Subsea pipeline key Malampaya draw for investors
By Lenie Lectura – October 30, 2020
from Business Mirror
Malampaya gas field in offshore Palawan. File photo
DEPUTY Speaker and Surigao del Sur Rep. Johnny T. Pimentel revealed Thursday that the interests of prospective buyers of the 45-percent stake of Shell Exploration B.V. (SPEx) in the Malampaya gas project lie primarily in the 504-kilometer subsea pipeline.
“The interest is clearly in Malampaya’s existing infrastructure, mainly its underwater pipeline, which could be used to transfer all the offshore gas in the West Philippine Sea to the onshore gas power plants in Batangas,” Pimentel said in a statement.
The Malampaya Deep Water Gas-to-Power project off the shores of Palawan is being operated by SPEx. It announced last month plans to divest its entire stake in the project as part of its portfolio rationalization efforts.
The sale includes the 504-kilometer, 24-inch diameter pipeline that delivers gas to the gas plants in Batangas, and the Sampaguita gas discovery in Recto Bank, formerly Reed Bank, some 250 kilometers southwest of Malampaya.
Existing Malampaya consortium member Udenna Corp., with a 45-percent stake, wants to invoke its preemptive and consent rights over the stake sale. The Philippine National Oil Company-Exploration Corp. (PNOC-EC), which holds the remaining 10 percent, is being invited by UC to join in the latter’s takeover plan.
The group of Manuel V. Pangilinan is also interested.
“Even if all of Malampaya’s resources eventually run out, the project’s pipeline could serve as the ‘toll road’ of all future gas that may be harvested from nearby reservoirs,” Pimentel pointed out.
PXP, JP Morgan
Pimentel’s statement comes after Pangilinan said his group is in talks with JPMorgan to assist PXP Energy Corp.
“We are looking at it. We’ve been talking to JPMorgan who has been advising Shell on their share sale in Malampaya,” Pangilinan said.
Pangilinan said PXP Energy could be used as the vehicle to acquire the stake of SPEx.
The now 19-year-old Malampaya gas-to-power project still generates up to 3,400 megawatts (MW) of electricity for the Luzon grid.
However, Department of Energy officials previously told a congressional hearing that by 2024, Malampaya’s gas output would fall to just one-third of current capacity.
Four years from now, Malampaya’s diminishing gas reserves might be able to produce just 1,100 MW of electricity for Luzon.
Based on an independent assessment by Weatherford Petroleum Consultants, the nearby Sampaguita field in Recto Bank “is estimated to contain 2.6 trillion cubic feet of in-place contingent resources and 5.5 trillion cubic feet of in-place prospective resources.”
The operator of the service contract that contains the Sampaguita gas discovery, Forum Energy Ltd., is controlled by PXP.
There was no comment on Thursday from the DOE and SPEx on this.
Senate hearing
Sen. Sherwin T. Gatchalian earlier called for a Senate inquiry on the issues surrounding the looming expiration of Service Contract (SC) 38 or the Malampaya Deep Water Gas-To-Power Project given its critical role in the country’s energy security.
Gatchalian, along with Senate President Vicente C. Sotto III and Sen. Panfilo Lacson, filed Senate Resolution 533 citing the need for Congress to be apprised of the government’s plans for SC 38.
The solon wants to look into the compliance of the government and the consortium with Presidential Decree (PD) 87 or the Oil Exploration and Development Act of 1972, and the impending sale of the 45-percent stake of SPEx.
“We’re looking at the larger picture which is the energy security of the country. So we have to make sure that whoever takes over that portion of Shell should have the technical capability. They should be able to demonstrate that they can operate this rig competently with technical expertise and in the future, if ever that area has potential, they should be able to demonstrate that so they can explore and develop that area,” Gatchalian said.
Gatchalian cited Section 4 of PD 87 which states that the government may directly explore for and produce indigenous petroleum and may also indirectly undertake the same service contracts, provided that the contractor is technically competent and financially capable to undertake the operations.
