Malampaya bloc eyes investment hike to $1.5B

Subic Bay Freeport—The consortium operating the Malampaya deepwater gas-to-power project off Palawan plans to further hike its investments to $1.5 billion (roughly P64 billion) to increase production and tap more gas reserves within Service Contract 38.

At the sidelines of the signing of a shareholders’ agreement for a coal plant here, Energy Secretary Jose Rene D. Almendras said the SC 38 consortium would sign in the first week of August a design contract and agreement to push through with Phases 2 and 3 of the Malampaya project.

Royal Dutch Shell Plc, through Shell Philippines Exploration BV, has a 45-percent stake in the project and operates SC 38. Chevron Malampaya LLC holds another 45-percent stake while local firm PNOC Exploration Corp. owns the remaining 10 percent.

According to Almendras, Phase 2 of the Malampaya development may need about $1 billion to complete. Phase 3, on the hand, may require an additional $500 million. It involves expanding the coverage area for additional reserve extraction.

“Plans are not final yet. One option is to dig new wells at the Camago area. But it seems like, as present studies show, the Camago gas is connected to the existing Malampaya site, so they have to make sure that the gas flows into Malampaya so it can be extracted,” he explained.

Almendras has already instructed PNOC EC to prepare and start securing funds to finance its investment share in the project.

The energy chief further said that the government would likewise form an interagency team to facilitate the grant of permits and approvals for the planned expansions. The Department of Energy is expected to spearhead the proposed interagency team.

As soon as it awards the engineering, procurement and construction (EPC) contract, hopefully before the end of the year, the SC 38 consortium will begin the Malampaya Phase 2 development.

Almendras noted that the expansion would be crucial because it would ensure the reliability and sustainability of Malampaya as a source of natural gas. The Philippine government considers Malampaya to be a genuine alternative capable of backing up generation capacity and providing cleaner fuel for public utility vehicles.

At present, the $4.5-billion Malampaya power project provides 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. Power generated using Malampaya’s resources currently accounts for roughly 30 percent of energy produced in Luzon.

As operator of SC 38, SPEX earlier sought a 15-year extension of its license for the Malampaya project as it pursues more developments within the area.

This will extend the SC 38 license up to 2039 from 2024, the year when the license would have expired under the original agreement.

But the DOE has yet to approve the application.