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Gauging the Market Potential for Natural Gas Among Philippine Manufacturing Firms

Author

Listed:
  • Majah-Leah V. Ravago

    (Department of Economics, Ateneo de Manila University)

  • Raul V. Fabella

    (School of Economics, University of the Philippines)

  • Karl Robert L. Jandoc

    (School of Economics, University of the Philippines)

  • Renzi G. Frias

    (School of Statistics, University of the Philippines)

  • J. Kathleen P. Magadia

    (Gas Policy Development Project, UPSCRFI)

Abstract

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

Suggested Citation

  • Majah-Leah V. Ravago & Raul V. Fabella & Karl Robert L. Jandoc & Renzi G. Frias & J. Kathleen P. Magadia, 2021. "Gauging the Market Potential for Natural Gas Among Philippine Manufacturing Firms," Department of Economics, Ateneo de Manila University, Working Paper Series 202105, Department of Economics, Ateneo de Manila University.
    • Handle: RePEc:agy:dpaper:202105
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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