
and
the
ability
to
deliver
projects
on
challenging
(me
schedules.
• Catastrophic
environmental
events
-­‐
Should
these
become
increasingly
common
or
inextricably
linked
to
CO2
emissions,
then
the
argument
for
immediate
ac(on
to
reduce
CO2
emissions
will
become
not
just
about
affordability,
but
necessity.

17. Top
Five
Factors
Affecting
the
Oil
Price
in
2015
• China’s
economy
-­‐
China
is
the
second
largest
consumer
of
oil
in
the
world
and
surpassed
the
United
States
as
the
largest
importer
of
liquid
fuels
in
late
2013.
• American
shale
-­‐
By
the
end
of
2014,
the
U.S.
was
producing
more
than
9
million
bopd,
an
80
percent
increase
from
2007.
Big
ques(on
is
how
affected
U.S.
drillers
will
be
by
sub-­‐$60
WTI.
• Elas(city
of
demand
-­‐
The
cure
for
low
prices
is
low
prices.
• OPEC’s
next
move
–
OPEC
or,
more
accurately,
Saudi
Arabia
–
has
stood
firm
in
its
insistence
not
to
cut
produc(on
quotas.
• Geopoli(cal
flashpoints
-­‐
History
has
demonstrated
that
geopoli(cal
crises
are
some
of
the
most
powerful
short-­‐
term
movers
of
oil
prices.

18. RESOURCES
INDUSTRY
PHILIPPINES
UPDATE

37. LOCATION
COMMISSIONING YEAR
2013-2015 2016-2020 2021-2025 2026-2030
LUZON 20 800 65 -
VISAYAS 30 150 - 60
MINDANAO - 230 90 20
Total 50 1,180 155 80
TOTAL Geothermal Capacity Addition (2013-2030): 1,465 MW
Targeted Geothermal Capacity Addition
(in MW), by Grid

40. Power
Generation
Mix
2011 2012

42. Developments
in
the
Philippine
Resources
Industry
• West
Philippine
Sea
conflict
• Benham
Rise
• Framework
Agreement
of
Bangsamoro
• Extrac(ve
Industries
Transparency
Ini(a(ve
• Resource
Na(onalism

43. China’s
Nine-­‐Dashed
Lines

44. Benham
Rise
–
The
New
Frontier

45. Proposed
Bangsamoro
Core
Territory

47. DRY WELL,
P&A
DRY WELL w/ oil shows,
P&A
DRY WELL w/ gas shows,
P&A
DRY WELL w/ oil & gas shows,
P&A
OIL
SEEP

48. Developments
in
the
Philippine
Resources
Industry
Extrac1ve
Industries
Transparency
Ini1a1ve
(EITI)
• EITI
is
a
global
standard
for
transparency
in
the
extrac(ves
sector
that
involves
the
reconcilia(on
of
company
payments
with
government
receipts
by
an
independent
administrator
and
disclosure
of
that
informa(on
to
the
public
• EITI
is
a
voluntary,
mul(-­‐stakeholder
ini(a(ve
launched
in
2002,
in
response
to
Publish
What
You
Pay
(PWYP)
campaign;
• The
process
is
managed
by
government,
company
and
civil
society
stakeholders.
Civil
society
must
be
involved
in
the
process;

49. Developments
in
the
Philippine
Resources
Industry
Extrac1ve
Industries
Transparency
Ini1a1ve
(EITI)
• The
Philippine
and
Bri(sh
Governments,
along
with
NGO
Bantay
Kita,
are
embarking
on
a
partnership
that
will
push
the
Philippine
agenda
on
strengthening
transparency
and
accountability
in
extrac(ve
industries.
• The
collabora(on
will
help
the
Philippine
Government
fulfill
its
ini(a(ve
as
a
candidate
country
to
the
EITI
by
working
together
with
Bantay
Kita
in
the
PH-­‐EITI
mul(-­‐stakeholder
group
with
support
from
the
Bri(sh
Government.

50. Developments
in
the
Philippine
Resources
Industry
Extrac1ve
Industries
Transparency
Ini1a1ve
(EITI)
• Aquino
III
recently
announced
its
commitment
to
join
the
EITI
through
EO
79.
The
Philippines
was
accepted
as
an
EITI
candidate
country
at
the
EITI’s
global
mee(ng
in
Sydney
on
22
May.
• MOU
was
signed
on
14
June
2013
between
the
Philippine
Government
and
Bantay
Kita,
which
formalizes
the
agreement
between
the
par(es
to
carry
out
ac(vi(es
that
will
reinforce
the
country’s
work
plan
to
increase
accountability
and
transparency
in
sectors
such
as
mining
and
oil
and
gas.
• Bantay
Kita
has
undertaken
a
separate
agreement
with
the
Bri(sh
Embassy
that
will
provide
funding
for
these
ac(vi(es
through
the
Bri(sh
Government’s
Prosperity
Programme.

51. Developments
in
the
Philippine
Resources
Industry
Resource
Na1onalism
• Governments
are
now
looking
at
different
strategies
to
extract
a
greater
share
of
the
value
from
mining
opera(ons.
• Strategies
include
increasing
taxes
and
royal(es
to
restric(ng
foreign
ownerships.
• Requiring
in-­‐country
processing
or
beneficia(on
prior
to
export
is
another
form.
• Encouraging
in-­‐country
processing
can
also
be
achieved
indirectly
by
imposing
export
restric(ons
and
increasing
export
levies
on
unrefined
ores.
• Con(nued
resource
na(onalism
from
governments
makes
the
countries
less
aZrac(ve
for
mining
investment.

52. Development
Constraints
• Full
foreign
ownership
• Availability
of
geo-­‐scien(fic
informa(on
and
professionals
• Area
status
and
clearance,
conflict
with
other
land
use,
surface/land
ownership
• Procedural
efficiency
and
clarity
between
government
agencies
• Environmental
issues
-­‐
Judicial
interven(on
• Tax
issues
• Cheap
shale
gas
in
the
US
and
its
wide
use
for
power
genera(on
-­‐
coal
producers
to
export
more
to
Asia
at
cheaper
prices.

53. Conclusion
• Philippine
government
will
con(nue
to
ensure
energy
security
by
op(mizing
the
use
of
indigenous
energy
by
investment
promo(ons
and
iden(fica(on
and
implementa(on
of
sector
reforms
• BUT:
Regulatory
framework
should
be
long
term,
transparent,
predictable
and
independently
administered
• Need
to
address
environmental
and
social
acceptability
issues
by
harmonizing
the
permilng
process
and
intensifying
efforts
to
increase
the
level
of
awareness
for
indigenous
energy

54. Overview
of
Global
and
National
(Philippines)Energy
Outlook
Atty. Fernando S. Penarroyo
Asian
Ins(tute
of
Technology

55. About
the
Lecturer
• BS
Geo,
Bachelor
of
Laws
(UP),
Master
of
Laws
(Univ.
of
Melbourne)
• Managing
Partner,
Puno
and
Penarroyo
Law
(www.punopenalaw.com)
• Trustee
and
Secretary,
Philippine
Mineral
Explora(on
Associa(on
• Trustee,
Na(onal
Geothermal
Associa(on
of
the
Philippines
• Director,
Interna(onal
Geothermal
Associa(on
• Professorial
Lecturer,
De
La
Salle-­‐FEU
MBA-­‐Law
Program,
UP
Na(onal
Ins(tute
of
Geological
Sciences
• hZp://www.philippine-­‐resources.com/