NINETEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
SENATE
S.B. No. 1944
IS)(©ffitc of tl)f g^i-MTtnrji
23 mar -1 All :26
RECEIVED 3V
Introduced by SENATOR IMEE R. MARCOS
AN ACT
PROMOTING THE DEVELOPMENT OF THE PHILIPPINE DOWNSTREAM 
NATURAL GAS INDUSTRY, AND APPROPRIATING FUNDS THEREFOR
EXPLANATORY NOTE
Article II Section 20 of the 1987 Constitution states that "The State recognizes 
the indispensable role of the private sector, encourages private enterprise, and 
provides Incentives to needed investments."
As of 2021, natural gas accounts for 12.8% of the country's installed capacity 
in the grid at 3,453 MW. Due to the location of the Malampaya Gas Field and its related 
infrastructure, almost all of this capacity is located in Luzon. As such, natural gas 
accounts for 18.6% of the capacity mix of the Luzon Grid at 3,452 MW of installed
capacity.
However, the Malampaya Gas Field is projected to ran out at 2027. Even before 
that, the Malampaya concession will expire at 2024. These developments threaten to 
transform the natural gas installed capacity into stranded assets unless alternative 
sources of natural gas can be developed.
Absent the development of new gas fields, the only remaining option to avert 
an energy crisis is for the country to import natural gas. As such, there is a need to 
pass a law to cover the downstream natural gas industry. The proposed measure 
recognizes regulated private sector participation in the industry, with an end goal of 
protecting the interest of consumers.
The passage of this bill is earnestly sought.
EE R. MARCOS


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NINETEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
S£,tua';‘
V®fficr of file ig* r I fJai-p
23 mar ~1 All :26
SENATE
. 1944
S.B. No
Introduced by SENATOR IMEE R. MARCOS
AN ACT
PROMOTING THE DEVELOPMENT OF THE PHILIPPINE DOWNSTREAM 
NATURAL GAS INDUSTRY, AND APPROPRIATING FUNDS THEREFOR
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled:
CHAPTER I
GENERAL PROVISIONS
SECTION 1. Short Title. - This Act shall be known as the "Philippine 
Downstream Natural Gas Industry Development Act".
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to:
a. Promote natural gas as a safe, environment-friendly, efficient and cost-effective 
source of energy, and an indispensable contributor to grid security, especially 
with the entry of more intermittent renewable energy sources by establishing 
the Philippine downstream natural gas industry (PDNGI) for the benefit of all 
segments of the nation,s population and all sectors of its economy,
b. Promote the development of the Philippines as a liquefied natural gas (LNG) 
trading and transshipment hub within the Asia-Pacific Region;
c. Provide a conducive industry environment through the issuance of policies, 
regulations, safety code, product quality and facility operational standards, and 
plans and programs geared towards the promotion and development of the
PDNGI;


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d. Promote access to and the financial viability of the PDNGI by liberalizing the 
entry of investors under a system of competition, transparency and fair trade 
and providing responsive policy support, with the end goal of attaining fair price 
for all stakeholders;
e. Ensure compliance with international and Philippine health, safety, security, 
environment (HSSE) standards and best practices under a system of safe, 
secure, high-quality, environmentally responsible operation and services that 
afford protection to consumers;
f. 
Ensure transparent and reasonable price of natural gas and rates for its 
importation, storage and regasification, transmission and distribution in a 
regime of open and fair competition and full public accountability that shall 
promote greater operational and economic efficiency and enhanced 
competitiveness of the Philippine products in the global market;
g. Develop the necessary trades, technical expertise and skills to support the
PDNGI; and
h. Facilitate the development of end-uses of natural gas including the use of 
natural gas as fuel for power, commercial, industrial, residential and transport 
that promote fuel diversity and compliance with existing environmental laws.
SEC. 3. Scope. - This Act shall provide a framework for the development of 
the PDNGI and its transition from emerging industry into mature industry status within 
a competitive natural gas market, and define the responsibilities of various 
government agencies and private entities in furtherance of this national goal. All 
activities of the Department of Energy (DOE), Energy Regulatory Commission (ERC) 
and other concerned government agencies relevant to the development and regulation 
of the PDNGI shall be in accordance with this Act.
SEC. 4. Definition of Terms. - As used in this Act: 
a. Affiliates refer to the corporate relationships of two or more persons, one of whom 
either owns or controls or is being controlled by other persons. As used herein, 
"control" shall mean the power to direct or cause the direction of management 
policies as an inherent part of decision-making power.


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e.
f.
b. Anti-Competitive Behavior refers to the practices and agreements in violation of 
the provisions of Republic Act No. 10667, otherwise known as the "Philippine 
Competition Act";
c. Capacity refers to the maximum flow expressed in normal cubic meters per time 
unit or in energy unit per time unit;
d. Deiivery refers to the transmission or distribution of natural gas and the supply of 
natural gas at wholesale or retail;
Distribution refers to the transportation of natural gas through a gas distribution 
system to end-users;
Distribution system refers generally to the pipeline and related facilities used to 
transport natural gas extending between the last delivery point of the transmission 
system to the last connection point to the end-user;
g. End-user refers to any person that will receive delivery of natural gas for resale or
final use;
h. Franchise refers to the right, privilege and authority issued by Congress authorizing 
a person to engage in the transmission of natural gas or distribution of natural gas 
within a specific geographical area;
/, Gathering facilities refer to natural gas pipelines and its ancillary facilities used to 
gather gas in the field and bring it to a location for processing or for delivery at an 
interconnection with the gas transmission system. The terms "gather" and 
"gathering" shall be construed accordingly;
j. 
Importation refers to the act of bringing LNG into the Philippines;
k. Liquefied natural gas or LNG refers to natural gas which has been liquefied by 
cooling at a cryogenic temperature;
/. Natural gas refers to gas obtained from boreholes and wells consisting primarily of 
a mixture of methane, ethane, propane and butane with small amounts of heavier 
hydrocarbons and some impurities, consistent with the Philippine National 
Standards (PNS) or the standards developed by the International Organization for 
Standardization (ISO);
m. Natural gas distribution code refers to the code to be formulated by the DOE 
pursuant to Section 5(h) of this Act that shall set the technical performance


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n.
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standards for operating gas distribution utilities and the minimum financial 
standards for gas distribution systems;
Natural gas distribution system refers to the system of conventional pipelines and 
related facilities extending from the delivery points where the gas distribution 
system receives the natural gas to the point of connection in the premises of the 
end-user; and any available virtual pipeline that allows alternative modes of 
transportation;
Natural gas distribution utility refers to any person engaged in the operation of a 
natural gas distribution system providing services for general public use, which 
requires a franchise to operate a gas distribution system;
Natural gas sales and purchase agreement or NGSPA refers to any contract or 
agreement for the delivery and sale of indigenous or imported natural gas by and 
between sellers, suppliers, buyers and end-users;
Natural gas transmission code refers to the code to be developed by the DOE 
pursuant to Section 5(h) of this Act that shall set the technical performance 
standards for operating gas transmission systems and the minimum financial 
standards for gas transmission utilities;
Natural gas transmission system refers to the system of high-pressure pipelines, 
storage and its ancillary facilities that are used to transport natural gas from the 
interconnection with gathering facilities, other LNG-related facilities and other gas 
transmission or distribution systems;
Natural gas transmission utility refers to a natural or juridical person that has a 
franchise to operate or is intending to operate a gas transmission system except 
own-use pipelines;
Own-use permit refers to an authorization granted by the DOE to a permit holder 
or-operator for the exclusive use by the operator or its affiliates in the operation 
of its natural gas facility;
Permit refers to an authorization issued by the DOE for the importation, 
construction, commercial operation and maintenance of natural gas facilities. 
Permit holder or operator refers to a natural or juridical person who is granted 
a permit by the DOE to engage in the importation, construction, commercial 
operation and maintenance of natural gas facilities;


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w. Person refers to a natural or juridical person, as the case may be, including the
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national and local governments of the Republic of the Philippines, its agencies and
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instrumentalities, and government-owned and controlled corporations;
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X. Philippine downstream natural gas industry or PDNGI refers to the sectors of
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transmission, distribution, supply, and use of natural gas and their related
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activities, such as importation, storing, regasification, transmission and distribution
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of natural gas to end-users;
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/. Philippine Energy Plan or PEP refers to the overall energy program formulated and
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updated yearly by the DOE and submitted to Congress pursuant to Republic Act
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No. 7638, otherwise known as the "Department of Energy Act of 1992" as
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amended;
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z. Rates refer to the payment on the utilization of the capacity and use of other
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services offered by the permit holder or operator of the transmission and
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distribution pipeline;
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aa. Supplier refers to any person engaged and registered with the DOE to trade on
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indigenous or imported LNG and their subsequent supply to end-users;
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bb. Supply refers to the trade or sale of indigenous or imported natural gas and their
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subsequent sale to end-users;
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cc. Third-party access or TPA refers to a transparent and non-discriminatory access
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and utilization by a third-party user of the excess capacity of the LNG terminal and
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its related facilities;
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dd. Transmission refers to the transportation of natural gas through a natural gas
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transmission system;
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ee. Virtual Pipeline refers to alternative methods of transporting natural gas to places
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where there is no pipeline network available. It is based on a modular system of
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compression or liquefaction, transport and decompression and regasification of
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natural gas, which communities, industries, gas stations and others may use.
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SEC. 5. Powers and Responsibilities of the DOE. - In addition to its existing
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powers and functions, the DOE shall have the overall responsibility of supervising and
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monitoring the development of the Philippine downstream natural gas industry.
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Towards this end, the DOE shall perform the following powers and functions:


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a. Prepare the Natural Gas Industry Development Plan (NGIDP) within two (2)
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years from the effectivity of this Act, incorporating therein the plans submitted
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by public and private stakeholders after open discussions and consultations
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with them. The NGIDP shall consist of approved regasification, transmission
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and distribution development plans which shall be integrated into the Philippine
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Energy Plan (PEP), and reviewed and updated every three (3) years after its
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adoption;
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b. Establish standards on gas quality, facility installation and safety of operation.
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For this purpose, a Philippine Inter-Agency Technical Committee (PIA-TC) shall
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be created by the Bureau of Philippine Standards (BPS) to be chaired by the
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DOE. The PIA-TC shall have as members the representatives of concerned
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government agencies and private industries. A Philippine Inter-Agency Health,
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Safety, Security and Environment Inspection and Monitoring Team (PIA-HSSE
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imt) shall likewise be created to monitor and enforce compliance with
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established standards;
15 c. Evaluate applications and issue permits on the importation, exportation,
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receipt, unloading, loading, storage, regasification of liquefied natural gas,
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transmission, distribution, marketing, utilization, aggregation of natural gas;
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and the safe, secure, reliable and efficient planning, construction, operation,
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expansion, modification, maintenance, decommissioning and abandonment of
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the downstream natural gas industry infrastructure and facilities;
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d. Evaluate applications for permits or authorities to operate, including a Notice
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to Proceed (NTP), a Permit to Construct, Expand, Rehabilitate and Modify
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(PCERM), and a Permit to Operate and Maintain (POM) downstream natural gas
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projects and facilities, accreditation to import, supply and transport natural gas,
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Acknowledgement to Import (ATI) LNG and Acknowledgement to Supply and
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Transport (AST) natural gas;
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e. Review, suspend or revoke, after due notice and hearing, permits issued in
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accordance with the preceding paragraphs (c) and (d) herein, and Section 12
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of this Act after a finding of non-compliance with the provisions of this Act,
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rules and regulations that shall be issued to implement it, and related
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issuances;


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f. Issue a written approval on the assignment or transfer of interest on any
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permits issued in accordance with Section 42 of this Act, after finding that the
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assignee or transferee has met all the legal, technical, and financial
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qualifications and has committed itself to assume all existing obligations of the
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permit holder, and such assignment or transfer is in accordance with existing
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laws, rules, and regulations: Provided, That permits requiring the prior issuance
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of a legislative franchise shall not be subject to assignment or transfer of
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interest;
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g. Ensure compliance of PDNGI participants with health, safety, security, and
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environmental standards, together with the Department of Environment and
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Natural Resources (DENR), Department of Health (DOH), and other relevant
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government agencies;
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h. Issue, in coordination with the ERC and in consultation with other concerned
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government agencies and the PDNGI participants, the Gas Transmission and
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Distribution Codes, which shall contain the standards and best practices on
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safe, high-quality, environmentally responsible and consumer protected
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operation and service, competitive practices and reasonable rates of service,
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i. Endorse requests for investigation to the Philippine Competition Commission
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(PCC) of any anti-competitive behavior in the conduct of any business under
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the downstream natural gas 
industry;
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j. Issue directives to qualified government agencies, in their capacities as
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investing arms, to spearhead the development of the PDNGI value chain as the
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DOE may deem imperative to catalyze its development within a given timeline;
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k. Determine the qualifications and detailed responsibilities of the Natural Gas
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Transmission System Operator (NGTSO) and Natural Gas Distribution Utilities
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(NGDUs) pursuant to their responsibilities provided in this Act;
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I. Initiate actions against the NGTSO or NGDUs for failure to comply with the
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qualifications and detailed responsibilities specified in this Act;
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m. Review and approve the natural gas supply and regasification development plan
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of the regasification terminal owner or operator, natural gas transmission
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development plan of the NGTSO, and the natural gas distribution development
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plans of the NGDUs, and integrate the same into the PEP;


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n. Require the PDNGI participants to submit the regasification, transmission and
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distribution development plans, and regular and special reports regarding the
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organization, business, conduct, practices, and management of any business
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entity duly registered as part of the downstream natural gas industry, subject
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to Section 21 hereof;
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0. Promulgate the TPA Code and ensure compliance therewith. The TPA Code
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shall be reviewed and updated regularly;
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p. Determine the necessity of and then direct the interconnection of natural gas
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transmission systems based on the Philippine Energy Plan, taking into
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consideration the maturity of the industry, the existing natural gas transmission
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systems' infrastructure, and the cost efficiency of interconnection, and upon
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consultation with the ERC, other relevant government agencies, midstream
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natural gas Industry participants, and other public and private stakeholders;
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q. Ensure compliance with the publication and unbundling of the terminal fee in
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accordance with Section 35 of this Act;
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r. Exercise such other powers and functions as may be necessary or incidental to
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attain the objectives of this Act. Subject to existing laws, rules and regulations,
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the DOE is hereby authorized to create offices and appoint personnel as may
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be necessary to efficiently and effectively implement this Act.
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SEC. 6. Powers and Responsibilities of the ERC. - In addition to its existing
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powers and functions, the ERC shall have the sole regulatory responsibility for
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establishing the rates and related terms and conditions of service for the transmission
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and distribution, regasification and supply of natural gas to the extent that such
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activities are regulated pursuant to the requirements set forth in this Act. It shall:
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a. In the public interest, establish and enforce a methodology for setting
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transmission, distribution, and supply rates, taking into account all relevant
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considerations, including the efficiency or inefficiency of the regulated entities.
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The rates shall be to allow the recovery of just and reasonable costs and a
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reasonable return to enable the entity to operate viably. The ERC may, upon
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due notice and public consultation, adopt internationally accepted rate setting
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methodology. The rate setting methodology so adopted and applied shall
8


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promote efficiency and ensure a reasonable price or tariff, and the rates to be
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prescribed shall be non-discriminatory. For this purpose, the ERC is hereby
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authorized to require from all participants in the natural gas supply chain all
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necessary and appropriate records and documents relevant to the
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determination of just and reasonable fuel cost used in power generation as
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recoverable component of electricity cost to end-users;
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b. Regasification services and supply services shall be subjected to rate regulation
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when there are no competing regasification operators;
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c. Apply administrative procedures that will ensure the constitutional right to due
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process;
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d. Before the end of April of each year, submit to the Office of the President of
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the Philippines and Congress, copy furnished the DOE, an annual report
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containing such matters or cases, which have been filed before or referred to
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it during the preceding year, the actions and proceedings undertaken thereon
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and its decision or resolution on each case. The ERC shall make copies of such
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report available to any interested party upon payment of a charge, which shall
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reflect the printing costs;
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e. Publish in newspapers of general circulation all its cases and decisions involving
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rates;
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f. Create offices and appoint personnel thereto as may be necessary to efficiently
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and effectively perform its functions as stipulated in this Act, subject to existing
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laws, rules and regulations; and
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g. Exercise such other powers as may be necessary or incidental to attain the
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objectives of this Act.
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SEC. 7. Powers and Responsibilities of the Department of Environment and
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Natural Resources (DENR). - In addition to its functions under Executive Order No.
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192, otherwise known as the "Reorganization Act of the Department of Environment
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and Natural Resources", the DENR shall, together with the DOE, determine and
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monitor compliance with the environmental standards for the location, construction,
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improvement, expansion, operation, modification, rehabilitation, repair, maintenance.


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decommissioning, and abandonment of LNG terminals, natural gas transmission 
systems, and all related equipment and facilities.
SEC. 8. Powers and Responsibilities of the Department of Health (DOH). - In 
addition to its functions under Executive Order No. 317, Series of 1941, entitled, 
"Organizing the Department of Health and Public Welfare", as amended, the DOH 
shall, together with the DOE, determine and monitor compliance with the health 
standards for the location, construction, improvement, expansion, operation, 
modification, rehabilitation, repair, maintenance, decommissioning, and abandonment 
of LNG terminals, natural gas transmission systems, and all related equipment and 
facilities.
SEC. 9. Powers and Responsibilities of the Department of Trade and Industry- 
Bureau of Philippine Standards (DTI-BPS). - In addition to its functions under Republic 
Act No. 4109, entitled, "An Act to Convert the Division of Standards under the Bureau 
of Commerce into a Bureau of Standards, to Provide for the Standardization and/or 
Inspection of Products and Imports of the Philippines and for other Purposes" the 
DTI-BPS shall, together with the DOE, determine, develop, formulate, promulgate, 
and revise, the Philippine National Standards for natural gas transmission systems, 
and for natural gas, in its original or liquefied form, LNG terminals, all related 
equipment and facilities.
SEC. 10. Powers and Responsibilities of the Department of Transportation and 
Its Attached Agencies. - In addition to its functions under Executive Order No. 125, 
series of 1987 otherwise known as the Reorganization Act of the Ministry of 
Transportation and Communications, as amended, and other applicable laws, the 
DOTr or its attached agencies such as the Land Transportation Office, Land 
Transportation Franchising and Regulatory Board, and Maritime Industry Authority, in 
coordination with the DOE, DENR, DOH, DTI-BPS, and other relevant government 
agencies, shall issue the appropriate guidelines and regulations and the applicable 
permits, licenses, certificates, or authorizations to virtual pipelines, motor vehicles and 
marine vessels transporting, storing or processing natural gas, in its original state or
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liquefied form, as well as marine facilities used to import, receive, unload, load, 
transport, process, and store natural gas In its original or liquefied form, including 
those utilized as offshore LNG terminals. The DOTr shall monitor and ensure 
compliance therewith.
SEC. 11. Powers and Responsibilities of the Philippine Competition Commission 
(PCC). - All matters concerning abuse of market power, cartelization, and any anti­
competitive or discriminatory behavior shall be subject to the quasi-judicial powers of 
the PCC as provided for under Republic Act No. 10667, otherwise known as the 
"Philippine Competition Act".
CHAPTER III
STRUCTURE, OPERATION AND REGULATIONS OF THE 
DOWNSTREAM NATURAL GAS INDUSTRY
SEC. 12. Structure. - For purposes of this Act, the structure of the PDNGI value 
chain shall consist of an LNG terminal and its related facilities, transmission, 
distribution pipelines and their related facilities, storage and distribution-related 
facilities, and supply and transport of natural gas.
SEC. 13. Permits. - The DOE shall have the power to issue, review, suspend 
and revoke for cause, the permits necessary for the construction, expansion, 
rehabilitation, modification, operation and maintenance of any PDNGI facility or 
activity. Own-use permit for natural gas facilities shall be allowed for the exclusive use 
of the operator and its affiliates in the operation of its facilities. The holder of an own- 
use permit shall still comply with the requirements in this Act. Own- use transmission 
and distribution of natural gas shall be exempted from franchise requirement.
An LNG terminal may have a separate owner and operator. The LNG terminal owner 
and operator, should they be separate entities, shall be treated as one and the same 
entity insofar as permits, licenses, certificates, and authorizations are concerned, as 
well as in the exercise of rights and compliance with obligations, standards,
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regulations, guidelines, and codes imposed by this Act, its implementing rules and 
regulations, and other relevant laws and issuances.
The owner and operator of an LNG terminal shall have the option to apply for both 
permits and simultaneously perform the functions of an own-use LNG terminal permit 
holder and a TPA LNG terminal permit holder, to the extent of the capacity allowed by 
and during the period specified in each type of permit.
SEC. 14. Rate Regulation. - The rate of charges and fees for the services of 
transmission or distribution pipelines and their related facilities shall, when they 
function as public utilities, be subject to the review and approval by the ERC. The rate 
methodology to be applied by the ERC shall be based on the principle of full recovery 
of prudent and reasonable costs incurred, including a reasonable return on rate base, 
or such other principles that will promote the determination of just and reasonable 
rates that is consistent with the encouragement of private investments and goal of 
developing a PDNGI infrastructure.
SEC. 15. Compliance with Philippine Laws, Rules and Regulations. -Operators 
or permit holders of PDNGI facilities shall comply with all Philippine laws, rules and 
regulations implemented by the different agencies of the government.
SEC 16. Compliance with Standards. -The DOE shall ensure that downstream 
natural gas products are of high quality, and natural gas facilities provide efficient 
service, observe stringent safety systems, accord attention to design details and 
structural integrity and employ operational and maintenance best practices.
All PDNGI facilities shall be predicated to be of high quality and efficient service, 
observe stringent safety systems, accord attention to design details and structural 
integrity and employ operational and maintenance best practices. Regulations shall be 
consistent with both applicable Philippine and internationally-accepted natural gas 
industry standards. Regulations shall be consistent with applicable Philippine and 
internationally-accepted natural gas industry standards.
The permit holder or operator shall maintain the quality of gas supply to end- 
users in accordance with the Philippine and internationally accepted standards and
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ensure that delivery of indigenous or imported LNG comply with the purification 
requirements to ensure that associated compounds that are unnecessary or damaging 
to the LNG regasification facility and other related natural gas facilities used for 
storage, distribution and transportation of natural gas supply are eliminated.
SEC. 17. Confidential Information. -The government shall not use confidential 
or commercially sensitive information for purposes other than those provided herein 
and shall protect and limit the disclosure of confidential or commercially sensitive 
information, unless allowed by the operator or when required by laws, rules and 
regulations.
SEC. 18. Authority to Obtain Information. - The DOE, ERC and other 
concerned government agencies may require any downstream natural gas player or 
permit holder, through a valid order and with due regard to confidential information, 
proprietary data and trade secrets, to furnish, within a reasonable period specified, all 
information and documents relating to all such matters as to the permit, rates and 
operation of business and natural gas facilities, and provide explanations on the 
information or document submitted, subject to Section 16 of this Act. The failure of 
a PDNGI participant or permitee to provide the required information or document 
without valid reason shall be punishable under this Act.
SEC. 19. Supply of Natural Gas. - Existing laws and rules governing the 
upstream natural gas sector shall provide the government the option to sell directly 
or otherwise authorize a service contractor to sell its share of the indigenous 
production. Accordingly, the Secretary of Energy may, when natural gas supply 
conditions so require, direct the supply of such share of indigenous production to the 
downstream natural gas sector.
The operator of an LNG-related facility shall likewise ensure the accommodation of 
both indigenous and imported supply of natural gas. To this end, the DOE and the 
ERC shall provide measures to ensure that the supply of indigenous natural gas to the 
domestic downstream natural gas sector is given preferential treatment.
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The DOE shall support and ensure the implementation of any plan to upgrade an 
LNG terminal and its ancillary facilities into a hub for international trading and trans­
shipment.
Any entity engaged in the distribution of natural gas may engage in the supply of 
the same.
SEC. 20. Abandonment of Downstream Natural Gas Facility. - No holder of a 
permit for the construction, installation, operation or maintenance of a downstream 
natural gas facility shall abandon or withdraw from service any portion of said 
downstream natural gas facility or project without obtaining prior authorization from 
the DOE. The DOE shall, in coordination with the DENR, provide the guidelines and 
regulations for decommissioning and abandonment of natural gas infrastructures and 
facilities.
SEC. 21. Registration and Reportorial Requirements of Natural Gas 
Participants, Facilities, Import, Export and Supply. - Holders of permits for the 
construction, installation, operation or maintenance of a downstream natural gas 
facility, including importers, exporters and supplier and transporter of natural gas or 
LNG, shall be registered with the DOE. Appropriate reportorial requirements shall 
likewise be required for proper supervision and monitoring in accordance with the 
implementing rules to be issued subsequently.
SEC. 22. Rules of Practice. - All concerned government agencies shall issue 
the appropriate rules of procedure to serve as guideline for administrative legal 
proceedings. The Rules of Court shall apply in a suppletory manner.
CHAPTER IV
FRANCHISE REQUIREMENT
SEC. 23. Natural Gas Transmission System. - The use, access, and terminal 
fee of a natural gas transmission system shall be regulated. The ownership and 
operation of a natural gas transmission system shall be considered a public utility and
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shall require a legislative franchise. The issuance of a CPCN to a natural gas
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transmission utility shall take into consideration its legal, technical, and financial
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capability. The use and access to the entire capacity of a natural gas transmission
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system shall be open to all third parties for a natural gas transmission fee, subject to
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the reserve price of the ERC in accordance with Section 6 of this Act.
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A natural gas transmission utility shall:
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a. Regularly disclose to the public the capacity available for and utilization by third
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parties in accordance with the reportorial requirements under this Act and the TPA
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Code;
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b. Determine the mode of and conduct a competitive selection 
of third parties.
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Provided, That each natural gas transmission utility shall determine 
its own
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competitive selection process which shall be transparent, fair, reasonable, and non-
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discriminatory, subject to the reportorial requirements under this Act;
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c. Ensure that the winning bid does not go beyond the reserve price determined by
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ERC pursuant to Section 6 of this Act;
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d. Provide transparent, fair, reasonable, and non-discriminatory use and access to
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third parties;
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e. Not give any undue preference or advantage to any third party, whether in rates,
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terms, conditions, or special privileges;
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f. Submit annually its Natural Gas Transmission Development Plan to DOE for review
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and approval, or the NGTSO, whichever is applicable, pursuant to Sections 5 and
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of this Act;
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g. Assign to the NGTSO the operation and maintenance of its natural gas transmission
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system upon direction of the ERC after the Interconnection of natural gas
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transmission systems and the selection of the NGTSO; and
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h. When applicable, inform and coordinate with the NGTSO for the location,
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construction, improvement, operation, utilization, expansion, modification,
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rehabilitation, repair, maintenance, decommissioning, and abandonment of any
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part of the natural gas transmission system to be undertaken in accordance with
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the submitted National Gas Transmission Development Plan
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SEC. 24. Natural Gas Transmission System Operator. -The DOE, based on the
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Philippine Energy Plan, the Midstream Natural Gas Industry Development Plan, and
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the various Natural Gas Transmission Development Plans shall determine the necessity
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of and then direct the interconnection of natural gas transmission systems pursuant
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to Section 5 of this Act. The DOE shall thereafter select a single independent NGTSO.
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The NGTSO shall not be an affiliate of any LNG terminal owner and operator, natural
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gas transmission utility, or any midstream end-user. The NGTSO shall:
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a. Operate and manage the interconnected natural gas transmission system in
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accordance with the Natural Gas Transmission Code and TPA Code;
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b. Coordinate with natural gas transmission utilities for the location, construction,
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improvement, operation, utilization, expansion, modification, rehabilitation, repair,
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maintenance, decommissioning, and abandonment of any part of the natural gas
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transmission system in accordance with their submitted Natural Gas Transmission
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Development Plan;
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c. Furnish midstream natural gas industry participants with sufficient information for
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efficient access to the interconnected natural gas transmission system;
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d. Procure ancillary services necessary to support the reliable and continuous flow of
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natural gas through the interconnected natural gas transmission system;
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e. Annually prepare a comprehensive Natural Gas Transmission Development Plan
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based on the submitted Natural Gas Transmission Development Plans of natural
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gas transmission utilities, upon consultation with public and private stakeholders,
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and submit the same for review and approval of the DOE;
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f. Collect an NGTSO fee, subject to the approval of the ERC; and
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g. Perform other functions and responsibilities determined by the DOE and ERC
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pursuant to Sections 5 and 6 of this Act.
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SEC. 25. Transmission and Distribution Pipeline and Related Facility as Public
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Utility. -Operators of transmission and distribution pipelines and their related facilities
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considered as public utility shall be required to obtain a Certificate of Public
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Convenience and Necessity (CPCN) from the ERC and shall be subject to the provisions
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of Commonwealth Act. No. 146, otherwise known as the "Public Service Act, as
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amended.
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CHAPTER V
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THIRD-PARTY ACCESS
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SEC. 26. Third-party Access (TPA) Obligation. - Available and uncommitted
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excess capacity of an LNG terminal, transmission and distribution pipelines and related
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facilities shall be made accessible to third-party users. The ERC shall, in coordination
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with the DOE and in consultation with the PDNGI participants, ensure the full
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implementation of the TPA and shall issue the TPA Code within one (1) year from the
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effectivity of this Act.
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The DOE is hereby authorized to synchronize activities to optimize and stabilize the
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utilization of existing infrastructure for the extraction, storage, and delivery of natural
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gas, such as the Malampaya natural gas facilities, which shall be subject to the third-
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party access provision in order to integrate the same with the PDNGI.
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A TPA shall apply only to the available and uncommitted excess capacity of LNG
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terminal, transmission or distribution pipelines and their related facilities, but excluding
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those constructed and operated under a dedicated use agreement or for own use. The
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operators thereof shall conduct an open and sufficient consultation process with both
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existing and potential third-party users to discuss the available capacity and other
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available services.
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To ensure safe and reliable operation, the operator shall determine, subject to the
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review and recommendation by the DOE, the available and uncommitted excess
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capacity of the natural gas facilities offered to third parties. The operator shall likewise
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allocate such excess capacity based on the following criteria as they pertain to the
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third-party user:
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a. Proposed contract price and terms;
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b. Credit-worthiness;
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c. Availability of a functioning off-take facility;
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d. Ability to meet fuel specification parameters of the LNG facility; and
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e. Other relevant factors that may directly affect the allocation.
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Non-availment by any third-party user of the excess capacity so allocated and
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offered shall not be a ground for the denial or cancellation of any permit under this
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Act.
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SEC. 27. Third-party Access (TPA) Principles. - Adherence to the principles of
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transparency, fair competition, and safe practices is the key to the beneficial
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participation of third-party users. In line with this, the following guiding principles shall
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be observed:
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a. Competition in the downstream natural gas industry must be encouraged because
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it promotes efficiency and lowers costs and prices to the benefit of end-users;
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b. Investments in natural gas supply and infrastructure 
from both local and foreign
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sources, which are otherwise prevented 
by actions of incumbent monopolistic
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companies shall be earnestly pursued and supported;
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c. Benefits to be derived from the diverse and sustainable use of natural gas make it
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an ideal tool of development;
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d. Participation of third parties in the downstream natural gas industry shall be
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anchored on safe and measurable standards of service and practice;
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e. Open and sufficient consultation between permit holders or facility operators on
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the available and excess capacity of natural gas is essential in the formulation of
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supply agreements between permit holders or facility operators and third-party
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users;
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f. Transparency in business activities shall consistently be observed to spur
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confidence. Pursuant thereto, permit holders or facility operators shall publish their
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available and uncommitted excess capacity, access terms, and conditions, and
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allow the review and inspection of their facilities and records to verify the same.
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SEC. 28. Congestion Management - Whenever the holder of a capacity is no
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longer able to use or has not released the capacity without justifiable reason, the
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permit holder or the operator of the facility shall have the authority to release and
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market the same. The procedure and criteria of the release shall be part of the TPA
27 
Code. The government agency which shall have an oversight function on this matter
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shall be designated in the TPA Code.
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SEC. 29. Approved Access Conditions and TPA Contracts. - Prior to the conduct
31 
of negotiations with third parties, the permit holder or the facility operator shall
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request the DOE for the review and recommendation of its access conditions in
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accordance with the TPA Code. All subsequent access contracts shall be reviewed and 
approved by the DOE.
SEC 30. Infrastructure Development Period. - To develop the TPA, the TPA 
Code shall provide an infrastructure development period and the TPA shall become 
obligatory only against the permit holder or facility operator if it can be demonstrated 
that there is already sufficient demand necessary to justify the investment and sustain 
the additional operational requirement. For this purpose, the DOE shall review and 
attest to the validity of supply and demand outlook for natural gas.
CHAPTER VI
RESPONSIBILITIES OF THE PERMIT HOLDER OR OPERATOR
SEC. 31. Responsibilities of the Permit Hoider or Operator. - A permit holder 
or operator shall have the following responsibilities:
a. Align all its goals and objectives to the accomplishment of the declared policies
of this Act;
b. Be directly responsible for the construction and operation of LNG facilities by 
providing the necessary services, technology and financing, either by itself or 
through its duly authorized subcontractors, without entitlement from the 
Philippine government to any reimbursement of any expense incurred;
c. Comply with applicable Philippine laws and regulations relating to tax, labor 
and employment, health, safety, indigenous people's rights, environmental 
protection and ecological preservation;
d. Comply with the regulatory obligations, maintenance of complete records and 
submission of all reportorial requirements and other documents as may be 
required by the DOE, ERC and other government agencies pursuant to this Act 
and its implementing rules;
e. Implement the natural gas project strictly adhering to the scope and limits of 
the permit and operate in accordance with Philippine and international
standards;
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f. Allow and facilitate, based on a valid order, the entry to the facility of the 
examiners of the Bureau of Internal Revenue and the Bureau of Customs and 
allow them full access to accounts, books, and records for tax and other fiscal 
purposes;
g. Allow, based on a valid order, the entry of personnel of the DOE, ERC, PIA- 
HSSE IMT and other government agencies to the facility and grant them full 
access to operational records for inspection and monitoring activities;
h. Give preference to qualified local talents for hiring and local companies or 
agencies in entering into subcontracts on projects or services, which are 
required in the construction or operation of the LNG facility;
i. 
Hold the DOE, ERC, PIA-HSSE IMT and other government agencies or other 
affected individuals free from all claims, demands or actions arising out of its 
failure to comply with laws, regulations, standards, contracts, and permits in 
connection with accidents, damages, or injuries which are beyond their control; 
and
j. 
Observe in the regular operational meeting of the DNG-REC and in the 
development, issuance and review of plans, protocols, standards and codes 
applicable to the natural gas project.
CHAPTER VII 
INCENTIVES
SEC. 32. Fiscal Incentives. - In recognition of the substantial investments 
needed for the construction of, operation and maintenance of, and conversion to 
natural gas facilities, the PDNGI value chain projects, as certified by the DOE, shall be 
included in the Strategic Investment Priorities Plan (SIPP) for the next ten (10) years 
from the effectivity of this Act. Entities engaged in said projects that are duly 
registered by any Investment Promotion Agency (IPA) shall be entitled to all the 
incentives under Title XIII (Tax and Duty Incentives) of the National Internal Revenue 
Code of 1997, as amended, during the construction period of the projects and ten 
(10) years of commercial operation thereafter.
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The sale of natural gas to locators inside the ecozone shall be subject to zero 
percent (0%) Value-Added Tax (VAT), pursuant to the National Internal Revenue Code 
of 1997, as amended.
SEC. 33. Streamlined Regulatory Process. - The operation of LNG terminals, 
natural gas transmission systems, natural gas distribution systems, own-use LNG 
terminals, own-use natural gas transmission systems, and own-use natural gas 
distribution systems shall be considered as energy projects of national significance 
(EPNS) whose implementation shall not be subject to unnecessary administrative 
processing delays pursuant to Executive Order No. 30, series of 2017. To be 
considered an EPNS, a project has to be endorsed by the DOE.
All permits, licenses, certificates, and authorizations issued pursuant to this Act 
shall be streamlined and shall be covered by Republic Act No. 11234, otherwise known 
as the Energy Virtual One-Stop Shop Act, except for those whose time frames are 
expressly provided herein.
CHAPTER VIII
PROMOTION OF COMPETITION
SEC. 34. Anti-Competitive Behavior. - No gas transmission utility, gas 
distribution utility or supplier, or affiliate thereof, may engage in any anti-competitive 
behavior or abuse of market power, specifically the prohibition against monopolies 
and combinations in restraint of trade under Article 186 of the Revised Penal Code 
and Chapter III of the Philippine Competition Act.
SEC. 35. Functional and Structural Unbundling. - All PDNGI participants shall 
functionally and structurally unbundle their business activities and rates in accordance 
with the particular sector. LNG terminals with regulated third party access, whether 
through an TPA permit or a DOE declaration of an unutilized capacity, natural gas 
transmission utilities, and the NGTSO shall identify and segregate in their bills to 
midstream end-users the components of their terminal fees, natural gas transmission 
fees, and NGTSO fee, respectively, and publish the same on their website.
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SEC. 36. Complaint and Investigation Procedures. - The ERC shall, within nine 
(9) months after the effectivity of this Act, promulgate rules and regulations providing 
for a complaint and investigation procedure that shall, without limitation, provide the 
party alleged to have engaged in anti-competitive or abusive activities with notice and 
an opportunity to be heard.
SEC. 37. Affiliated Suppliers. - In order to prevent anti-competitive conduct, 
service contractors, gas transmission utilities and gas distribution utilities that own or 
control affiliates that are suppliers shall conduct their businesses, as follows:
a. No preference shall be given to the affiliate supplier over other persons in 
contracting, scheduling and balancing of available capacity, as well as 
curtailment, or the imposition of tariffs;
b. Marketing information provided to the affiliate supplier shall be provided to any 
non-affiliated supplier that is a competitor or potential competitor;
c. Employees of the affiliate supplier shall, to the maximum extent possible, 
function independently in making business decisions; and
d. Books of accounts and records of the affiliate supplier shall be maintained
separately.
CHAPTER IX
PROHIBITED ACTS AND PENALTIES
SEC. 38. Prohibited Acts. - Without prejudice to civil and criminal liability, the 
following acts shall be prohibited:
a. For government agencies: failing to comply with the responsibilities under Chapter 
II of this Act, and within the timeframes specified in Sections 5, 6, and 46 of this 
Act;
b. For PDNGI participants:
i. Engaging in activities without the required permits, licenses, 
certificates, and authorizations under this Act;
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ii. Failure to comply with health, safety, security, and environmental
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standards, requirements, and guidelines as well as codes under this
3 
Act, whichever is applicable
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Hi. Failure to submit or disclose required data, information, and
5 
documents, whichever is applicable,
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iv. Failure to comply with the requirements on fees, whichever is
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applicable,
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V. Failure to comply with the requirements on own use and regulated
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TPAs, whichever is applicable,
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vi. Failure to comply with other responsibilities as PNDGI participants,
11 
whichever is applicable.
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SEC. 39. Penalties. - Without prejudice to civil and criminal liability, the
14 
following administrative penalties shall be imposed upon any natural or juridical person
15 
for every prohibited act enumerated below:
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a. Section 27 (a): Fine not exceeding the equivalent of six (6) months' salary or
17 
suspension not exceeding one (1) year, or removal depending on the gravity of
18 
the offense;
19 
b. Section 27 (b):
20 
i. First Offense: Fine of not less than Five hundred thousand pesos
21 
(P500,000) for every day of non-compliance, and if applicable,
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suspension of permits, licenses, certificates, or authorizations until
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the violation Is corrected,
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ii. Second Offense: Fine of not less than One million pesos (P1,000,000)
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for every day of non-compliance, and if applicable, suspension of
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permits, licenses, certificates, or authorizations until the violation Is
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corrected, and
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iii. Third Offense: Fine of not less than Five million pesos (P5,000,000),
29 
revocation of permits, licenses, certificates, or authorizations, and
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disqualification from applying for future permits, licenses,
31 
certificates, or authorizations. In the case of natural gas transmission
32 
utilities, DOE and ERC shall recommend the revocation of their
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respective franchises to Congress. In the case of the NGTSO, it shall 
be replaced.
c. Congress may, upon the recommendation of the DOE, ERC or other government 
agencies, as the case may be, revoke such franchise or privilege granted to the 
party found in violation of the provisions of this Act.
CHAPTER X
TRANSITORY PROVISIONS
SEC. 40. Existing Systems. - Natural gas facilities that have been constructed 
prior to the effectivity of this Act shall continue to be operated under their existing 
permits and shall comply with additional requirements as may be applicable within 
five (5) years of its effectivity.
Suppliers who have entered into an NGSPA with end-users and have delivered 
indigenous or imported natural gas prior to the effectivity of this Act shall continue to 
operate under the said contracts, subject to compliance with the additional 
requirements in this Act.
SEC. 41. Pending Application. - All applications on any activity in the natural 
gas value chain pending before the DOE upon the effectivity hereof shall be covered 
by this Act.
CHAPTER XI 
FINAL PROVISIONS
SEC. 42. Assignment or Transfer of Interest. - Assignment or transfer of 
interest of the permit shall be allowed only upon prior written approval by the DOE 
based on acceptable reasons and compliance by the operator, the assumption by the 
assignee of all obligations of the former permit holder, and upon meeting the minimum 
legal, technical, and financial qualifications of the transferee.
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SEC. 43. Consultation and Arbitration. - All parties shall make their best efforts 
to amicably settle any dispute arising from the performance or interpretation of any 
provision of this Act.
SEC. 44. Congressional Oversight. - The Joint Congressional Energy 
Commission (JCEC) shall exercise oversight powers over the Implementation of this 
Act. The DOE, ERC, and other relevant government agencies shall submit annual 
reports to the JCEC not later than the fifteenth day of September, which shall include 
the latest relevant data, implementation review and reports, and policy and regulatory 
issuances.
SEC. 45. Appropriations. - The amount necessary for the implementation of 
this Act shall be included in the annual General Appropriations Act.
SEC. 46. Implementing Rules and Regulations. -The DOE shall, in consultation 
with the ERC, relevant government agencies such as the DENR, DOH, Department of 
Transportation (DOTr), Philippine Ports Authority (PPA), DTI and Department of 
Finance (DOF), the PDNGI participants, non-governmental organizations and end- 
users, promulgate rules and regulations for the effective implementation of this Act 
within twelve (12) months AFTER the effectivity of this Act.
SEC. 47. Separability Clause. - If for any reason, any provision of this Act is 
declared unconstitutional or invalid, the other parts or provisions hereof, which are 
not affected thereby, shall continue to be in full force and effect.
SEC. 48. Repealing Clause. - Any law, presidential decree or issuance, 
executive order, letter of instruction, rule or regulation inconsistent with the provisions 
of this Act is hereby repealed or modified accordingly.
SEC. 49. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the OfTicial Gazette or in a newspaper of general circulation.
Approved,
25