Continued production of locally sourced natural gas fuel is expected after the government approved the renewal of service contract 38 (SC 38) which covers the Malampaya deep water gas-to-power project.
The extension of the 25-year production contract originally set to expire on Feb. 22, 2024 has been renewed by the Office of the President for final 15 years or until Feb. 22, 2039.
This is seen to not only reduce the country’s dependence on oil imports but also ensure a more stable supply of cleaner energy from an indigenous source.
“As we renew SC 38, we optimistically look forward to the continued production and utilization of the remaining reserves of the Malampaya gas field, as well as further exploration and development of its untapped potential,” said President Ferdinand Marcos Jr., at the signing of the contract yesterday.
The Malampaya resource provides natural gas fuel for four power plants in Luzon with a combined capacity of 2,011 megawatts.
Marcos directed the Department of Energy (DOE) to ensure the smooth implementation of the project while making sure the Malampaya consortium’s goals are aligned with the country’s national interests and consistent with the Constitution and the state policy of hastening discovery and production of the country’s indigenous petroleum.
The Malampaya consortium is currently comprised of Prime Energy Resources Development B.V., the operator, with a 45 percent stake; Udenna Corp. through UC38 LLC, 45 percent; and the government through PNOC-Exploration Corp.. 10 percent.
“Because of the contract renewal, the government will continue to generate revenues from the project through a favorable sharing scheme,” Marcos said, adding the government generated around P374 billion since Malampaya’s commissioning in 2001.
For 2022 alone, the project yielded about P26 billion in government revenues.
DOE Secretary Raphael Lotilla said the contract extension of SC 38 underwent an assessment that “encompassed legal, technical and financial capabilities,” confirming the Malampaya consortium’s capacity to sustain the production operations and to meet its obligations under the renewal agreement.
“The DOE recommended the renewal of the service contract, anchored on the commitment of the consortium to actively explore and evaluate additional gas resources,” Lotilla added.
The DOE said with the extension of SC 38, the consortium would also ensure the conduct of further geological and geophysical studies and the drilling of at least two deep water wells during the sub-phase 1 from 2024 to 2029. This is aimed at unlocking the potential in both the existing gas field and nearby prospect areas for incremental production.
DOE added the conduct of exploratory drilling away from Malampaya’s main production area is a requirement for the SC 38 consortium to retain the exploration areas. If it fails to comply, the consortium is obligated to relinquish a portion of the exploration areas.
Lotilla also said in consonance with international oil and gas exploration practice, the Malampaya consortium is also required to submit a decommissioning plan and budget covering the abandonment of wells and decommissioning of facilities in accordance with applicable international standards, to include timing and costs, within 30 calendar days from the effectivity of the renewal agreement for approval by the DOE.
Enrique Razon Jr., chairman of Prime Infrastructure Capital Inc. , said they will continue to improve and utilize the asset with the contract extension. Prime Energy is a subsidiary of Prime Infrastructure.
“This is a significant development for our national energy security and independence. The Malampaya asset will continue what it has started in operating this world-class installation for further exploration and utilization of the country’s remaining gas reserves as well as open up the other potential near field areas for future production,” Razon said in a statement.
Among the major components of the Malampaya project include subsea wells and flowlines, a shallow water platform to process natural gas, a depletion compression platform, a catenary anchored leg mooring buoy for the export of liquid condensate, a 504-kilometer long gas export pipeline on the seabed and an onshore gas plant in Batangas City. With Jocelyn Montemayor
