Razon-led consortium commits $600M to continue Malampaya operations, dig new wells

MANILA, Philippines—The Malampaya consortium led by gas field operator Prime Energy Resources Development B.V. (Prime Energy) of tycoon Enrique Razon has committed an initial investment of $600 million to continue production and put new wells into commercial operation in 2026.

According to Department of Energy (DOE) officials, the consortium operating the Malampaya deep-water gas-to-power project will drill three wells, which will cost as much as $90 million each.

The target is well above the two wells required by the government.

“In terms of the cost of drilling one well, currently the cost increased and they are looking at between $80 million and $90 million per well,” a statement by Prime Energy quoted Energy Undersecretary Alessandro Sales as saying at a press conference.

DOE officials said between $300 million and $330 million would be needed to connect two additional wells to the Malampaya system and to start commercial operations of the new wells.

Sales, during the DOE press conference, said the total cost would reach $600 million.

“These are all, at the moment, high level numbers because in fact the pricing of drill ships , equipment, specialist services are getting to be a little bit volatile,” said Sales.

The extension of Service Contract 38 for Malampaya requires the current operator to:

—Continue production

—Work on geological and geophysical studies for other potential new wells

—Drill at least two new deep water wells from 2024 to 2029

President Ferdinand “Bongbong” Marcos Jr on Monday signed the extension of SC 38 until February 22, 2029.

Razon’s Prime Energy holds a 45-percent stake in the project. Other members of the Malampaya consortium are UC38 LLC and Philippine National Oil Company-Exploration Corp.

Energy Secretary Raphael Lotilla was quoted previously as saying that Prime Energy, as lead operator of the gas project, has shown technical competence over the last six months by managing the decline of the gas supply and conducting a successful maintenance program.

“This confirms the findings of the DOE last year on the operator’s technical, financial, and legal qualifications,” Lotilla had said.

The consortium has been remitting 60 percent of its net proceeds from Malampaya to the national government.

Sales said the commitment of the consortium in phase one of SC 38’s extension “is at least two new wells.”

Sales said the consortium, however, is conducting preparations to drill three wells which is “above the committed program for renewal contract.”

He said the consortium wanted to drill three wells as it would be more cost-effective.

The Malampaya field’s best estimate for additional output is 210 billion cubic feet of gas, he added.

Lotilla said the extension of SC 38 is the first ever granted by the government. “We hope that it would not be the last of its kind,” Lotilla said.

He said the existence of “attractive prospects within the same service contract area shows promise in exploration activities in the Philippines.”

He said the Malampaya consortium is the first that is backed and run entirely by Filipinos which he described as “a remarkable milestone in the maturation of the Philippine petroleum industry.”

Razon, following the signing by Marcos of SC 38’s extension, said the consortium will “continue what it has started in operating this world-class installation.”

“This is a significant development for our national energy security and independence,” said Razon about SC 38’s extension.

Malampaya currently supplies natural gas to power four generation plants in Batangas (Santa Rita, San Lorenzo, San Gabriel, and Avion) with a combined capacity of 2,011 megawatts.

From October 2001 to December 2022, Malampaya had remitted more than $13.14 billion in revenue to the national government.

-TSB

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