Malampaya license extension now under review by Malacanang
By Myrna M. Velasco – February 14, 2023, 3:31 PM
from Manila Bulletin
The 15-year license extension of the Malampaya gas field project being sought by Prime Energy of the Razon group is now under review by the Office of President Ferdinand Marcos, Jr, according to the Department of Energy (DOE).
In a statement to the media, Tuesday, Feb. 14, the DOE stated that it will be “withholding any comment on the request for an extension of the Service Contract (SC) No. 38 consortium, while the same is under review by the Office of the President.”
Fundamentally, a service contract for petroleum exploration and production (E&P) investment in the country will have to go through the evaluation and initial go-signal of the DOE first before it will be elevated to the Office of the President for review, final approval and signing.
SC 38 is the license that binds the consortium-members on the continued operation of the commercial gas production facility.
The current operator of the project is Prime Energy, a subsidiary of Razon-led Prime Infrastructure Capital Inc. Its partners in the Malampaya consortium are UC38 of businessman Dennis Uy’s Udenna Group, and state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC).
The latest proposal set forth by some groups on the Malampaya field is for the government to take over its operations, upon the expiration of the initial 25-year contract by February next year.
The energy department, nevertheless, emphasized that “the Philippine government retains at all times its full control over all aspects of gas and oil exploration and development.”
Under Presidential Decree (PD) 87 or the Philippine Oil and Gas Law, the DOE cited that such prevailing edict “embodies an early example of public-private partnerships – where the private sector bears all the risk; and, in the case of the Malampaya deep water gas-to-power project, a successful one.”
The DOE is mum on media queries if the royalty sharing arrangement will be modified in the prospective extension of the Malampaya license, as well as on other issues like the coverage and budget of the work program submitted by the consortium.
The department is not also giving categorical statements on questions whether or not the exploration and production (E&P) area to be awarded in the extended license will be expanded beyond the initial block covered by SC38.
In previous discussions between the DOE and the Malampaya consortium, there had been recommendations advanced by the government to increase the royalty share of the state to 70 percent and the balance of 30 percent will be for the contractor.
On top of that, the DOE also imposed other conditions that consortium members of Malampaya shall comply with other conditions related to the targeted license extension. These are: a) assessment of the remaining reserves in the gas field; b) the extraction and sale of the banked gas; c) the development opportunity or the work program that will be necessary in order for the department to evaluate the proposals of the consortium-members; d) the decommissioning plan; e) the asset disposal; f) the price of the gas in the event of license extension; and g) the corporate social responsibility (CSR) programs that shall be carried out by the consortium.
The license extension for Malampaya was first applied for by former operator Shell Philippines Exploration B.V. (SPEX) in 2010 during the initial years of the Aquino administration.
In the past Duterte administration, SPEX affirmed its application through a formal correspondence to former Energy Secretary Alfonso Cusi in 2018 and the company also re-filed an application in 2019. However, all of these had not been acted upon by the DOE, thus, that reportedly triggered the exit of Chevron, one of the former majority equity holders in the project.
