Malampaya consortium seeking extension until 2039

MANILA, Philippines – While it is committed to explore and drill for more gas, Shell Philippines Exploration B.V. (SPEX), the operator of the Malampaya deep water gas-to-power project gas, is urging the government to extend assistance that would make the business environment more enticing.

The Malampaya project fuels 3 natural gas power plants with a combined capacity of 2,700 megawatts (MW), equivalent to about 36% of Luzon’s power generation requirements.

The government and the consortium, which wants a 15-year extension of its service contract to 2039, are discussing the issue.

The license granted to the Malampaya consortium to conduct exploration and drill activities under SC no. 38 is valid until 2024.

SPEX General Manager Sebastian Quiniones, Jr. said that to do more drilling, they need government assistance, particularly in the issuance of permits. Other government agencies should also provide support, like the Bureau of Customs, he added.

“It’s a tall order,” Quiniones said.

But Energy Secretary Carlos Jericho Petilla said the government could not act on the license renewal until SPEX submits a “definitive proposal,” which must include the gas volumes beyond 2024 and the cost of the gas.

Since its commercial operations in 2001, the Malampaya project has remitted over $7.7 billion to the national government as of June 2014. “The government gets 60% of everything,” the SPEX official said.

For his part, Graeme Smith, SPEX Vice President for Exploration in Asia, said separately that SPEX remains interested to conduct future exploration activities after work for Service Contract (SC) no. 38 is done.

“We’re always interested to look at all opportunities available. We are constantly looking and taking note of the financial and technical risks involved,” Smith said.

The Malampaya gas field off Palawan contains 2.7 trillion cubic feet of natural gas and 85 million barrels of condensate.

The consortium has consumed around 1.5 cubic trillion of gas, Quiniones said. But the facility is expected to run out of gas by 2024.

To sustain the level of gas production committed under existing contracts, the consortium has started a $1-billion expansion program through two new project phases.

Phase 2 involves the installation of two new subsea gas wells worth $250 million. Phase 3, meanwhile, is composed of new compressors and a platform that will be completed in 2015.

“We are nearing the stage where everything has been put together. The depletion compression platform for Phase 3 will sail from Subic in January next year,” Quiniones said.

The consortium is composed of SPEX, 45%; Chevron Malampaya, LLC, 45%; and Philippine National Oil Company-Exploration Corporation, 10%. – Rappler.com