PXP Energy Corp. said on Tuesday that it had submitted an unsolicited proposal to the Department of Energy (DoE) for the “strategic development and utilization” of an integrated gas hub at the site of the Malampaya project when Service Contract (SC) No. 38 expires in 2024.
The upstream oil and gas company has also offered to acquire the 45% stake of Chevron Malampaya LLC in SC 38, which is located offshore northwest of Palawan.
“The project intends to ensure energy security to the country from indigenous natural gas resources for the next 25 years and beyond, while bringing in significant revenues to the Philippine government. The use of the Malampaya facilities as an integrated gas hub will also support the development of a robust indigenous gas industry,” PXP said in a statement to the Philippine Stock Exchange.
Under its proposal, the company envisions the Malampaya infrastructure and distribution network to support continued development of the oil discovery’s resources as well as the economic development of Sampaguita field and other nearby projects under SC 72, which is operated by PXP Energy through Forum (GSEC 101) Ltd.
PXP Energy said it submitted to the DoE on Nov. 11 its unsolicited proposal to take over the Malampaya facilities, which it described as strategically positioned in the West Philippine Sea.
The Malampaya deep water gas-to-power project is the first oil and gas platform designed and built in the Philippines. It fuels up to 30% of the country’s power needs and has contributed over $10 billion in government revenues. Shell Philippines Exploration B.V. (SPEx) operates the project on behalf of the SC 38 consortium.
The company said the benefits of the project are consistent with the DoE’s commitment to pursue national development through the twofold agenda of attaining energy independence and implementing power market reforms as contained in the Philippine Energy Plan. The project is also aligned with the department’s clean fuel strategy, including the reduction of dependence on coal, it added.
The company also sees the unsolicited proposal “to yield substantial foreign exchange savings resulting from the reduced importation of coal and other fuel supply.”
“In the meantime, PXP has expressed an interest to acquire the 45% ownership of Chevron Malampaya LLC in SC 38 through the right to match of the other SC 38 consortium members,” PXP Energy said.
SPEx also holds a 45% in SC 38, while state-led Philippine National Oil Co. Exploration Corp. has the remaining 10%.
PXP Energy’s unsolicited proposal came after SPEx said in September that it would again go to the DoE to discuss its plan to extend the SC 38 contract beyond 2024.
Kiril Caral, managing counsel of SPEx, had said that 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 with the agency.
He said the request letter was sent in late 2018 “informing the DoE that we expressed our interest in SC 38 to be extended.”
PXP interest in SC 38 came months after the deal calling for Dennis A. Uy to invest in the listed company fell through.
In April, PXP Energy said that the subscription agreement it had signed with the Davao City businessman’s Dennison Holdings Corp. had been terminated by the two parties effective on March 29, 2019. The deal was supposedly for P4.03 billion, or the issuance of 340 million shares for P11.85 each.
Mr. Uy’s Phoenix Petroleum Philippines, Inc. in October last year granted preferential rights to PXP to participate and acquire up to a 49% equity in the former’s liquefied natural gas project under subsidiary Tanglawan Philippine LNG Inc. That deal also fell through.
PXP directly and indirectly owns oil and gas exploration and production assets in the Philippines, and indirectly owns an exploration asset located in offshore Peru.
On Tuesday, its shares climbed 4.77% to close at P12.30 each. — Victor V. Saulon