No carryover terms on Malampaya

ENERGY Secretary Alfonso Cusi declared on Wednesday that his office would not extend the exploration contract of the Malampaya consortium under the same terms.

“There is no such thing as extension. I cannot agree to just extending the same terms. If I am going to extend it on the same terms and conditions, I will not because ang sinasabi ko nagbago, pag-aari na ito ng Pilipinas. Nabayaran na natin so ang facility na ito, atin na what I’ve been saying is that things are different now, this is now property of the Philippines. This facility has already been paid for, so it’s ours now],” said Cusi.

What could be possible, he said, is the crafting of new contract terms that will be beneficial to the country. “I have to study what is good for our country. The facility will be owned by the country. The landscape changes.”

One possible amendment to the contract is the conduct of an auction to determine the next contract operator. “That’s an option. We can hire a new operator. Whatever will be good for us,” said Cusi.

The Malampaya deep water gas -to-power project was developed and is operated by Shell Philippines Exploration BV  (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.

The consortium was awarded a license to conduct exploration activities under Service Contract (SC) 38, which is set to expire in 2024. The existing contract allows for a maximum of 15 years of extension, Spex Managing Counsel Kiril Caral had said.

The DOE may not decide to extend SC 38 under the same terms and conditions since the government can operate the gas facility after the contract expires. PNOC-EC has been tasked to conduct a study on the possible scenarios once SC 38 expires in 2024.

The study will determine the gas facility’s life term; if it will be commercially viable and more beneficial to the national government for PNOC-EC to operate the gas facility; if drilling an additional source with 1,000 megawatts (MW) of capacity east of the Malampaya project is more feasible.

“That’s also possible,” Cusi replied in Filipino when asked if PNOC can take over. “Sila ang may-ari nun (They own it after all).”

Spex, the local unit of energy giant Royal Dutch Shell, had said the gas could be depleted sometime in 2027, depending on demand. It also cited the possibility of a gas supply until 2030 with oil and gas prospects near the Malampaya deepwater gas-to-power project.

“That again is something that we’d like to ascertain by engaging a third party, PNOC,  to determine ano ba talaga ang maiiwan [what will remain]. What is really the inventory? How certain are we [that we’re given the right] information. We also asked Spex. I have to be certain because when we make a decision we want to make sure that the basis is correct.”

Takeover not a good idea

The possibility of a government takeover is not a good idea, according to Sen. Sherwin T. Gatchalian, chairman of the Senate Committee on Energy. “Personally, I am not confident the government can operate it properly. We have a bad history of operating projects, if you look at MRT, LRT and the airports,” he had said.

Another thing to consider is PNOC-EC’s technical capability to operate the gas project, added the lawmaker. Gatchalian was also informed by Spex that it was seeking to extend its contract to 2030 because it wants to explore other potential areas near SC 38 in hopes that 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,” said Gatchalian.

Shell had planned to pursue an LNG project in the Philippines. Last December, the company said it would rather explore for more oil and gas exploration instead of putting up an import terminal for LNG.

The Malampaya 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. It has been providing a stable supply of energy, meeting 40 percent of Luzon’s power needs.