Philippines Faces LNG Cost Surge Threatening Energy Security

By Francis Allan L. Angelo

A new analysis warns that the country’s plan to dramatically increase liquefied natural gas (LNG) imports by 508% over the next four years will lead to soaring electricity prices, burdening households and threatening economic stability.

The joint briefing by international research group Zero Carbon Analytics (ZCA) and the Philippine-based Center for Renewable Energy and Sustainable Technology (CREST) outlines billions in expected costs.

The financial pressure stems from a triple threat: expensive LNG imports, massive infrastructure investments, and rising electricity generation costs.

The report, released today, comes as the Philippines confronts the depletion of its primary domestic gas source, the Malampaya gas field.

According to the Department of Energy, the Malampaya field’s supply was predicted to run out in 2024, while other analyses project its depletion by 2027.

Despite the looming end of this local resource, the government’s 2023 Philippine Energy Plan (PEP) foresees the share of gas in electricity generation climbing from 16% in 2022 to 24% by 2040.

This strategy hinges on a massive surge in LNG imports, which are projected to grow six-fold between 2025 and 2029.

The planned expansion is set to cost the nation an estimated USD 3.9 billion (PHP 218 billion) through 2029.

That figure is approximately USD 841 million (PHP 47 billion) more than what domestic gas would have cost over the same period.

On top of import costs, the construction of five new LNG terminals will require an additional investment of about USD 1.5 billion (PHP 83.7 billion).

This brings the total investment for the nation’s gas strategy to a staggering USD 5.4 billion (PHP 301.5 billion) in just the next four years.

Experts caution that these figures are likely conservative.

The calculated construction costs do not include ancillary expenses like shipping, terminal operations, or pipeline transport.

Ultimately, these escalating expenses are expected to be passed on to the public.

The analysis projects that the reliance on expensive LNG will drive up gas-fired power generation costs by 11% to 24%.

Since generation charges account for over half of a consumer’s electricity bill, this increase will directly impact households and industrial users.

In April 2025, generation charges already constituted an average of 56% of electricity bills for many consumers.

The Philippines already contends with some of the highest electricity prices in Asia, ranking third in the region from 2023 to 2025, trailing only Singapore and Japan.

Yu Sun Chin, Asia Regional Researcher for Zero Carbon Analytics, stated, “The Philippines has had the third-highest electricity prices in Asia over the past two years. Our analysis shows that importing more gas will likely raise those prices. Instead of importing LNG and building costly LNG infrastructure, the government should look instead to the country’s huge potential for solar and wind, which can now produce electricity more cheaply than gas.”

The report highlights that renewable energy sources like solar and onshore wind are already more cost-effective than gas in the Philippines.

In 2023, the levelized cost of energy (LCOE) for solar was USD 87/MWh and for onshore wind was USD 111/MWh, both lower than the USD 114.5/MWh for combined cycle gas turbines.

The costs for renewables are projected to continue their downward trend, while gas costs are expected to fall by less than 10% by 2040.

Rei Panaligan, President of CREST, emphasized the economic and environmental advantages of renewables.

“The Philippine government’s reliance on imported fuel for power generation resulted in high electricity prices which is a burden to Filipino electricity consumers and local industry,” Panaligan said. “LNG imports are very expensive and the rising gas price will continue to expose the country to a volatile global market.”

Panaligan added, “Renewables such as solar and wind are cheaper options than gas both in terms of the upfront costs and generation. Renewables are also a cleaner choice compared to LNG, a fossil fuel that emits significant amounts of greenhouse gases such as methane. The Philippines has the potential to generate enough indigenous renewable power to meet our own energy demands. The Philippine government should invest further for more renewables and to start closing permanently the door to fossil fuels.”

The turn to imported LNG also exposes the Philippines to the volatility of global energy markets.

Following Russia’s invasion of Ukraine in 2022, Asian LNG prices doubled, leading to blackouts in import-dependent nations like Bangladesh and Pakistan that could not afford the fuel.

Recent tensions in the Middle East have reignited fears of supply disruptions and price spikes in Asia.

Sam Reynolds, Research Lead at the Institute for Energy Economics and Financial Analysis (IEEFA), underscored these risks.

“This latest report from Zero Carbon Analytics and CREST demonstrates clearly the economic risks of LNG imports for the Philippines and the exorbitant costs associated with national plans to deepen dependence on global fossil fuel markets,” Reynolds stated. “A three-fold increase in the country’s LNG import bill over the next four years is fundamentally incompatible with efforts to reduce household electricity prices and bolster economic growth and development.”

Reynolds warned that the cost estimates in the report represent a best-case scenario.

“Importantly, the cost estimates in this report represent a conservative scenario. Recent geopolitical tensions around the Strait of Hormuz show just how exposed the Philippines could be to price spikes and energy insecurity in the event that key LNG shipping routes are disrupted. Amidst a potential closure of the Strait of Hormuz, through which 20% of global LNG trade flows, analysts have projected that Asian LNG prices could rise 10-fold. This is not an isolated case. Rather, extreme volatility is part and parcel of global LNG markets.”

He concluded, “While some imports may be necessary to replace domestic production in the short term, this should not justify long-term plans to rely even more on imported gas. Instead, supporting the rapid deployment of low-cost, domestically sourced renewables will be critical. Not only for economic growth and sustainability, but also for energy security.”

The government has promoted LNG as a “transition fuel,” enacting the Philippine Natural Gas Industry Development Act in January 2025 to encourage investment.

However, the report questions this strategy, pointing to the financial risks and the potential for long-term lock-in to expensive infrastructure.

High electricity prices have already been shown to hinder industrial growth and foreign investment in the Philippines.

They particularly affect small to medium-sized enterprises, which are responsible for about 40% of the nation’s GDP.

The analysis concludes that a decisive shift toward the country’s abundant and increasingly cheaper renewable energy resources is essential to lower costs, enhance energy security, and meet climate goals.