WP 2021-05: Gauging the Market Potential for Natural Gas Among Philippine Manufacturing Firms

Working Paper 2021-05
Gauging the Market Potential for Natural Gas Among Philippine Manufacturing Firms
Majah-Leah V. Ravago, Raul V. Fabella, Karl Robert L. Jandoc, Renzi G. Frias, and J. Kathleen P. Magadia

Abstract 

One sizable group of energy users in the Philippines is the collection of firms in the Special Economic Zones (SEZs). The production process among many of the firms in the SEZs includes heating, which currently uses the more expensive and less environment-friendly diesel or liquefied petroleum gas as fuel. Thus, natural gas is a potential cost-competitive and cleaner substitute for the feedstock currently used in both heating process and electricity requirements of firms in SEZs. Our objective in this study is to assess the likelihood of firms to switch to natural gas and determine the profile of power and fuel use among firms in manufacturing and agro-industrial SEZs. We find that the extent of knowledge about natural gas and their production technology process are the primary determinants of the likelihood to switch. Particularly, the knowledge that natural gas is a cost-competitive alternative along with the use of heating in the production process are critical to increasing a firm’s probability of switching. Hence, energy-intensive manufacturing firms that use more expensive fuel sources such as diesel for heating are more likely to switch to natural gas. These results also help shed light on facilitating the efficient transition away from less environment-friendly fuels to relatively cleaner natural gas and renewable sources.

Keywords: Liquefied natural gas use, industry processes, Philippines, logit regression

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