$756M Malampaya rig going up in Subic
SUBIC, Philippines—A platform of the Malampaya Deep Water Gas-to-Power Project off Palawan province is to be installed next year to maintain fuel supply to power plants providing about half of Luzon’s electricity needs. The platform, worth $756 million (P33.68 billion), is part of Phase 3 of the Malampaya project.
Phase 2 involved the installation of two additional subsea wells at a cost of $250 million (P11.139 billion), said Shell Philippines Exploration B.V. (Spex).
Malampaya is a joint undertaking of the Philippine government and the private sector. The project is spearheaded by the Department of Energy (DOE), and developed and operated by Spex on behalf of joint-venture partners Chevron Malampaya LLC and PNOC Exploration Corp.
DOE data show that the country’s largest natural gas producer will start losing output from 2015 and will run out by 2024 “if no further activities are undertaken until 2024.”
The Luzon grid is dependent on Malampaya as it fuels three power plants—Sta. Rita (1,000 megawatts), San Lorenzo (500 MW) and Ilijan (1,200 MW).
Last year, amid the scheduled shutdown of Malampaya, the three plants used more expensive liquid condensate and diesel.
The shutdown was exacerbated by the unplanned and simultaneous outages of other power plants in the Luzon grid, resulting in the record P4.15 per kilowatt hour (kWh) increase in electricity rates of Manila Electric Co. (Meralco) for December.
The increase in generation charges is now the subject of an extended Supreme Court order that prevents Meralco from collecting it from consumers.
In the first half of 2015, the installation of the Phase 3 platform will coincide with the maintenance shutdown of the Malampaya gas facility.
“We want to have just one maintenance shutdown instead of two. So we are timing it in coordination with the Department of Energy,” said Spex managing director Sebastian Quiniones.
The transport and installation of the new gas platform beside the existing one some 80 kilometers off Palawan will involve European firms Boskalis and Mammoet of the Netherlands.
The Malampaya natural gas field is estimated to contain 2.7 trillion cubic feet of natural gas and 85 million barrels of condensate (gas oil, naphtha, and other light hydrocarbons).
To sustain production, the Shell-led consortium that develops and operates the gas field invested in the Phase 2 development that was completed last year and in the Phase 3 platform.
“Malampaya Phases 2 and 3 were meant to keep up the volume of gas production,” Energy Undersecretary Ramon Allan V. Oca said in a phone interview.
He said that the DOE was monitoring the progress of work and that he was set to inspect the fabrication’s progress next month.
Keeping gas flowing
Matthias Bichel, Shell director for projects and technology, said the compression process would keep the gas flowing from the reservoir.
Phases 2 and 3 do not require well drilling since existing wells are interconnected.
To date, SC 38 Consortium has drilled 11 wells, of which five are being used for production and the rest are just exploration ones not used for production.
“It is very important that Malampaya gas production remain at present levels otherwise these power plants will shift to more expensive fuels,” the DOE said, even though it has not granted any extension for Service Contract No. 38 (SC 38), which is set to expire in 2024.
Quiniones said the $756 million included the fabrication at the Keppel Subic Shipyard here of the substructure and modules of a self-installing platform (the first locally made one) fitted with compressors.
The budget also includes seabed preparation, installing the platform near the existing one, and costs for the accommodation vessel that will host 300 beds for personnel who will help get the platform established on-site.
About 2,000 jobs were generated by the project, including engineers and shipyard workers.
Besides the jobs, the gas field has provided royalties to the government.
From 2002 to October 2013, the government collected P184 billion in royalties from Malampaya, Treasury head Rosalia de Leon told senators last year.
The head of the European Union delegation in Manila underscored the need for stable energy sources in the Philippines as the country aims to sustain economic growth amid concerns of tightening power supply.
Guy Ledoux, the EU ambassador to the Philippines, also called on the Philippine government to fully open up the economy by allowing 100-percent foreign ownership of certain sectors, a move that would require amending the Constitution.
Currently, foreigners are limited to owning only 40 percent of public utilities in the country.
“Certainly, opening up the economy. That is what has shown to be the most successful policy. I think that is the road that the Philippine government is taking at the moment and we are encouraging the government in that direction,” Ledoux told reporters following a visit to the Keppel shipyard.
He noted that despite the limit, foreign firms remained keen on investing in the country because of its encouraging economic performance, credit rating upgrades and restored confidence in governance given recent reforms, particularly the “very conducive atmosphere of fighting corruption.”
Ledoux spoke to reporters as he led a contingent of European diplomats visiting the shipyard, where construction of a second platform for the Malampaya gas project has been underway since December 2012.
The natural gas cuts the country’s dependency on imported fuel by 30 percent, according to Spex, and increases the use of clean energy. Power plants running on natural gas are known to emit 70 percent less carbon dioxide than coal-fired plants.
European firms are “heavily involved” in the project, Ledoux said. Dutch firm Mammoet has been tapped to transport the new platform from the Subic shipyard to the Palawan site, while the Royal Boskalis Westminster N.V., also of the Netherlands, will install the new platform beside the existing one.
Parts and machinery from various European countries also make up the new platform itself, including the compressor from Germany and turbines from British engine maker Rolls-Royce.
“European companies are heavily involved in this project. With 7 percent economic growth three years in a row, the demand for electricity and energy is rising very fast in the Philippines,” Ledoux said.
“So it is crucial that this project be successful and Shell has very well planned this phase,” he added.
European firms have infused some 4 billion euros (about P240 billion at the exchange rate of 61 euros to P1) since 2001 in what the European Union considers its flagship investment in the Philippines.
Ledoux led the group of 10 EU diplomats in the largest high-level visit to the shipyard. The group consisted of envoys of Austria, Belgium and Italy; chargés d’ affaires of Germany, the Netherlands and Romania; deputy heads of mission of the Czech Republic and Greece; and the French commercial counselor.
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