Malampaya contract renewal to boost energy security, investments

By Kris Crismundo

May 15, 2023, 4:25 pm

MANILA – The Department of Energy (DOE) has welcomed the signing of the renewal agreement for the Malampaya Service Contract No. 38 (SC 38) as this will support the country’s goal of achieving energy security and will bring in additional investments in indigenous power sources.
In a statement, the DOE said the extension of the Malampaya contract for another 15 years will allow further exploration and production of natural gas from the facility.
This, as President Ferdinand R. Marcos Jr. approved on Monday the extension of SC 38 until Feb. 22, 2039.
“Aside from continuing the production operations, the SC 38 Consortium is required to conduct a minimum work program consisting of geological and geophysical studies and the drilling of at least two deep water wells during the Sub-Phase 1 from 2024 to 2029,” DOE said.
It said the work program aims to unlock potential gas supply both in the existing gas field and nearby prospect areas to increase Malampaya’s production.
“The discovery of additional reserves in the Malampaya gas field will boost the country’s quest for energy security. It is also expected to encourage opportunities for further exploration in the country, which to date remains underexplored, and to add to the Philippines energy portfolio,” it added.
In his speech during the ceremonial signing of the renewal agreement at the Malacanang Palace, DOE Secretary Raphael Lotilla said his office will facilitate the efficient and sustainable exploration of the country’s indigenous energy sources, including the Malampaya gas-to-power project.
“Under the President’s direction and working with Congress in pursuit of the country’s energy security agenda, the Department of Energy acknowledges its responsibility in helping ensure the efficient and sustainable exploration, development, and utilization of our indigenous energy including Malampaya,” Lotilla said.
SC 38 Consortium
The DOE chief said the agency has “meticulously evaluated” the capability of SC 38 Consortium in operating and exploring the Malampaya gas project.
According to the website of the PNOC-Exploration Corp. (PNOC-EC), which holds a 10 percent stake in the Malampaya project, the SC 38 Consortium is composed of Shell Philippines Exploration B.V. (SPEX) and UC38 LLC, which have 45 percent share each.
“The assessment encompassed legal, technical, and financial capabilities, and confirmed the consortium’s capacity to sustain the production operations and meet its obligations under the renewal agreement. The DOE recommended the renewal of the service contract, anchored on the commitment of the consortium to actively explore and evaluate additional gas resources,” Lotilla added.
Following the renewal agreement of the SC 38, the DOE said the consortium is required to submit a decommissioning plan and budget within 30 days upon the effectivity of the newly signed document.
Critical power asset
The Malampaya gas-to-power project is one of the country’s vital power assets, being the only natural gas field in the country.
It was discovered in 1989, but operations began in 2001, in which the initial license is set to expire in February 2024.
It supplies 20 percent of Luzon’s total power requirements by supplying clean natural gas to five power plants —the 1,200-megawatt Sta. Rita power plant, the 500-MW San Lorenzo power plant, the 1,200-MW Ilijan power plant, the 414-MW San Gabriel power plant, and the 97-MW Avion power plant.
In June 2022, the Ilijan power plant, which provided 15 percent of Manila Electric Company’s peak demand, was shut down because of the declining production from the Malampaya project.
“Since then up to today, the loss of Ilijan has contributed significantly to the thin reserves in the Luzon grid and helped push up electricity spot prices,” Lotilla said. (PNA)