Gov’t share from Malampaya to reach $11 B
By Myrna M. Velasco – July 7, 2019, 10:00 PM
from Manila Bulletin
The share of the Philippine government in the multi-billion Malampaya gas field project will reach a milestone $11 billion by August this year, according to projections of the Department of Energy (DOE).
Department of Energy (DOE) logo
(MANILA BULLETIN)
An official of the department indicated such “status update” had been communicated to them by gas field operator Shell Philippines Exploration B.V. (SPEX). By far, this was reckoned from the field’s gas extraction performance in the first half of the year.
The $11-billion revenue share was $1 billion higher than the $10-billion government share in August last year.
A government source noted that the state’s royalty share from the gas field venture had more than surpassed the original projections of $8 billion overall when the Malampaya reached commercial operations in 2011.
The 25-year contract for the Malampaya field will expire in 2024, so the government still has five more years to corner massive revenue-dollars from it. As could be gleaned from the past years, Malampaya’s scale of remittance to the state coffers had been hovering at $800 million to $1.1 billion annually – just lower on the years when cost recovery on investments were being made.
Last year, the gas field logged all-time high production of 150.804 billion standard cubic feet, the highest since the kick-off of its commercial operations in 2001.
There have been stipulations both from the DOE and SPEX that Malampaya’s life cycle could still be extended for another five to six years, but that shall depend on the government’s decision on propounded renewal of the Service Contract (SC) 38 of the country’s major and only commercial gas field.
SPEX, for its part, has indicated that if it would be granted an extended license to operate the field, Malampaya would still be able to satiate the requirements of the five gas-fired power facilities in the country until 2029-2030.
The gas production of the field had been committed to 3,200 megawatts of power generating facilities in the country via gas sale and purchase agreements. In Luzon, gas-generated capacity accounts for roughly 30 percent of the grid’s requirements.
The field operator’s application for service contract extension is for 15 years, but that has yet to be acted upon by the DOE – which will then recommend further action to the Office of the President. With additional drilling of wells, it is hoped that new discoveries could turn out to be commercially feasible.
Given assumptions on residual gas that may still be drawn from the field, a government action on extending Malampaya’s production life cycle could help bridge the fuel needs of gas-fired plants in the country – and this is considered most critical step at this point when the biggest power grid of Luzon is teetering into a crisis state.
The Philippines has been desperately searching for investments that will replace the Malampaya field, but there is capital flow scarcity in the country’s upstream oil and gas sector-due to array of factors, including diplomatic strain on prospective blocks at the West Philippine Sea.
