DOE eyes more local coal in Semirara contract

TAGUIG CITY, Philippines — The Department of Energy is considering requiring the next operator of the Semirara coal mine to sell more of its output in the Philippines while giving the government a larger share of the project’s revenue.

The proposed changes could improve domestic energy security, reduce exposure to imported fuel and generate more public revenue, although any benefit to electricity consumers would still depend on coal pricing, transportation costs and power-supply arrangements.

Energy Secretary Sharon S. Garin said during an Aug. 11 press conference in Taguig that the government was still drafting the terms of reference for the bidding, including the conditions and deliverables that would bind the winning contractor.

Garin said about 80% of Semirara’s current coal production was exported, a balance the government wanted to reverse under the new agreement.

“We’re doing the terms of reference… on what conditions do we want [from] the winner. Like now, 80% of that is exported. We want the other way around,” Garin said in an interview following the briefing.

Directing more Semirara coal to Philippine buyers could increase the availability of locally produced fuel for power generators and other industries.

The policy could also lessen the country’s vulnerability to international supply disruptions and foreign-exchange movements, although local availability would not automatically guarantee cheaper electricity.

Garin said the DOE was coordinating with the Department of Finance, Department of Economy, Planning, and Development, Department of Environment and Natural Resources and other agencies as it finalized the bidding conditions.

The DOE is also studying whether the government should receive a higher revenue share because Semirara is an established operation with lower project risk than an undeveloped coal site.

“We’re entertaining the idea because Semirara has been a reliable source. It’s a sure source. There’s less risk in that contract,” Garin said, adding that the government could seek a sharing arrangement that provides greater public benefit.

Under the existing contract, the government’s share is calculated at 30% of net proceeds, subject to contract provisions, with a minimum share equivalent to 3% of coal revenue.

During the main press conference, Garin said the extent of the domestic allocation would depend on how the terms of reference were written.

She said requiring the majority of the mine’s output to be sold locally was a policy direction supported not only by the DOE but also by the Executive.

The proposed revisions have delayed the bidding process as the government works to settle outstanding issues and complete the terms.

Semirara is among three coal contracts being prepared for bidding, but the process remains on hold while the government refines the conditions.

The government’s contracting round covers three areas containing 18 coal blocks across 18,000 hectares, including 10 Semirara blocks spanning 10,000 hectares in Caluya, Antique.

The DOE still hopes to conduct the bidding proper within the year.

Garin said the original timetable of around September could be pushed back by at least two months.

The timing is significant because SMPC’s 50-year Coal Operating Contract No. 5 expires in July 2027, increasing the need for a transition that protects workers, host communities and continuity of supply.

The delay comes after SMPC, the current mine operator, announced a workforce reduction amid uncertainty over the bidding.

Garin said the DOE would investigate the reason for the retrenchment.

She stressed that the workforce reduction would not affect the bidding and described SMPC as a “very qualified candidate” for the coming round.

The energy secretary also played down concerns that a temporary interruption in Semirara’s operations would cause a major disruption to the country’s power supply.

Garin said only a relatively small share of Semirara coal was currently consumed by Philippine power plants because most of the output was exported.

She said any additional coal requirement could be supplied by other domestic mines or through imports from other countries.

The government’s proposed allocation requirement could reshape Semirara’s role by directing more of the country’s coal resources toward Philippine consumers.

A higher government share could also allow the public to capture more value from an established mine while the bidding rules seek to preserve operational continuity, employment and reliable energy supply.