The UAE and Saudi Arabia are stepping up support for the Philippines’ energy security, with both Gulf countries offering to finance oil storage facilities that could give Manila greater protection against disruptions to global fuel supplies.
Rather than leaving Manila to shoulder the full cost of new infrastructure, the two Gulf countries have offered to fund storage facilities themselves.
With the Philippines consuming around 450,000 to 460,000 barrels of oil a day, increasing the amount of fuel stored inside the country could provide an important buffer when international supplies come under pressure.
Saudi Arabia proposes 50 million barrel facility
Saudi Arabia’s proposal is significant in scale. The planned facility could eventually have capacity for up to 50 million barrels of oil.
Rino Abad, director of the Philippine Department of Energy’s Oil Industry Management Bureau, told the Senate hearing that Saudi Arabia was prepared to cover the cost of the project.
The Philippines has already submitted a concept note requested by Saudi Arabia, although several details still need to be settled, including the timeline and requirements for moving ahead.
A newly created strategic petroleum reserve team within the Department of Energy is expected to continue discussions with Saudi officials.
If the project reaches its proposed capacity, it could substantially increase the volume of petroleum stored in the Philippines and provide another source of supply during an international disruption.
UAE makes similar oil storage offer
The UAE has also offered to support the Philippines with additional petroleum storage infrastructure.
Philippine officials are expected to formally approach the UAE as discussions progress. Under the arrangement being considered, the UAE would retain ownership of its facility and could use the storage capacity commercially during normal market conditions.
Philippine authorities want to secure priority access to petroleum stored at the facility if a supply crisis affects the domestic market. This would allow the project to operate commercially while still providing the country with an additional source of fuel when needed.
Why additional oil reserves matter
The Philippines’ daily oil consumption highlights the challenge of maintaining enough reserves to cope with an extended disruption.
That could prove important during periods of geopolitical uncertainty, when disruption or concerns surrounding major shipping routes can quickly affect international energy markets.
Philippines developing its own strategic reserve
The proposed UAE and Saudi facilities are not the only part of the country’s oil security strategy.
The Philippines is also developing a government controlled strategic petroleum reserve through the Philippine National Oil Co.
A facility planned in Bataan is expected to start with capacity for around one million barrels, with the initial project targeted for completion next year.
While one million barrels may sound substantial, it would cover only a little more than two days of demand at the Philippines’ current consumption rate.
The longer term goal is much larger. Authorities eventually want to expand the Bataan reserve to around 15 million barrels, creating a more meaningful emergency stockpile.
If those plans progress alongside the UAE and Saudi-backed projects, the Philippines could have several sources of petroleum available during a serious supply disruption instead of relying on a single reserve.
Philippine lawmakers push for faster progress
With international support on offer, lawmakers are pressing government agencies to move the projects forward.
Senate Committee on Energy chairman Erwin Tulfo has urged the Department of Energy and Philippine National Oil Co. to speed up the administrative work needed to advance the initiatives.
The aim is to ensure the country has adequate reserves in place before another external shock puts pressure on fuel supplies.
Important details still have to be agreed, particularly around ownership, project timelines and the circumstances in which the Philippines would gain priority access to petroleum held in foreign-owned facilities.
Building a stronger energy safety net
For the Philippines, the proposals could ultimately provide more than additional storage space. They could give the country greater room to respond when international oil markets become unpredictable.
Energy security is not simply about having reliable suppliers. The location of reserves, the amount of fuel immediately available and the ability to access those supplies during a crisis can be just as important.
Combining the Philippines’ own strategic reserve with potential UAE and Saudi backed facilities could create a much stronger energy safety net.
The projects could also deepen the Gulf states’ long-standing energy relationships with the Philippines and reinforce their role as major energy partners in Asia.
Discussions and approvals are still required before the proposals become operational. But with Saudi Arabia considering capacity of up to 50 million barrels, the UAE offering similar support and Manila developing its own reserve, the Philippines is moving towards a more resilient petroleum supply system.
For a country consuming as much as 460,000 barrels of oil every day, having that additional cushion could prove valuable the next time global energy supplies come under pressure.