Is Malampaya East-1 the Philippines’ natural gas comeback story

The cheer over the Philippines’ discovery of new natural gas sources may offer only short-term impact on energy stocks, with the discovered reserves being dwarfed by the capacity of the standing main reservoir.

On Monday, President Ferdinand Marcos Jr. announced the discovery of about 98 billion cubic feet of gas near the Malampaya gas field off the coast of Palawan, now dubbed Malampaya East-1 (MAE-1).

The nation’s first significant gas discovery in over a decade offers a silver lining amid worries that the main Malampaya field would run dry as early as 2027.

Ranking of the Philippines’ power sources

To address power security, companies including Manila Electric Company (Meralco), Aboitiz Power Corp. (AP), and San Miguel Corp. partnered to create LNG Philippines (LNG PH) and develop a terminal for the import for liquefied natural gas (LNG).

The recent gas discovery offers a new avenue to secure natural gas, potentially extending the life of Malampaya. Still, the current sentiment may be inflated. Reserves in MAE-1 is equivalent to about 3% to 4% of Malampaya’s total estimated capacity.

What is the impact on power stocks?

What may happen is a short-term lift in sentiment, especially with ongoing progress of two other gas exploration initiatives in the area–with results to be released sometime this quarter.

Among power stocks, First Gen Corp. may benefit the most, as bulk of their earnings come from the gas sector, and with the Malampaya gas field operator having a 60% share in the company’s assets.

Meralco and AP may see minimal upside in the near term. As LNG PH has already secured contracts for imported LNG, they may not immediately be impacted by the new supply. However, should exploration efforts lead to new discoveries, it could ease the pressure on LNG PH, and provide them with the option to source locally instead.

Overall, the sector may see some slightly positive movement due to sentiment in the near future. The actual long-term impact remains hinged on upcoming news regarding current natural gas explorations.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses)

WILLIE KRISTOFFERSON YU is an Equity Research Analyst at Metrobank’s Trust Banking Group. His coverage includes utilities, telcos, mining, and gaming, as well as select offshore markets. He holds a Bachelor’s degree in Management Engineering from the Ateneo de Manila University. He is currently pursuing industry certifications to better immerse himself in Financial Markets. Outside of work, he enjoys playing the piano and golf.

CHARLES RANDY LUMHOD is an Equity Research Analyst at Metrobank’s Trust Banking Group. His coverage includes shipping, properties, REITS, and consumers, as well as select offshore markets. He holds a Bachelor’s degree, cum laude, in Business Administration major in Financial Management from the University of Santo Tomas. He is also a Certified Treasury Professional and Certified UITF Salesperson, and is currently pursuing other industry certifications. Outside work, he stays active by running and going to the gym.