Gauging the Market Potential for Natural Gas Among Philippine Manufacturing Firms

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Securing energy supply and pursuing low-carbon economic growth have become doubly challenging for the Philippines as it faces depletion of its indigenous natural gas. Importing liquefied natural gas is seen as the immediate solution. Our objective is to gauge the extent of the potential demand for natural gas among manufacturing firms. Specifically; we aim to determine the likelihood of switching to natural gas among firms in manufacturing ecozones; which takes the lion share of 85% of total exports. Using logistical regression; we find that the extent of the firms' knowledge about natural gas and their production process are the primary determinants of the likelihood to switch. For firms with heating component and those that perceived natural gas to be more cost-competitive; the predictive probability to switch is higher by 39.4 percentage points compared to their counterparts. More knowledgeable firms have 19.1 percentage points higher predictive probability of switching than less knowledgeable firms. The study is important for low-income countries as it sheds light on the measures its manufacturing industry can take to become cleaner and more competitive and the obstacles to transitioning to relatively cleaner natural gas and renewable sources; ultimately replacing the more expensive diesel fuel.