1 
Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City, Metro Manila 
NINETEENTH CONGRESS 
1st Regular Session 
House Bill No. ________ 
Introduced by Representatives PAOLO Z. DUTERTE, ERIC G. YAP, 
EDVIC G. YAP, and JEFFREY SORIANO 
EXPLANATORY NOTE 
The Malampaya deep water gas-to-power project is the biggest success story in the 
Philippine energy sector as it signaled the birth of the natural gas industry in the 
country. The project began its commercial operations in January 2002 and has 
contributed over $12 billion in revenues to the Philippine government while powering 
up to twenty percent (20%) of the country’s growing electricity requirements. 
However, the Malampaya’s reserves are dwindling which could lead to the country 
importing liquefied natural gas if no alternative is found.  
Despite the establishment of the Philippine Energy Plan (PEP) which is the overall 
energy program formulated and updated yearly by the DOE and submitted to 
Congress pursuant to Republic Act No. 7638 or the Department of Energy Act of 1992, 
threats on potential blackouts remain as the drilling activities in pursuit of exploring 
natural gas were halted. This is worsened by the skyrocketing prices of imported oil—
signaling the urgent necessity to tap alternative sources of energy, particularly cleaner 
energy from indigenous resources. 
In pursuant of such initiative, this proposed measure seeks to promote the 
development of Philippine downstream natural gas industry (PDNGI) through a 
provision of a framework embodying the industry’s development and its transition 
from emerging industry into mature industry status within a competitive natural gas 
market, as well as the definition of the responsibilities of various government agencies 
August 25, 2022
10:03 am
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and private entities in furtherance of this national goal. Most importantly, this bill 
seeks to ensure the delivery of secure, sustainable, sufficient, affordable and 
environment-friendly energy to all economic sectors in the country. 
 
In view of the foregoing, approval of this bill is earnestly sought. 
 
 
PAOLO Z. DUTERTE  
 
 
 
ERIC G. YAP 
 
 
 
 
        EDVIC G. YAP 
 
   
           JEFFREY SORIANO 
 
 


1 
Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City, Metro Manila 
NINETEENTH CONGRESS 
1st Regular Session 
House Bill No. ________ 
Introduced by Representatives ERIC G. YAP, PAOLO Z. DUTERTE, 
EDVIC G. YAP, JOCELYN P. TULFO, JEFFREY SORIANO, and RALPH TULFO 
AN ACT 
PROMOTING THE DEVELOPMENT OF THE PHILIPPINE DOWNSTREAM 
NATURAL GAS INDUSTRY, CONSOLIDATING FOR THE PURPOSE ALL 
LAWS RELATING TO THE TRANSMISSION, DISTRIBUTION AND SUPPLY OF 
NATURAL GAS, AND APPROPRIATING FUNDS THEREFOR 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
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 natural gas as the energy fuel, which has tremendous potential to
meet the increasing local demand for fuel, and the development of the
Philippines as a liquefied natural gas (LNG) trading and transshipment hub
within the Asia-Pacific Region. In all cases, the State shall ensure the safe,
secure, reliable, transparent, competitive and environmentally responsible
operation of the PDNGI value chain;
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 the conversion of existing fossil fuel-operated machines and 
facilities to natural gas use, provided it is technically and financially 
feasible; 
 
e. 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; 
 
f. 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; 
 
g. Encourage the inflow of private capital through equity participation by the 
private sector in the downstream natural gas value chain including gas 
transmission and distribution utilities; 
 
h. 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; 
 
i. Develop the necessary trades, technical expertise and skills to support the 
PDNGI; and 
 
j. 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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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. Delivery refers to the transmission or distribution of natural gas and the 
supply of natural gas at wholesale or retail; 
 
e. Distribution refers to the transportation of natural gas through a 
gas/distribution system to end-users; 
 
f. 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; 
 
i. 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. Insurance refers generally to a risk-transfer mechanism that ensures full or 
partial financial compensation for the loss or damage caused by events 
beyond the control of the insured party wherein compensation is normally 
proportionate to the loss incurred; 
 
l. Liquefied natural gas or LNG refers to natural gas which has been liquefied 
by cooling at a cryogenic temperature; 
 
m. 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); 
 
n. Natural gas distribution code refers to the code to be formulated by the DOE 
pursuant to Section 5(g) of this Act that shall set the technical performance 


 
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standards for operating gas distribution utilities and the minimum financial 
standards for gas distribution systems; 
 
o. 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; 
 
p. 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; 
 
q. 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; 
 
r. Natural gas transmission code refers to the code to be developed by the DOE 
pursuant to Section 5(g) of this Act that shall set the technical performance 
standards for operating gas transmission systems and the minimum 
financial standards for gas transmission utilities; 
 
s. 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; 
 
t. 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; 
 
u. 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; 
 
v. Permit refers to an authorization issued by the DOE for the importation, 
construction, commercial operation and maintenance of natural gas 
facilities; 
 
w. 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; 
 
x. Person refers to a natural or juridical person, as the case may be, including 
the national and local governments of the Republic of the Philippines, its 
agencies and instrumentalities, and government-owned and controlled 
corporations; 
 


 
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y. Philippine downstream natural gas industry or PDNGI refers to the sectors of 
transmission, distribution, supply, and use of natural gas and their related 
activities, such as importation, storing, regasification, transmission and 
distribution of natural gas to end-users; 
 
z. Philippine Energy Plan or PEP refers to the overall energy program 
formulated and updated yearly by the DOE and submitted to Congress 
pursuant to Republic Act No. 7638, otherwise known as the "Department of 
Energy Act of 1992" as amended; 
 
aa. Rates refer to the payment on the utilization of the capacity and use of other 
services offered by the permit holder or operator of the transmission and 
distribution pipeline; 
 
bb.  Supplier refers to any person engaged and registered with the DOE to trade 
on indigenous or imported LNG and their subsequent supply to end-users; 
 
cc. Supply refers to the trade or sale of indigenous or imported natural gas and 
their subsequent sale to end-users; 
 
dd. Third-party access or TPA refers to a transparent and non-discriminatory 
access and utilization by a third-party user of the excess capacity of the LNG 
terminal and its related facilities; 
 
ee. Transmission refers to the transportation of natural gas through a natural gas 
transmission system; 
 
ff. Virtual Pipeline refers to alternative methods of transporting natural gas to 
places where there is no pipeline network available. It is based on a modular 
system of compression or liquefaction, transport and decompression and 
regasification of natural gas, which communities, industries, gas stations 
and others may use. 
 
 
CHAPTER II 
POWERS AND RESPONSIBILITIES OF THE DOE AND THE ERC 
 
SEC. 5. Powers and Responsibilities of the DOE. - In addition to its existing 
powers and functions, the DOE shall have the overall responsibility of supervising 
and monitoring the development of the Philippine downstream natural gas industry. 
Towards this end, the DOE shall perform the following powers and functions: 
 
a. Prepare the Natural Gas Industry Development Plan (NGIDP) within two 
(2) years from the effectivity of this Act, incorporating therein the plans 
submitted by public and private stakeholders after open discussions and 
consultations with them. The NGIDP shall consist of approved 
regasification, transmission and distribution development plans which 


 
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shall be integrated into the Philippine Energy Plan (PEP), and reviewed and 
updated every three (3) years after its adoption; 
 
b. Establish standards on gas quality, facility installation and safety of 
operation. For this purpose, a Philippine Inter-Agency Technical 
Committee (PIA-TC) shall be created by the Bureau of Philippine Standards 
(BPS) to be chaired by the DOE. The PIA-TC shall have as members the 
representatives of concerned government agencies and private industries. 
A Philippine Inter-Agency Health, Safety, Security and Environment 
Inspection and Monitoring Team (PIA-HSSE IMT) shall likewise be created 
to monitor and enforce compliance with established standards; 
 
c. Evaluate applications and issue permits on the importation, exportation, 
receipt, unloading, loading, storage, regasification of liquefied natural gas; 
transmission, distribution, marketing, utilization, aggregation of natural 
gas; and the safe, secure, reliable and efficient planning, construction, 
operation, expansion, modification, maintenance, decommissioning and 
abandonment of the downstream natural gas industry infrastructure and 
facilities; 
 
d. Evaluate applications for permits or authorities to operate, including a 
Notice to Proceed (NTP), a Permit to Construct, Expand, Rehabilitate and 
Modify (PCERM), and a Permit to Operate and Maintain (POM) 
downstream natural gas projects and facilities, accreditation to import, 
supply and transport natural gas, Acknowledgement to Import (ATI) LNG 
and Acknowledgement to Supply and Transport (AST) natural gas; 
 
e. Review, suspend or revoke, after due notice and hearing, permits issued in 
accordance with the preceding paragraphs (c) and (d) herein, and Section 
12 of this Act after a finding of non-compliance with the provisions of this 
Act, rules and regulations that shall be issued to implement it, and related 
issuances; 
 
f. Issue a written approval on the assignment or transfer of interest on any 
permits issued in accordance with Section 50 of this Act, after finding that 
the assignee or transferee has met all the legal, technical, and financial 
qualifications and has committed itself to assume all existing obligations of 
the permit holder, and such assignment or transfer is in accordance with 
existing laws, rules, and regulations: Provided, That permits requiring the 
prior issuance of a legislative franchise shall not be subject to assignment or 
transfer of interest; 
 
g. Issue, in coordination with the ERC and in consultation with other 
concerned government agencies and the PDNGI participants, the Gas 
Transmission and Distribution Codes, which shall contain the standards 
and best practices on safe, high-quality, environmentally responsible and 
consumer protected operation and service, competitive practices and 
reasonable rates of service; 


 
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h. Endorse requests for investigation to the Philippine Competition 
Commission (PCC) of any anti-competitive behavior in the conduct of any 
business under the downstream natural gas industry; 
 
i. Issue directives to qualified government agencies, in their capacities as 
investing arms, to spearhead the development of the PDNGI value chain as 
the DOE may deem imperative to catalyze its development within a given 
timeline; 
 
j. Determine the qualifications and detailed responsibilities of the Natural 
Gas Transmission System Operator (NGTSO) and Natural Gas Distribution 
Utilities (NGDUs) pursuant to their responsibilities provided in this Act; 
 
k. Initiate actions against the NGTSO or NGDUs for failure to comply with the 
qualifications and detailed responsibilities specified in this Act; 
 
l. Review and approve the natural gas supply and regasification development 
plan of the regasification terminal owner or operator, natural gas 
transmission development plan of the NGTSO, and the natural gas 
distribution development plans of the NGDUs, and integrate the same into 
the PEP; 
 
m. Require the PDNGI participants to submit the regasification, transmission 
and distribution development plans, and regular and special reports 
regarding the organization, business, conduct, practices, and management 
of any business entity duly registered as part of the downstream natural gas 
industry, subject to Section 20 hereof; and 
 
n. Exercise such other powers and functions as may be necessary or incidental 
to attain the objectives of this Act. Subject to existing laws, rules and 
regulations, the DOE is hereby authorized to create offices and appoint 
personnel as may be necessary to efficiently and effectively implement this 
Act. 
 
SEC. 6. Powers and Responsibilities of the ERC. - In addition to its existing 
powers and functions, the ERC shall have the sole regulatory responsibility for 
establishing the rates and related terms and conditions of service for the transmission 
and distribution, regasification and supply of natural gas to the extent that such 
activities are regulated pursuant to the requirements set forth in this Act. 
 
 
It shall: 
 
a. In the public interest, establish and enforce a methodology for setting 
transmission, distribution, and supply rates, taking into account all relevant 
considerations, including the efficiency or inefficiency of the regulated 
entities. The rates shall be to allow the recovery of just and reasonable costs 
and a reasonable return to enable the entity to operate viably. The ERC may, 


 
8 
upon due notice and public consultation, adopt internationally accepted 
rate setting methodology. The rate setting methodology so adopted and 
applied shall promote efficiency and ensure a reasonable price or tariff, and 
the rates to be prescribed shall be non-discriminatory. For this purpose, the 
ERC is hereby authorized to require from all participants in the natural gas 
supply chain all necessary and appropriate records and documents relevant 
to the determination of just and reasonable fuel cost used in power 
generation as recoverable component of electricity cost to end-users; 
 
b. Regasification services and supply services shall be subjected to rate 
regulation when there is no competing regasification operators; 
 
c. Apply administrative procedures that will ensure the constitutional right to 
due process; 
 
d. Before the end of April of each year, submit to the Office of the President of 
the Philippines and Congress, copy furnished the DOE, an annual report 
containing such matters or cases, which have been filed before or referred 
to it during the preceding year, the actions and proceedings undertaken 
thereon and its decision or resolution on each case. The ERC shall make 
copies of such report available to any interested party upon payment of a 
charge, which shall reflect the printing costs; 
 
e. Publish in newspapers of general circulation all its cases and decisions 
involving rates; 
 
f. Create offices and appoint personnel thereto as may be necessary to 
efficiently and effectively perform its functions as stipulated in this Act, 
subject to existing laws, rules and regulations; and 
 
g. Exercise such other powers as may be necessary or incidental to attain the 
objectives of this Act. 
 
 
CHAPTER III 
POWERS AND RESPONSONSIBILITIES OF GOVERNMENT AGENCIES 
 
SEC. 7. Powers and Responsibilities of the Department of Environment and 
Natural Resources (DENR). - In addition to its functions under Executive Order No. 
192, otherwise known as the "Reorganization Act of the Department of Environment and 
Natural Resources" the DENR shall, together with the DOE, determine and monitor 
compliance with the environmental standards for the location, construction, 
improvement, 
expansion, 
operation, 
rehabilitation, 
repair, 
maintenance, 
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, 


 
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"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, 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, NG terminals, all related equipment and 
facilities. 
 
SEC. 10. 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 IV 
STRUCTURE, OPERATION AND REGULATIONS OF THE 
DOWNSTREAM NATURAL GAS INDUSTRY 
 
SEC. 11. 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. 12. 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. Transmission and 
distribution of natural gas shall be exempted from franchise requirement. 
 
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, pursuant to Section 35 of this Act, and a third-party access (TPA) LNG 
terminal permit holder pursuant to Section 26 of this Act, to the extent of the capacity 
allowed by and during the period specified in each type of permit.  
 
SEC. 13. Rate Regulation. - The rate of charges and fees for the services of 
transmission or distribution pipelines and their related facilities shall, when they 


 
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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. 14. 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 15. 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. 
Regulations shall be consistent with applicable Philippine and internationally 
accepted natural gas industry standards. 
 
SEC. 16. 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. 17. 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 permit to provide the required information or document 
without valid reason shall be punishable under this Act. 
 
SEC. 18. 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. 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. 


 
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SEC. 19. 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. 20. 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. 21. 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. 
 
SEC. 22. Fees. - All concerned government agencies shall have the authority to 
prescribe and collect fees and charges relating to the issuance or review of permits, 
and the supervision and regulation of the PDNGI. 
 
 
CHAPTER V 
FRANCHISE REQUIREMENT 
 
SEC. 23. Transmission and Distribution Pipeline and Related Facility as 
Public Utility. - Operators of transmission and distribution pipelines and their related 
facilities considered as public utility shall be required to obtain a legislative franchise 
and a Certificate of Public Convenience and Necessity (CPCN) from the ERC. 
 
Operators of virtual pipelines and their related facilities, which are likewise 
considered as public utilities, shall no longer be required a legislative franchise. 
However, such operators shall be required to secure a CPCN from the concerned 
agency having appropriate jurisdiction over them, in accordance with the provisions 
of Commonwealth Act. No. 146, otherwise known as the "Public Service Act" as 
amended. 
 
SEC. 24. Philippine Ownership Requirement. - As required under Article XII, 
Section 11 of the Constitution, no franchise, certificate, or any other form of 
authorization of a public utility shall be granted except to citizens of the Philippines 
or to corporations or associations organized under the laws of the Philippines, at least 
sixty percent (60%) of whose capital is owned by such citizens. 
 


 
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SEC. 25. LNG Terminals Not a Public Utility. - The operation of an LNG 
terminal shall not be considered as a public utility operation. Hence, it shall be 
exempted from securing a legislative franchise and a Certificate of Public Convenience 
and Necessity. 
 
 
CHAPTER VI 
THIRD-PARTY ACCESS 
 
SEC. 26. Third-party Access (TPA) Obligation. - Available and uncommitted 
excess capacity of an LNG terminal, transmission and distribution pipelines and 
related facilities shall be made accessible to third-party users. The ERC shall, in 
coordination with the DOE and in consultation with the PDNGI participants, ensure 
the full implementation of the TPA and shall issue the TPA Code within one (1) year 
from the effectivity of this Act. 
 
The DOE is hereby authorized to synchronize activities to optimize and 
stabilize the utilization of existing infrastructure for the extraction, storage, and 
delivery of natural gas, such as the Malampaya natural gas facilities, which shall be 
subject to the third-party access provision in order to integrate the same with the 
PDNGI. 
 
SEC. 27. Available Capacity. - A TPA shall apply only to the available and 
uncommitted excess capacity of LNG terminal, transmission or distribution pipelines 
and their related facilities, but excluding those constructed and operated under a 
dedicated use agreement or for own use. The operators thereof shall conduct an open 
and sufficient consultation process with both existing and potential third-party users 
to discuss the available capacity and other available services. 
 
To ensure safe and reliable operation, the operator shall determine, subject to 
the review and recommendation by the DOE, the available and uncommitted excess 
capacity of the natural gas facilities offered to third parties. The operator shall likewise 
allocate such excess capacity based on the following criteria as they pertain to the 
third-party user: 
 
a. Proposed contract price and terms; 
b. Credit-worthiness; 
c. Availability of a functioning off-take facility; 
d. Ability to meet fuel specification parameters of the LNG facility; and 
e. Other relevant factors that may directly affect the allocation. 
 
 
 
Non-availment by any third-party user of the excess capacity so allocated and 
offered shall not be a ground for the denial or cancellation of any permit under this 
Act. 
 
SEC. 28. 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 
participation of third-party users. In line with this, the following guiding principles 
shall be observed: 
 
a. Competition in the downstream natural gas industry must be encouraged 
because it promotes efficiency and lowers costs and prices to the benefit of 
end-users; 
 
b. Investments in natural gas supply and infrastructure from both local and 
foreign sources, which are otherwise prevented by actions of incumbent 
monopolistic companies shall be earnestly pursued and supported; 
 
c. Benefits to be derived from the diverse and sustainable use of natural gas 
make it an ideal tool of development; 
 
d. Participation of third parties in the downstream natural gas industry shall 
be anchored on safe and measurable standards of service and practice; 
 
e. Open and sufficient consultation between permit holders or facility 
operators on the available and excess capacity of natural gas is essential in 
the formulation of supply agreements between permit holders or facility 
operators and third-party users; 
 
f. Transparency in business activities shall consistently be observed to spur 
confidence. Pursuant thereto, permit holders or facility operators shall 
publish their available and uncommitted excess capacity, access terms, and 
conditions, and allow the review and inspection of their facilities and 
records to verify the same. 
 
SEC. 29. Congestion Management. - Whenever the holder of a capacity is no 
longer able to use or has not released the capacity without justifiable reason, the 
permit holder or the operator of the facility shall have the authority to release and 
market the same. The procedure and criteria of the release shall be part of the TPA 
Code. The government agency which shall have an oversight function on this matter 
shall be designated in the PA Code. 
 
SEC. 30. Approved Access Conditions and TPA Contracts. - Prior to the 
conduct of negotiations with third parties, the permit holder or the facility operator 
shall request the DOE for the review and recommendation of its access conditions in 
accordance with the TPA Code. All subsequent access contracts shall be reviewed and 
approved by the DOE. 
 
SEC 31. 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. 


 
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CHAPTER VII 
STANDARDS ON FACILITIES, PRODUCT AND SAFETY PRACTICE 
 
SEC. 32. Standards on LNG Ships and LNG Facility. - 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. 
The DOE shall ensure compliance with this requirement. 
 
SEC. 33. Standards on Product Quality. - 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 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. The DOE shall ensure compliance with this 
requirement. 
 
SEC. 34. Standards on Safety Practice. - The permit holder or operator shall 
implement an acceptable health, safety, security and environment management 
system in accordance with applicable Philippine and internationally accepted 
standards. The DOE shall ensure compliance with this requirement. 
 
 
CHAPTER VIII 
RESPONSIBILITIES OF THE PERMIT HOLDER OR OPERATOR 
 
SEC. 35. Responsibilities of the Permit Holder 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 


 
15 
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; 
 
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 IX 
INCENTIVES 
 
SEC. 36. 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 Incentives) of the National Internal Revenue Code of 
1997, as amended. 
 
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. 
 


 
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SEC. 37. 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. 
 
SEC. 38. Withdrawal of Exemptions. - To achieve the declared policies of this 
Act, particularly in relation to the promotion of fair and non-discriminatory treatment 
of public and private sector entities in the development of the PDNGI infrastructure, 
all existing tax exemptions applicable to persons engaged in the transmission or the 
distribution of natural gas, insofar as such exemptions relate to revenues derived from 
the transmission or the distribution of natural gas, shall be deemed revoked upon the 
effectivity of this Act, any law to the contrary notwithstanding. 
 
 
CHAPTER X 
PROMOTION OF COMPETITION 
 
SEC. 39. 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. 40. Functional and Structural Unbundling. - All PDNGI participants shall 
functionally and structurally unbundle their business activities and rates in 
accordance with the pa within nine (9) months from accordance with the particular 
sector. The ERC shall, within nine (9) months from the effectivity of this Act, 
promulgate the unbundling rules and regulations. 
 
SEC. 41. 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. 42. 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; 


 
17 
 
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 XI 
FINES AND PENALTIES 
 
SEC. 43. Administrative Fines and Penalties. - The following administrative 
fines and penalties shall be imposed on any industry participant who violates the 
provisions of this Act: 
 
a. The permit issued by the DOE under Chapter IV, Section 12 of this Act, may 
be suspended or revoked and the DOE shall impose upon the operator a 
fine of Fifty thousand pesos (Php50,000.00) per violation of any provision 
under Chapter VIII, Section 35 of this Act, without prejudice to other 
appropriate administrative fines and penalties that other relevant 
government agencies may impose on the operator: Provided, That the 
schedule of fines provided for in this Section shall be increased by the DOE 
every five (5) years. 
 
b. The permit issued by the DOE under Chapter IV, Section 12, may be 
suspended or revoked upon the recommendation by the ERC and the 
operator may be charged by the ERC a fine of Five hundred thousand pesos 
(Php500,000.00) per violation of any provision under Chapter IV, Section 13 
of this Act. This is without prejudice to other appropriate administrative 
fines and penalties that other relevant government agencies may impose 
against the operator. 
 
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. 
 
SEC. 44. Criminal Fines and Penalties. - Appropriate fines and penalties under 
existing penal laws shall apply to any criminal violation associated in the 
implementation of this Act. 
 
 
CHAPTER XII 
TRANSITORY PROVISIONS 
 
SEC. 45. 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. 
 


 
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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. 46. 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 XIII 
FINAL PROVISIONS 
 
SEC. 47. 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. 
 
SEC. 48. 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. 49. Joint Congressional Energy Commission. - Upon the effectivity of this 
Act, the oversight function shall be exercised by the Joint Congressional Energy 
Commission (JCEC), as provided for by law. 
 
The said Oversight Commission shall, in aid of legislation, perform the 
following functions: 
 
a. Set the guidelines and overall framework to monitor the proper 
implementation of this Act; 
 
b. Look into the appropriateness of creating a single independent regulatory 
body when the conditions prevailing so require; 
 
c. Conduct a periodic review of this Act at least once every three (3) years; 
 
d. Determine inherent weaknesses in the law and recommend necessary 
remedial administrative or legislative measures; 
 
e. Approve the budget for the programs of the said Oversight Commission 
and all disbursements therefrom; 
 
f. Submit periodic reports to the President of the Philippines and Congress; 
and 
 


 
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g. Perform such other powers and functions as may be necessary to attain its 
objectives. 
 
The JCEC shall be assisted by a secretariat to be composed of personnel who 
may be seconded from the Senate and the House of Representatives and may retain 
consultants who possess sufficient background and competence on policies and issues 
relating to the downstream natural gas industry. 
 
SEC. 50. Appropriations. - The amount necessary for the implementation of 
this Act shall be included in the annual General Appropriations Act. 
 
SEC. 51. 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. 52. 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. 53. 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. 54. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in a newspaper of general circulation. 
 
 
Approved,