Malampaya operator still keen on extending service contract

SHELL Philippines Exploration BV (SPEX), operator of the Malampaya deep water gas-to-power project, said Tuesday there are discussions with the Department of Energy (DOE) on its formal request to extend Service Contract (SC) 38.

SPEX managing counsel Kiril Caral said the letter request was filed in “late 2018” and there has been no formal reply from the DOE since.

“There was a letter that was sent… in late 2018 informing the DOE that we expressed our interest in having SC 38 extended. SC 38 allows us for extension. That’s one of the options available within SC 38,” said Caral during the Powertrends 2019 press conference.

SPEX is part of the Malampaya consortium awarded a license to conduct exploration activities under SC 38, which is set to expire in 2024.

Caral said SC 38 could be extended for a maximum of 15 years but it is up to the DOE to grant its request.

A request for extension was submitted and it’s something for the government to decide.

It’s a matter ultimately for the DOE to discuss and inform the Malampaya consortium on what it intends to do on the extension.

Caral said they will await feedback from the DOE on “what they would want us to do for the extension to be granted. They have not given a specific time frame but of course, we are aware that the contract would expire in 2024. It has to be earlier than that.”

This is the first time that SPEX has admitted that it asked DOE to extend its license. Caral said there is no need to file for another request, saying there were previous discussions with the DOE. “It’s ongoing. It’s under discussion, so no decision yet.”

SPEX had said the Malampaya gas reserves could last between 2027 and 2029, depending on the demand. It is also possible that there could be new gas discovery within SC 38. “Yes, there’s still gas after 2024 but the question is, of course, how much and that will depend on what happens in the next few years. In SC 38, there have been discoveries that are not yet being produced. Those are the logical areas where you might drill the wells,” he said.

The Malampaya project is developed and operated by SPEX with a 45-percent stake on behalf of joint-venture partners Chevron Malampaya Llc., also with a 45-percent stake, and PNOC-EC (Philippine National Oil Co.-Exploration Corp.), which holds the remaining 10 percent.

40 percent of Luzon needs

The gas facility supplies 40 percent of Luzon’s power requirements and 30 percent nationwide.

The gas facility fuels the following 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.

Caral said the government has received a “significant contribution” of $11 billion as of August this year from the Malampaya facility since commercial operations started in 2001.

Last month, Sen. Sherwin Gatchalian, Senate Energy committee chief, said SPEX wants to extend its contract to 2030 so it can explore other potential areas near SC 38 in hopes these could yield more natural gas and extend the life of the Malampaya gas facility until 2030.

“We heard that Shell is willing to explore more around that area. In fact, there are three or four potential areas around SC 38 and that will eventually extend the same quantity. That is only a briefing to us by Shell but we also want to understand how that will affect the LNG [liquefied natural gas] terminal, knowing there are now new prospects. Because if I am the LNG terminal, why would I import if there is still [gas] by 2030. My $2-billion [investment] will be sleeping,” Gatchalian had said.

New advocates’ group

Meanwhile, a group of energy advocates formed the Philippine Energy Independence Council (PEIC) in order to move the government and the private sector to explore new indigenous, renewable, and cleaner energy options for the country.

The PEIC aims to initiate and sustain specific conversations on indigenous energy, renewable energy, energy security, energy independence, and other pertinent concepts with the youth, with rural communities, and with local and national government officials.

PEIC is the first formal association in the country committed mainly to achieving the Philippines’s energy independence. “Our council aims to be at the forefront of initiatives to continuously initiate public discourses in order to move government and private-sector decision-makers to beef up our energy reserves,” noted PEIC Chairman Dr. Tony La Viña. “We hope that these discussions can lead to concrete steps toward the goal of energy independence.”

Image Credits: shell.com