THE government, through the Philippine National Oil Co.–Exploration Corp. (PNOC-EC), is seriously considering the possibility of taking over the Malampaya Deep Water Gas to Power project when the contract of the Malampaya consortium expires in 2024.
DOE Assistant Secretary Leonido Pulido said PNOC-EC is undertaking a study that will determine if it can continue to operate the gas facility located northwest of Palawan, with plans to conduct exploration activities near the gas field.
“There are two parts of that study,” said Pulido. “The first one is, will it be commercially viable? Is it more beneficial to the national government for PNOC-EC to continue the concession agreement?
“The second part is, will it be commercially viable to source the 1,000 megawatts worth of natural gas to the east of SC [service contract] 38?”
Whether or not PNOC-EC “should actually drill or extract that gas,” is a key question to be determined in the study, which the DOE ordered the conduct of, Pulido said.
PNOC-EC is part of the Malampaya consortium that operates the Malampaya project, a joint undertaking of the Philippine government and the private sector.
The project is spearheaded by the DOE, and developed and operated by SPEX (Shell Philippines Exploration B.V) with a 45-percent stake in behalf of joint-venture partners Chevron Malampaya Llc.—also with a 45-percent stake—and PNOC-EC, which holds the remaining 10 percent.
Under SC 38, 70 percent of the gross proceeds from the sale of natural gas would go to the contractor to recover the investment cost. The remaining 30 percent is shared by the government and the consortium on a 60-40 basis, respectively.
The consortium’s contract with the government will end by 2024, a matter that some concerned quarters had cited earlier to prompt the government to be more aggressive in planning for how the government can source future energy needs.
The PNOC study is expected to be completed by end of the year. The DOE is then expected to forward its recommendation to the Office of the President for approval.
“Assuming the recommendations to the secretary and assuming that the President approves it, the concession does not have a choice,” said Pulido, when asked how the government will go about the possibility of resistance from the consortium members.
According to the DOE official, PNOC-EC’s role in the future of Malampaya project is critical. ”We are confident in our upstream resource exploration data and we will find another source like Malampaya in the future, especially once the geopolitical situation stabilizes.”
Pulido added: “If you are confident that you will find such resource, you will have to be ready to operate on your own. So, we need capacity building and it’s an opportunity to develop capacity within your own country.
“That is one of the reasons we look at allowing PNOC-EC to continue the concession agreement.” He also said that PNOC-EC could take in partners if and when it takes over SC38.
This takeover plan was discussed during the Senate Committee on Energy hearing held on Monday morning. The committee chairman, Sen. Sherwin T. Gatchalian, said the Malampaya project is better off in the private sector’s hands.
“Personally, I am not confident [that] the government can operate it properly. We have a bad history of operating the MRT, LRT and airports. I am not very confident but I am willing to give PNOC the benefit of the doubt. As an observation, the government is not a good operator.” On the other hand, it will also be beneficial to the government since 100 percent of the proceeds will directly go to government coffers.
The government’s share from the energy resource development fund, commonly known as the Malampaya Fund, reached P16.25 billion in 2017, or 21 percent higher than previous year’s collection. At present, the Malampaya Deep Water Gas-to-Power project is producing 3,400 MW.
The gas field in offshore Palawan fuels three natural gas-fired power stations with a total generating capacity of 2,700 MW to provide 30 percent of Luzon’s power generation requirements. SPEX earlier said the Malampaya gas reserves can last up to 2027 or 2029, depending on the demand.
According to Spex Managing Director Don Paulino, the group can still provide between 60 percent and 100 percent of the current demand for natural gas by 2022 due to a depletion compressor that was installed.
“ We installed a depletion compressor that brought back the output of the well allowing us to recover 80 percent of the reservoir until 2027 to 2029,” he said.