Operator of Malampaya gas field commits $1B to increase production

TABANGAO, Batangas, Philippines—The consortium operating the Malampaya deepwater gas field off Palawan has cemented its commitment to invest another $1 billion to increase production and extend the life of the field.

No less than President Benigno Aquino III witnessed the awarding and signing of the first engineering design contract here between field operator Shell Philippines Exploration BV, in behalf of the Service Contract 38 consortium, and the Philippine unit of the US-based Fluor Corp.

The contract was meant for Malampaya’s next-phase development, which is targeted to maintain the level of production and maximize the recovery of indigenous natural gas from the Malampaya and Camago reservoirs.

At the sidelines of the event on Tuesday, Energy Secretary Jose Rene D. Almendras stressed the importance of the Malampaya Phases II and III as these initiatives would extend the life of the field by at least 10 years, ensuring the continued operation of the gas field.

As it is, the Malampaya field already supplies natural gas to the 1,200-megawatt Ilijan plant of Korea Electric Power Corp. (Kepco); the 1,000-MW Sta. Rita; and 500-MW San Lorenzo plants, all in Batangas. The power generation at the Malampaya currently comprises roughly 40 to 50 percent of the power generated in Luzon.

Originally, the existing five wells of the Malampaya field were earlier estimated to produce gas until 2024. With Phases II and III, the SC38 consortium wants to further stretch the life of the field by 15 years to 2039, according to Energy Undersecretary Jose M. Layug Jr.

Layug said the consortium, which also includes Chevron and PNOC Exploration Corp., is looking to invest about $250 million for the second phase, which will entail the drilling and development of two additional wells. This is expected to be completed by February 2014.

Another $750 million will be invested for the third phase, which will involve the installation of a new platform where additional equipment and facilities will be housed by December 2015.

“The projects, entailing new investments, are seen to further benefit the Philippines in energy self-sufficiency and government revenues, and will continue to be a major source of power for Luzon’s energy requirements in the years to come,” SPEX said.

According to Layug, SPEX was originally looking at shelling out as much as $1.5 billion as announced earlier by Almendras, but it downscaled the investment as it wanted to reduce the cost of the development.

Officials are mum on the possible increase in reserves with the expected completion of Phases II and III. The Malampaya consortium has already used up 1 trillion cubic feet out of the 3.2 trillion cubic feet proven reserves in the five-well field, Layug disclosed.

The SC 38 consortium is proceeding with the planned $1-billion investment at the Malampaya even if it is awaiting a crucial approval from the Department of Energy. The SC 38 consortium has since been waiting for the government to approve the extension of its license by another 15 years up to 2039.

Malampaya is one of the largest and most significant industrial endeavors in the Philippine history, which had then cost $4.5 billion. Since it began producing natural gas in October 2001, the Malampaya gas field has been providing benefits including meeting Luzon’s clean power generation requirements, reducing oil imports and increasing government revenues.

The Philippine government has so far received a hefty P200.41 billion (about $4.64 billion) in royalties from the Malampaya field as of May this year.