Lotilla: Review of Prime Infra Malampaya buy-in ‘on track’

Energy Secretary Raphael P.M. Lotilla
Energy Secretary Raphael P.M. Lotilla

THE review of Razon-led Prime Infrastructure Capital Inc.’s (Prime Infra) acquisition of a controlling stake in the Malampaya consortium is “on track,” and an early resolution on this by the government is vital to the country’s energy security, the energy chief said on Thursday.

“Just to assure you that the review by the PNOC-EC (Philippine National Oil Company–Exploration Corp.) on Prime Infra’s acquisition is on track, and the notification to the DOE (Department of Energy), having been received, that is also moving in parallel,” Energy Secretary Raphael Lotilla said during an online news briefing held Tuesday.

The Malampaya gas field, which delivers around 20 percent of the country’s electricity requirements, is operated through Service Contract No. 38 (SC 38) granted to the consortium of SPEX (Shell Philippines Exploration B.V.), Chevron Malampaya (now UC38LLC), and state firm PNOC-EC.

Lotilla acknowledged that the ongoing review is crucial to the country’s energy security as the “present Malampaya-Camago field is a finite one,” and that “the resolution of legal, technical and financial issues” on the sale of Malampaya operator Shell Philippines Exploration’s (SPEX) interest to Prime Infra is “important for the energy security of the country.”

The Malampaya project is one of the country’s most important power assets and is the only local producer of indigenous natural gas. It began operations in 2001, with the consortium’s license for the project set to expire in 2024.

Operating since 2001, the Malampaya gas field supplies fuel to around 40 percent of gas-fired plants in Luzon, generating around 3,457 megawatts (MW) for the Luzon grid.

It may be recalled that SPEX sold its 45-percent stake to Malampaya Energy XP Pte Ltd. (MEXP), a company previously owned by Udenna Corporation of Davao businessman Dennis Uy. PNOC-EC did not give its consent to this deal. Later on, MEXP and Prime Exploration Pte. Ltd., a subsidiary of Prime Infra, signed a share purchase agreement.

Prime Infra’s undertaking

Prime Infra earlier vowed to accelerate investments in the Malampaya gas field to improve the output of existing wells and, if possible, develop new wells in the area once license extension is secured from the government.

Prime Infra’s investment in the expansion of Malampaya operations will also be critical to providing the necessary infrastructure to support the development of natural gas in the area, one of the key points defined in the administration’s energy agenda.

Lotilla said last week the review on the Malampaya deals would be finished and resolved within the year, with PNOC-EC likely to give the green light on Prime Infra’s investment deal. “The schedules are quite tight … Even if we stretch a bit, I don’t think they would have to go beyond this year,” the DOE chief had said.

Explaining the process, Lotilla said PNOC-EC, with its 10-percent stake in the Malampaya project, “will give consent first.”

“The PNOC Exploration Corp. is considering the matter of giving its consent to the sale of Shell’s interest, and as far as the Department of Energy is concerned, we would have to review the sale and the terms and conditions under which it is going to be made,” the energy chief said.

“But I can assure you that we will try to adhere to the timelines that are in the department circular that I issued in 2007 on the renewal and approval of transfers and interest in the service contract. I realize that the deadlines there are tight, but as much as possible, we would like to address these issues within the framework of that department circular,” he added.

The DOE would tap technical and financial advisors to help the agency review the technical and financial aspects of the proposed sale. “So I want to assure you and the public that the Department of Energy will exercise the utmost care and diligence in reviewing this proposal,” Lotilla had said.

“The main objective is to ensure that the Philippine government and the Filipino people will be able to take full advantage of this resource and that within the framework of Presidential Decree 87, we look forward not only to the extraction of the existing resource but that we also look to the full development of the other oil and gas resources of the country,” he said.

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