During the 1970s and 1980s, the Philippines sought growth and self-sufficiency in energy production. In 1972 the government altered the legal arrangements for oil exploration from concessions to a service contracts, and serious oil exploration began in the mid- and late 1970s. As a result of exploration in the Palawan-Sulu seabed, oil was discovered in the Nido oil field in 1976. Commercial production began in 1979 and yielded 8.8 million barrels. Successful wells also were drilled in the Cadlao and Matinloc fields off Palawan in 1981 and 1982, but the fields were relatively small. The level of production varied during the 1980s but never exceeded 5 million barrels in any one year. In 1988 local production--2.2 million barrels--accounted for only 3 percent of domestic oil use. A study released in early 1990, indicating that the geology of the Philippines was a favorable indicator of possible additional petroleum deposits, was used by the government to encourage oil exploration firms. Production-sharing arrangements allowed a firm first to recover the cost of its investment, after which 60 percent of profits would go to the government. In December 1990, there were new discoveries of oil and natural gas off the northwest coast of Palawan Island. Tests showed that the oil well could have a flow rate of 6,000 barrels per day, with potential reserves of about 1 billion barrels.

Between 1973 and 1983, power generation increased at an annual rate of 7.0 percent, two percentage points above the growth rate of real gross domestic product (GDP). In 1988 the National Power Corporation, which produced approximately 90 percent of the country's electricity, had a generating capacity of 5,772 megawatts. Of that, 42 percent was from oil-burning plants and 7 percent from dual oil-coal facilities. An additional 37 percent was from hydroelectric plants, and just under 15 percent was from geothermal plants.

The Philippines had a wealth of potential energy resources. It ranked second behind the United States in production of electricity from geothermal sources. Installed capacity in 1988 was 828 megawatts; estimated potential was 35,000 megawatts. Undeveloped hydroelectric potential of 3,771 megawatts also was identified. Coal resources, estimated to be 1.2 billion tons, also were plentiful, although of a rather poor grade for electrical generation. In addition to these sources, solar, animal waste, agriwaste, and other nonconventional sources were utilized for generating small amounts of electricity and other energy needs in rural areas. Together they accounted for about 15 percent of energy consumption.

In 1990 the Philippines was confronted with a crisis of insufficient electrical generating capacity. Metro Manila and the thirty-three provinces in the Luzon power grid experienced brownouts of up to four hours per day, with the grid averaging a daily deficiency of 262 megawatts. At the root of the problem was the decision by the Marcos regime to build a 620 megawatt nuclear-power plant on the Bataan Peninsula. The Aquino government decided not to use the facility because it was located on a seismic fault. As a result, a badly needed expansion of generating capacity in Luzon, which accounted for 75 percent of national electric consumption, did not come on line. The problem was compounded by inadequate planning and bureaucratic delays. There were delays in the building of a facility capable of generating 110 megawatts of geothermal power in Albay Province and a 300 megawatt coal-fired plant in Batangas Province. The short-term solution was to put up a series of gas-turbine plants with a combined rating of 500 megawatts. Only 245 megawatts came on stream between 1987 and 1989. Economists estimated that to achieve a 5.6 percent growth rate in real GNP, the country would need an additional 300 megawatts of generating capacity yearly.

Efforts also were being made to expand the country's rural electrification program. In 1985 it covered the franchise area of some 120 electrical cooperatives, reaching around 2.7 million households. The government planned to expand the coverage to some 4 million households by 1992.

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