DOE rejects PXP Energy’s unsolicited bid for Malampaya Integrated Gas Hub

THE Department of Energy (DOE) has turned down PXP Energy Corp.’s unsolicited proposal to develop and utilize an integrated gas hub at the site of the Malampaya project in Northwest Palawan.

The Pangilinan-led upstream oil and gas company submitted last month to the DOE an unsolicited proposal for the strategic development and utilization of an Integrated Gas Hub in Malampaya upon the expiry of Service Contract 38 (SC 38) in 2024.

At present, the Malampaya gas field is being maintained and operated by a consortium led by Shell Philippines Exploration BV (SPEx), with 45 percent in SC 38; Chevron Malampaya Llc., 45 percent; and state-led Philippine National Oil Co. Exploration Corp., with the remaining 10 percent.

PXP intends to take over the operations of the gas field from the consortium once the service contract expires.

However, a DOE official said this is not possible.

DOE Assistant Secretary Leonido Pulido III said Monday that the agency declined PXP’s unsolicited proposal.

“We advised PXP that [we] cannot be cognizant of their proposal. The reason is very basic.  We have PCECP (Philippine Conventional Energy Contracting Program) and, under that legal framework, there are only two ways in order to get a service contract and oil exploration permits,” said Pulido.

Under the PCECP, investors may engage in upstream exploration or development activities in two ways: One, choosing an area from the 14 Pre-Determined Areas (PDAs) offered by the DOE, and two, proposing their own areas for exploration.

“There are only two ways. There is no third mechanism. What they are trying to do is create a third mechanism, which is an unsolicited proposal. You cannot nominate an area that is already covered by a service contract.  SC 38 is already covered by an exiting contract so we can’t take cognizance of their unsolicited proposal.  We have to refuse it and we already advised them on that,” explained Pulido.

Under PXP’s proposal, the Malampaya infrastructure and distribution network, which is strategically positioned in the West Philippine Sea, is envisioned to support the continued development of the Malampaya resources, as well as the economic development of Sampaguita field and other nearby prospects under SC 72, which is operated by PXP through Forum Ltd.

PXP Energy holds a 78.98-percent operating interest in SC 72 or the contract to explore Recto Bank in the West Philippine Sea through London-listed Forum Energy Plc. It also has a direct operating interest of 50 percent in SC 75 northwest Palawan. It is also waiting for guidance from the Philippine government in respect of any future activity in the service contracts.

PXP said the use of the Malampaya facilities as the Integrated Gas Hub will support the development of a robust indigenous gas industry.  This, it added, is consistent with DOE’s commitment to pursue national development through the twofold agenda of attaining energy independence and implementing power market reforms as contained in the Philippine Energy Plan. It is also aligned with the DOE’s clean-fuel strategy, including the reduction of dependence on coal.

Its unsolicited proposal is also seen to yield substantial foreign-exchange savings resulting from the reduced importation of coal and other fuel supply, added PXP.

The Malampaya gas facility supplies 40 percent of Luzon’s power requirements.

The gas facility fuels these gas plants: the 1,000-megawatt Santa Rita, the 500-MW San Lorenzo, the 1,200-MW Ilijan, 97-MW Avion and the 414-MW San Gabriel.

Image Credits: www.shell.com