President Ferdinand R. Marcos Jr. yesterday approved the extension of the Malampaya natural gas project’s production contract for another 15 years or until February 2039.
Service Contract 38 covering the natural gas field off Palawan is set to expire next year.
The consortium led by Enrique K. Razon Jr.’s Prime Energy, thus, may continue sustaining the production of the Malampaya gas field project.
The government had, thus, removed the main obstacle to the exploration and development of the gas field which is known to have immense reserves.
“This is the key to our drive to energy security and is calculated to advance the nation’s energy interest. This project will reduce our dependence on oil imports while ensuring a stable supply of energy,” Marcos said during the signing ceremony in Malacañang Palace.
“It (the contract) is consistent with the Constitution and our state policy of hastening the discovery and production of indigenous petrol. As we renew the contract, we look forward to the continued production and utilization of the remaining reserves of the Malampaya gas field as well as further exploration and development of untapped (reserves),” he added.
The extended deal, he said, would generate more revenues for the government, given that the Malampaya gas project has generated a total of P374 billion in royalties.
He said the government is assured of a favorable sharing scheme with the private sector partner under the terms of the new contract.
“We are confident in the capability of the SC 38 consortium in handling this project,” he added.
Meanwhile, the Department of Energy said the discovery of additional reserves in the Malampaya gas field would 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,” the DoE said in a statement.
The Malampaya SC 38 is a natural gas field located northwest of Palawan. It covers an area of around 830 square kilometers.
Energy supply ensured
It also supplies natural gas to five power plants in Luzon, the country’s largest island.
The agreement to develop the Malampaya gas field was first awarded to Shell Philippines Exploration in 1990.
In 2022, Shell sold its 45 percent stake to Enrique Razon’s Prime Infrastructure Capital Inc.
Dennis Uy’s Udenna Corp. retains a 45 percent stake in the project after acquiring the shares of Chevron. The state-owned PNOC Exploration Corp holds the remaining 10 percent of the consortium.
The new agreement to extend the contract for the Malampaya gas field requires the contractors to conduct a minimum work program consisting of geological and geophysical studies and the drilling of at least 2 deep water wells from 2024 to 2029.
This will ensure that the remaining gas reserves are utilized and that the country has a stable energy supply.
Facing the consortium before the extension of SC 38 was the twin dilemma of the contract expiring in 2024 while the gas stock is expected to be completely depleted by 2027 without the development of new wells.
Malampaya’s previous consortium members Shell Philippines Exploration B.V., a unit of Royal Dutch Shell, and Chevron Malampaya, an affiliate of the American oil giant, had not undertaken exploration projects since 2007 since the Philippines asset was not a priority of the two multinationals.
Due to the huge cost of energy search, the consortium withheld investing in exploration and drilling projects until the contract is extended.
Energy Secretary Raphael Perpetuo Lotilla said Marcos signed the Renewal Agreement for the Malampaya SC 38 after meticulous evaluation.
The extended project will allow for the continued production of the Malampaya gas field. It will ensure that the remaining gas reserves are further explored and utilized.
For Prime Infrastructure Capital Inc. chairman Razon, the Malampaya contract extension will significantly contribute to the country’s national energy security and independence.
Razon: Project moves forward
“The Malampaya asset will continue what it has started in operating this world-class installation for further exploration and utilization of the country’s remaining gas reserves, as well as open up the other potential near field areas for future production,” Razon said.
As a part of the requirements for the extension, the SC 38 Consortium was required by the government to undertake a work program consisting of geological and geophysical studies and the drilling of at least two deep water wells from 2024 to 2029.
It should also conduct exploratory drilling away from the Malampaya production area but within the service contract.
Failure to comply with the provision will oblige the group to relinquish a portion of the exploration areas.
The SC 38 Consortium likewise needs to submit a decommissioning plan and budget covering the abandonment of wells and facilities covered by international standards.
The report should include timing and costs and should be submitted within 30 calendar days from the effectiveness of the renewal agreement for approval by the DoE.
Malampaya has been powering up to 20 percent of Luzon’s total electricity requirements. It supplies natural gas to power four power generation plants in Batangas with a combined capacity of 2,011 megawatts.