THE consortium behind the Malampaya natural gas discovery that powers about a third of Luzon’s energy requirement intends to go back to the Energy department to discuss its request to extend its exploration contract, an official of the group said.
“It will come, definitely. I cannot give an exact time, but definitely it will,” said Kiril Caral, managing counsel of Shell Philippines Exploration B.V. (SPEx), on the sidelines of Powertrends 2019 on Tuesday at SMX Convention Center in Pasay City.
He was responding to questions on whether the group will once again bring up the matter with the Department of Energy (DoE). He said the request letter was sent in late 2018 “informing the DoE that we expressed our interest in SC (Service Contract) 38 to be extended.”
SPEx is one of the members of the consortium along with Chevron Malampaya LLC and state-led PNOC Exploration Corp. (PNOC-EC).
Mr. Caral said the existing service contract allows for a maximum of 15 years of extension. He said how much the DoE is willing to grant is a matter that has to be discussed.
“The 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,” he said.
He said nothing “definite” had transpired on the discussions with the DoE to extend the contract, but said the talks are “ongoing.” The contract is scheduled to end in 2024.
“We have, of course, discussed the request for extension but there’s no final outcome yet,” he said.
“Yes, there’s still gas after 2024. The question is, of course, how much and that will depend on what happens in the next few years, so how fast we produce, and also eventually if we do actually drill new wells,” he added.
Mr. Caral also said SPEx remains “very interested” in investing in upstream petroleum exploration.
“In SC 38, there have been discoveries that are not yet being produced, so those are the logical areas where you might drill the wells,” he said.
The project is spearheaded by the DoE and developed and operated by SPEx on behalf of joint venture partners. Since its inception in 2001, Malampaya has been providing a stable supply of energy, meeting 35% to 40% of Luzon’s power needs.
The offshore Malampaya natural gas platform fuels several power plants in Batangas. PNOC-EC is a unit of the DoE’s commercial arm, Philippine National Oil Co.
The DoE previously said that it had not granted any extension for SC 38, which is set to expire in 2024. It had said the consortium’s application remains pending since 2008, when it filed for a 15-year extension.
Under SC 38, the government is entitled to receive an amount equal to 60% of the net proceeds from the sale of petroleum, including natural gas, produced from the project’s operations. The service contractors are entitled an amount equal to 40%.
Malampaya derives natural gas from the Camago-Malampaya reservoir, which was discovered in 1992 by SPEx. The natural gas flows through wells before reaching the production platform. It is then separated from water and condensate, which is a high-quality byproduct. The dry natural gas then traverses a 504-kilometer subsea pipeline to fuel the power stations in Batangas.
In a panel discussion earlier yesterday, Mr. Caral said as of the end of August this year, government revenues from Malampaya had reached a combined total of $11 billion.
He said petroleum exploration is a highly regulated industry, with an investor securing a service contract after a strict and rigorous process that is meant to select those that are technically and financially qualified.
Exploration is also a high-risk venture, with the promising sites in the Philippines mostly in the deepwater areas.
“It’s also a capital-intensive industry. If you drill a deepwater well, it could be anywhere from $50 million to $100 million,” he said, adding the venture requires a long-term commitment for investors. — Victor V. Saulon
