Malampaya license extension still hangs

By Myrna M. Velasco – May 5, 2021, 5:00 PM
from Manila Bulletin

The Duterte administration is now on its last year stretch, but the government still cannot give a definitive timeframe on when the decision on the propounded license extension of the Malampaya project will be laid down.

“We don’t have final decision yet of the DOE (Department of Energy) and we’re continuing discussions between the technical working group of the DOE and the TWG of the consortium, so we don’t have final yet – still continuing discussion,” Philippine National Oil Company-Exploration Corporation (PNOC-EC) President and CEO Rozzano D. Briguez has stated in a recent forum.

PNOC-EC is a minority shareholder in the Service Contract (SC) 38 of the Malampaya project, and it is part of the consortium-members negotiating with the government for the targeted license extension.

The gas field’s SC 38 will expire in 2024, and studies submitted to the energy department are showing potential of additional gas that can still be extracted from the field.

But the consortium of investors in the Malampaya venture indicated that for the additional gas reserves to be proven commercially; new well drillings have to be carried out and that will also entail fresh cash call from them.

Without the license extension, which has been proposed for additional 15 years, the Malampaya consortium noted that they cannot decide on additional capital outlay in the field because there is no certainty that they can recover any fresh investment they will be injecting into the project.

The DOE previously stipulated that it is imposing at least eight conditions on the Malampaya consortium relating to their application for extended license – and that include submission of their studies on the remaining reserves that the gas field would still be able to produce in the coming years.

The others delved with the resolution of the ‘banked gas’ that is now under the charge of state-run PNOC; and the development opportunity or the submission of work program that shall serve as DOE’s basis on its decision for license extension.

The other concerns being sorted between the Malampaya consortium and the government are those on:  the split or royalty sharing between the government and the project contractor; the decommissioning plan for the gas field; asset disposal; the price of the gas in the event of license extension; and the corporate social responsibility (CSR) programs that shall be undertaken by the consortium.

The energy department similarly echoed assumptions that the Malampaya field’s depletion may not happen within the timeframe of its SC 38 expiration. Instead, its gas producing life may still be extended by at least 6-7 years or at the earliest, its depletion could come by year 2027.

At this stage, it was reckoned that commercial gas potential may still be continually pursued in the Malampaya East, Iloc, Nido and the Linapacan plays which are all within the coverage of the field’s existing service contract.