Natural Gas in the Philippines: A Test Case for Southeast Asia’s Energy Transition

On 19 January 2026, Philippine President Ferdinand Marcos Jr proudly announced the discovery of new natural gas reserves just 5 kilometers east from the original Malampaya gas field off the coasts of Palawan. With an estimated 98 billion cubic feet (2.77 billion cubic metres) of natural gas, Malampaya East-1 was touted by Marcos as a discovery that will “significantly boost the country’s energy supply and strengthen long-term energy security.” But rather than securing the country’s energy future, the discovery underscores the danger of doubling down on natural gas when a faster pivot to renewables is urgently needed.

The timing could not have been more perfect. The Malampaya natural gas field was discovered in the late 1980s and powers as much as 40 per cent of the electricity needs in Luzon, the country’s biggest island group accounting for more than half of the Philippine population. It is expected to run out of natural gas in 2027.

But the new discovery may be too early to celebrate. A huge cloud of uncertainty surrounds Malampaya East-1, which is not enough to singlehandedly ensure energy security and sustainability in the Philippines.

For starters, the newly discovered natural gas field is relatively modest: initial data suggest it is just about 4 per cent of the original gas field. Granted, there are other potential new discoveries to be made in the West Philippine Sea. But Malampaya East-1 is in no position to replace Malampaya’s historic role and avert any looming energy crisis.

In addition, the discovery itself does not offer immediate relief. The size of the new reserves are based on exploratory test flows. The extent of recoverable natural gas is still unknown. Further drilling campaigns will also take much more time (years, perhaps) and lots of capital spending.

There is a bigger context to the discovery. Starting around 2017, in anticipation of the depletion of the original Malampaya reserves, the private sector and the government pivoted toward a strategy of imported liquefied natural gas (LNG), calling it a “transition fuel.” This spurred investments in LNG facilities (technically called floating storage and regasification units) in Batangas province — which is in the southwest of Luzon, the country’s biggest island. Many more facilities are in the pipeline.

The problem is that greater reliance on imported LNG is a stop-gap measure that exposes the country to the volatility of global LNG prices and exchange rate risks. For example, in the wake of Russia’s invasion of Ukraine in 2022, natural gas prices became exceedingly volatile. As of 2023, natural gas contributed 3.8 per cent of the country’s energy supply.

While Malampaya East-1 abates some of the pressure to develop LNG facilities for processing imported LNG, its modest size and long development timeline means it cannot easily substitute for imported gas. And there is a broader concern: natural gas (whether from Malampaya or abroad) is still a fossil fuel that goes against the Philippines’ climate goals, particularly its aim to rely less on fossil fuels. Locking into natural gas resources reduces the urgency to pour capital investments into renewables. Incidentally, the Philippines is one of the countries most at risk to climate change, which is a direct effect of fossil fuel usage.

The Philippines is projected to have the greatest prospective solar and wind capacity in ASEAN. But persistent grid bottlenecks, fragmented permitting, and regulatory uncertainties hamper investments.

There are also governance concerns. More than two decades ago, significant proceeds from the original Malampaya gas field funds (called the Malampaya Fund), were embezzled and diverted to bogus private organisations thanks to Janet Lim Napoles, a personality later linked to pork barrel fund scam. The state auditor has flagged that from 2002 to 2012, at least PHP 38 billion (USD660 million today) of the Malampaya Fund was misused, and until now this case is yet to be fully resolved.

On the part of the Marcos administration, the first order of business is transparency and expectation management. Apart from reporting to the public the “gas in place,” the Marcos administration must publicise credible assessments of the recoverable reserves, realistic timelines for commercial production, and expected government revenues. Without this, Malampaya East-1 risks being more of a political talking point than a sound basis for the planning of future energy supply.

Second, it would be ideal if Malampaya East-1 does not induce lasting investments in natural gas. While natural gas can be a viable transition fuel, it should be complementary to renewables and not become a permanent replacement for them.

The Marcos administration’s plan is for renewables (including geothermal, hydro, wind, solar, and biomass) to constitute half the country’s energy mix by 2040. As of 2024 this stood at 32 per cent. This is part of a broad strategy to attain zero net carbon emissions by 2050. Malampaya East-1 must not derail these goals, and the government ought to be taking advantage of the plummeting global costs of solar and wind energy capital investments.

The irony here is that the Philippines is projected to have the greatest prospective solar and wind capacity in ASEAN. But persistent grid bottlenecks, fragmented permitting, and regulatory uncertainties hamper investments. In contrast, Vietnam is racing ahead of the region not just in terms of economic performance but also in renewables: the combined share of solar and wind installed capacity there was approximately 6.8 times that of the Philippines in 2024 Vietnam has benefitted greatly from direct investments and cheap inputs from China.

Finally, there is an urgent need to zero in on the sources of energy insecurity in the Philippines. This includes addressing critical constraints in transmission infrastructure, permit processing, regulatory uncertainties, chronic underinvestment in energy storage facilities and grid flexibility. Malampaya East-1 cannot compensate for these structural failures. In short, Malampaya East-1 is modestly good news for the Philippines but nowhere near a breakthrough. For the country’s long-term prospects, a credible transition away from fossil fuels, including natural gas, will constitute much better news.

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