Malampaya shutdown starts March 15

MANILA, Philippines – The firm in charge of the Malampaya natural gas plant in Palawan will try to complete maintenance work on the facility ahead of the 30-day scheduled shutdown from March 15 to April 14.

Shell Philippines Exploration B.V. (SPEX), the upstream company of Shell in the Philippines in charge of operating the Malampaya Deep Water Gas-to-Power Project, will install a $765 million platform in a bid to maintain fuel supply to power plants providing about half of Luzon’s electricity needs.

The installation also coincides with the maintenance shutdown of the Malampaya gas facility, thus the looming power shortage in Luzon.

The Luzon grid is dependent on Malampaya which fuels 3 power plants: Sta Rita (1,000 megawatts); San Lorenzo (500MW); and Ilijan (1,200MW). The Sta Rita and San Lorenzo power plants are owned by Lopez-led First Gen Corporation. Ilijan is owned by Kepco Philippines.

When asked if the 30-day timeframe for Phase 3 work could be shortened,  SPEX managing director Sebastian Quiniones said, “We will try.”

He explained: “Thirty days is our contractual obligation. Malampaya has always fulfilled its obligations. We have such good technical people. We’re still talking to the government.”

Quiniones added that “the reservoir is depleting so in a bid to boost the gas we are undertaking Phase 3.” 

Phase 2 involved the installation of two additional subsea wells at a cost of $250 million.

The Malampaya project is spearheaded by the Department of Energy (DOE), and developed and operated by SPEX on behalf of joint-venture partners Chevron Malampaya LLC and PNOC Exploration Corporation.

Power rate hike

The 30-day shutdown of the Malampaya natural gas facility is expected to jack up power rates by at least P1 ($0.23) per kilowatt hour (kWh), the Philippine Independent Power Producers Association, Incorporated (PIPPA) had said.

“I guarantee that there will be a spike because that happens whenever Malampaya shuts down,” said PIPPA President Luis Miguel Aboitiz.

The power plants fueled by the Malampaya facility will have to shift to liquid fuel to keep them running.

“Once the gas plans shift to liquid fuel, there’s around P1 ($0.23) per kWh automatic increase,” said Aboitiz, referring to a spike in generation charge, the largest component of an electricity bill.

Lawrence Fernandez, Meralco vice president and Head of Utility Economics, agreed that the rate hike is estimated to reach at least P1 ($0.23) per kWh.

A Manila Electric Company (Meralco) bill is composed of the following charges: generation, distribution, transmission, taxes, system loss, and lifeline subsidy.

April 5 to 15 is also the critical period, as demand peaks up coinciding with the Malampaya shutdown which will last until April 14.

GE Philippines Chief Executive Officer Jose Emmanuel De Dios said that cheaper oil prices could temper power rate increases.

However, Aboitiz was quick to point out that it would not help much because “last year’s spike came from the shift to liquid fuel alone.”

“The moment these gas plants use liquid fuel there’s automatically around P1 ($0.23) per kWh increase. That’s excluding increases in WESM (Wholesale Electricity Spot Market) and other charges,” stressed Aboitiz.

But PIPAA is hopeful that the market cap imposed by the Energy Regulatory Commission (ERC) will help temper a rate hike.

“But it won’t be as bad [as 2013] because we’ve got a lower primary cap at the WESM and a secondary cap,” said Aboitiz.

The ERC has put in place a secondary price cap of P6.245 ($0.14) per kWh once the P9 ($0.20) per kWh  threshold was breached. ERC had also put in place a primary bid cap of P32 ($0.73) per kWh.

On March 2, the Senate finally approved on third and final reading a joint resolution allowing President Benigno Aquino III to address a potential power shortage in the summer of 2015. – Rappler.com


US$1 = P44.14