OPENING SPEECH OF PHILIPPINE ENERGY SECRETARY ALFONSO G. CUSI
Joint Official Opening Ceremony of the
35th ASEAN Ministers on Energy Meeting (AMEM35) and the
ASEAN Energy Business Forum (AEBF) 201727 September 2017, SMX Convention Center Manila
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Fellow ASEAN Ministers / Heads of Delegation from the ASEAN Member States / Heads of Delegation from the Development partners/ the ASEAN Secretariat / the ASEAN Center for Energy and other International Organizations / Fellow Government Officials/ Distinguished Guests / Partners and Colleagues in the Energy Sector.
Magandang Umaga Po!! Good morning.
It’s great to welcome you all today to Manila for the joint opening of the 35th ASEAN Ministers on Energy Meeting and the ASEAN Energy Business Forum.
I am especially delighted to have been given the opportunity to address such an eminent set of attendees: civil servants, fellow politicians, energy experts and business leaders across the region. We are also pleased to have with us many of ASEAN’s old friends from countries such as Australia, China, Japan, Korea, United States and Russia, India and New Zealand.
The diverse backgrounds and nationalities of our attendees highlight the truly global nature of the issues that we will be discussing throughout the week.
We will need great commitment, bold ideas and innovative solutions in our pursuit to make our tomorrows better than today. This is an endeavor that can only be realized if it is built on the foundations of regional and public-private cooperation.
Presented with an opportunity to do just that this week, I hope that all of us will be up to the task.
Ladies and gentlemen, in our journey towards one ASEAN community through resilient and sustainable energy, I believe that it is imperative that we take stock of the emerging headwinds faced by the global energy landscape.
These are headwinds that bring about new energy realities.
Realities that promise to change the way that governments and businesses approach the big energy questions of our times. New realities that manifest themselves in two notable trends.
First trend is that ASEAN is COMMITTED TO A FUTURE OF RENEWABLES
The first comes in the form of renewable energy. This of course is something that all of us in this room – by instinct or by outlook – feel strongly about. From reduced carbon footprints to lower emissions to cleaner air, we know just how important it is that we invest in a future of renewables.
I am pleased to say that this is an endeavor that ASEAN has been proactive in pursuing. That is why we celebrate the fact that in 2013, ASEAN exceeded its target RE mix under the ASEAN Plan of Action for Energy Cooperation (APAEC), where we made an initial promise to increase our RE mix to 23% by 2025. We managed to exceed this target in 2013 - ahead of time and some 12 years before our deadline.
That is why we also celebrate the recent strides in renewables made by member countries in this region. We celebrate the fact that Singapore has developed the region’s first offshore renewable energy system. We celebrate the fact that Malaysia is the 3rd-largest producer of solar panels in the world.
It’s clear that ASEAN wants to be part of the solution and not the problem. But while these are milestones that are significant, the work does not stop here. There is still more that needs to be done.
THE RENEWABLES INDUSTRY MUST INNOVATE TOWARDS A SUSTAINABLE FUTURE
With ASEAN’s resolve in this pursuit undiminished, a challenge has also been thrown to the renewables industry: How can you continue to attract investments, build capacities and eventually, bring costs down?
This is important because while renewables are a sustainable source of energy, they also need to be commercially sustainable. By this, I mean that it’s not just enough to have your technologies out there supplying power for the grids. Renewables need to be a commercially viable option - able to stand on its two feet without the crutches of subsidies as well as being an affordable solution for consumers.
I’m glad to say that we’ve seen in recent times that costs have come down. But in far too many countries, renewables still need to be subsidized to compete with other sources. This is not good for the future of renewables. Nobody – least of all the industry – should expect that subsidies would remain forever, especially when consumers have to foot the bill. Ultimately, renewables must reach grid parity. In a world where carbon is priced in a fair manner.
Therefore, it is imperative that we pursue a vision of a competitive market that keeps tariffs low and within reach. Where the onus is on renewable players to be able to innovate and compete on a level playing field. This is not a fantasy.
And as I argued earlier, the new reality for renewable energy sources is that they can and are becoming sustainable -- thanks to competition and innovation. The evidence is clear. Indeed, we have been able to do that to an extent here in the Philippines.
Consider that we’re the second-largest producer of geothermal energy in the world, which runs without subsidies and can cater to our baseload needs. Consider that we’ve also begun phasing out FIT schemes for Solar and Wind due to falling tariffs. For these sources, we are entering a new phase that sees market-based incentives at the forefront.
These come in the form of the Renewables Portfolio Standards, which guarantees incremental demand on the distribution side for power generated by renewable source.
We also see this happening on a broader scale. Asia has already emerged as the largest producer of renewable energy. China is leading the way, with a renewable sector that is growing faster than fossil fuels and nuclear.
In India, solar and wind tariffs have torpedoed making them viable options for the Indian consumer. Globally, we’ve seen Elon Musk develop power pack batteries that have already cut electricity bills in homes by up to 92%.
These are moves that are changing the renewable energy landscape. No longer are renewables the energy of tomorrow. Instead, they are slowly becoming the energy of today. Clearly, the future is renewable. One where it is sustainable. One where it is affordable. One where it is competitive.
To ride this wave, ASEAN countries can meet their end of the bargain by providing a market that can attract investments. But it is up to the industry to continue to meet its end of the bargain by bringing costs down, in line with the emerging trends and innovations that are on-going.
My challenge to you is to be part of this wave -- To innovate and to bring sustainable solutions. And I believe that this week’s conferences can serve as a platform where best practices on renewables can be learnt and shared. Not just among ASEAN member countries but also from our esteemed friends from the +3 nations and the other East Asia Summit countries.
Another trend is in the LNG: THE BRIDGING FUEL OF THE FUTURE
Ladies and Gentlemen, while sustainable renewables will come to dominate the future, there is still a need for a stable source of electricity that can bridge this transition. Without this, we will not be able to secure our energy security.
I would like to draw your attention to the second emerging trend that is changing our energy landscape: The revolution in gas that promises to make it the bridging fuel in the short to medium-term.
This revolution is defined by three major developments.
The first is increasing demand from Asia - where our players will eventually transition from net exporters to net importers.
The second is increasing supply from the rest of the world: Where new supplies have come on stream, especially from the United States.
The third is cheaper gas. Due to the reconfigurations of these supply and demand mechanics, changing the way gas is purchased and pushing costs down in the process.
In this region, these changes already taking place, and at a fast pace. For starters, nowhere are the prospects higher for the demand of gas than in Asia. For the first half of this year alone, Chinese LNG imports jumped 38% from the same period in 2016.This thirst for gas is set to grow further.
According to forecasts by British Petroleum, China and India alone are expected to account for half of the 30% increase in global energy demand between today and 2035.The same trends are happening in ASEAN, where the situation is such that as gas fields continue to deplete, we will eventually transition from net exporters to net importers.
In fact, the Oxford Institute for Energy anticipates that by 2021, ASEAN countries will be net importers requiring 20 million tons. This is set to rise to at least 45 million tons in 2030. Now, that’s just on the demand side of the equation. As demand continues to grow, things look promising on the supply side as well. Indeed, global supplies of LNG are on course to increase by 50% between 2014 and 2021.
It’s also wise to take note of the effects that US LNG exports have had on the global LNG market due to the shale gas revolution in the United States. Once a net importer, the US is now a net exporter of natural gas and is expected to become the world’s 3rd biggest exporter of LNG by 2020.
This has had a disruptive effect on the markets, as the prospects of rising US gas exports has put pressure on the pricing formula of several existing long-term contracts. What is happening is that a market once-dominated by long-term contracts between a small number of suppliers, and an equally exclusive club of buyers such as Japan and South Korea, have been blown open by the influx of US gas.
Consider that a decade ago, more than 95% of LNG contracts were for 10 years or more. Today, that figure is down to about 60%. Given these new developments, ASEAN needs to start planning for this future. We need to think of how we can ride this LNG wave, to ensure that we can safeguard our energy security.
We’ve started doing just that in the Philippines. We’ve started with the rollout of the Batangas LNG Terminal by 2020 to safeguard against the anticipated depletion of the Malampaya gas facility in 2024.
The buy-in is there. The investors are in. And we expect to commence groundbreaking of this project in 2018.
Things are also picking up on the regional front. We have already begun pursuing the Trans-ASEAN Gas Pipeline to ensure that we can move gas around the region, with pipelines linking Singapore, Malaysia, Thailand, Myanmar and Indonesia.
This will benefit our member countries, lowering costs to move gas around. This sense of urgency is encouraging, but more needs to be done to put us on a stronger footing. Especially when you consider ASEAN's increasing needs for LNG.
Already, it is expected that Southeast Asian nations could soon double import capacity for liquefied natural gas as domestic energy sources fall short, collectively becoming a key player in the global LNG market.
This will see the region boosting its annual LNG receiving capacity from 25 million tons to some 50 million tons over the next five years. The expanded figure equates to about 20% of the LNG carried on tankers worldwide in 2015.
ASEAN THEREFORE IS THE PLACE TO INVEST
These are great plans, yes. But these are plans that will cost money. It is now imperative on us to draw in more investments and expertise to ensure that we are prepared for this new future. Hence, I call on our friends from other countries to help us on this journey.
We welcome your expertise, your experience as well as your investments to help power growth in this region. My message is simple: ASEAN is the right place for you to invest.
Not only because of our growth potential, but also because of our efforts to make our region the primary investment destination for foreign investors. This is especially true here in the Philippines, where we intend to fulfill our side of the deal.
Our track record speaks for itself. We already have an open and transparent market. And we’ve always looked to introduce policies to create a regulatory environment that is conducive and supportive to both regional and global investors.
We’re also doing more, making conscious efforts to reduce regulations and to speed up the process of project approvals through the introduction of Executive Order No 30. This will change the way we process energy projects.
No longer will it take up to 3 years for an agency to respond to a proposal for a project. Instead, these agencies must act on a proposal WITHIN 30 days, failing which, the proposal is deemed approved.
Such efforts are not just unique to the Philippines. Indeed, similar trends are taking place across the region, as ASEAN member-countries seek to pull-in much needed investments.
My friends, if ever there was a right time to invest in energy in ASEAN, it is now!
Ladies and Gentlemen, let me conclude today by reiterating the points that I made earlier. I spoke about two emerging trends that are changing the realities of the global energy landscape.
I said at the start, that the prospects for sustainable renewables are better today than any time in the past. I also alluded to the fact that while renewables will come to dominate energy mixes in the long-term; LNG, will prove to be the bridging fuel that gets us through the short to medium-term.
These developments will bring their own sets of challenges. But at the same time, there are plenty of opportunities -- opportunities that can only be realized if all of us can work together to meet these challenges. And we can’t do this by merely grasping for simple solutions. We can only do this by engaging in a transition that is thorough.
That means innovation towards sustainability from a competitive renewables industry;
That means laying out detailed plans to make the most of the LNG revolution;
That means ASEAN governments clearing hurdles to investments;
That means our friends in the private sector and +3 nations and other East Asia Summit countries, sharing their best practices and investments in this region.
So, I encourage all of you to come and join us in ASEAN on this journey, as I believe this will not only be good for you and for us, but for future generations to come. The investments in these ideas will not only be good for the ASEAN economy, but also for our planet.
If all of us can work to ensure that all paths can lead to the same place, then we can get to where we need to be. With your full support, I look forward to the success of AMEM35 and its Associated Meetings and the ASEAN Energy Business Forum 2017.
Thank you and Mabuhay!
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