Philippines and Indonesia strengthen energy cooperation

President Ferdinand Marcos Jr. and Indonesian President Joko Widodo on Wednesday witnessed the signing of a Memorandum of Understanding (MOU) on cooperation in the field of energy between the Ministry of Energy and Mineral Resources of Indonesia and the Philippine Department of Energy, respectively, in Malacañang Palace.

“The signing of the MOU reinforces and updates the long-term energy cooperation between the two countries.  On the part of the Philippines, it is an offshoot of our President’s efforts to achieve higher energy security through energy diplomacy,” Energy Secretary Raphael P.M. Lotilla said.

Both parties agreed to facilitate cooperation between their respective business sectors particularly during periods of critical supply constraints on energy commodities such as coal and liquefied natural gas (LNG).

The MOU also offers potential benefits across economic, environmental, and geopolitical dimensions through collaboration on energy transition, renewable energy, demand-side management, electric vehicles, and alternative fuels such as hydrogen, ammonia, and biofuels.

Previous bilateral agreements reflected the dominance of state-owned companies in the power sector in the Philippines and the upstream sector including coal mining in Indonesia. The role of the private sector in energy has significantly grown in both countries and adjustments were made to reflect the new realities.

Secretary Lotilla pointed out that Indonesia and the Philippines share common energy concerns and can benefit from heightened levels of cooperation.

Indonesia and the Philippines are second and third globally in terms of installed geothermal generation plants.  Both are currently highly dependent on coal-fired power plants and are seeking an orderly transition to cleaner technologies without imposing heavy additional burdens to their respective populations.

Transitioning to clean energy to achieve the country’s energy security goals would require a transition fuel capable of providing baseload generation that would fill in the gap when existing coal-fired power plants start to retire.

Natural gas, including LNG, is a suitable transition fuel where the private sector investments in this technology will be facilitated to address the variability of renewable energy capacity additions and ensure the reliability and security of the power system.

The two countries are major sources of minerals needed for the energy transition and have vast potential for solar, wind and ocean energy production.

Both archipelagic countries also pursued similar advocacies during the negotiations on the United Nations (UN) Convention on the Law of the Sea that impact on energy development in their maritime zones.

While Indonesia does not consider itself a claimant to the features in the South China Sea, they share the same view that uninhabited rocks and submerged maritime features cannot generate their own exclusive economic zone and continental shelf.

Secretary Lotilla also noted that the Philippines has been a dependable market for Indonesian coal, accounting for nearly 98% share of total Philippine coal imports in 2022, consistently increasing from 88% in 2017.

But following the failure of Indonesian coal mines to provide adequate supply to their domestic power plants and markets, the Indonesian government issued a coal export ban in January 2022. This forced countries like the Philippines to scramble for alternative sources of coal and caused coal prices to spike.

The Philippines imported more than 80% of its coal requirements in 2023 and even more than 90 percent in previous years.

Since then, the Philippines exerted diplomatic efforts to ensure a steady flow of coal supply from Indonesia.

The latest among them were the bilateral meetings between Energy Secretary Lotilla and Indonesian Energy Minister Arifin Tasrif during the Asia Zero Emission Community (AZEC) Ministers’ Meeting held in Tokyo in March 2023 and the 41st ASEAN Energy Ministers Meeting (AMEM41) in August 2023 held in Bali, Indonesia.

During these engagements, Minister Arifin reiterated his assurances to Secretary Lotilla of the continued and uninterrupted coal supply from Indonesia.