Malampaya contract extended by 15 years

(UPDATE) PRESIDENT Ferdinand Marcos Jr. on Monday signed an agreement to extend the operations of the Malampaya power plant by another 15 years.

The 25-year Malampaya Service Contract 38 will expire on Feb. 22, 2024, but the President extended it until Feb. 22, 2039, to ensure the remaining gas reserves are explored and utilized.

“As I sign this SC 38 renewal agreement, we also lay stress on the administration’s commitment to actively pursue the exploration, development and utilization of the country’s indigenous energy resources, and to optimize our energy mix,” Marcos said during the signing ceremony in Malaca?ang.

Located 80 kilometers off Palawan, the Malampaya gas field has been providing 20 percent of Luzon’s energy requirement for more than three decades.

The government was able to generate P374 billion in revenues from Malampaya. In 2022 alone, it yielded about P26 billion in government revenues.

The Malampaya project utilizes state-of-the-art technology to extract natural gas and condensate from the depths of the Palawan basin.

The gas is processed and transported across three provinces through a 504-kilometer underwater pipeline.

An onshore gas plant in Batangas receives the gas for further processing before it is sent to five power-plant customers for power generation.

The government has tamped down concerns that Malampaya’s close to 3 trillion cubic feet of gas reserves would be depleted by next year, saying exploration for new reserves will continue.

Last year, Prime Infrastructure Capital acquired a 45-percent stake to operate Malampaya, taking over from Shell Philippines Exploration.

Under the contract, the Malampaya consortium must conduct geological and geophysical studies and drill at least two deep water wells during Sub-Phase 1 from 2024 to 2029.

It must also submit a decommissioning plan within 30 days after the agreement is renewed.

In his speech during the ceremony, Department of Energy (DoE) Secretary Raphael Lotilla said his department has “meticulously evaluated” the consortium.

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 said.

“Less than a year before the expiration of SC 38, we find ourselves at a critical juncture for insuring in continued partnership with the private sector the further development and drilling of the SC 38 area at the soonest possible time — and restoring some certainty in our indigenous gas supply,” he added.

Among the officials present during the event were Speaker Martin Romualdez, Sen. Raffy Tulfo, Executive Secretary Lucas Bersamin, Chief Presidential Legal Counsel Juan Ponce Enrile, Presidential Communications Secretary Cheloy Garafil, Defense Officer in Charge Undersecretary Carlito Galvez Jr., Prime Infrastructure Chairman Enrique Razon, and Philippine National Oil Company-Exploration Corp. President and CEO Franz Josef George Alvarez.

The discovery of additional reserves in the Malampaya gas field will boost the country’s quest for energy security. It is also expected to encourage opportunities for further exploration in the country, which to date remains underexplored, and to add to the Philippines’ energy portfolio.

In a press statement after the ceremony, Romualdez said the renewal agreement “is a welcome development as the Malampaya gas field provides a significant portion of our country’s energy requirement.”

“Extension of the SC 38 will not only reduce our dependence on imported oil as fuel for our power plants, which will help stabilize the price of electricity. More importantly, it would help boost our power reserves and prevent brownouts resulting in losses for businesses and suffering for our people,” Romualdez said.

“The House of Representatives supports the initiatives of the administration of President Marcos, including its agenda to promote our energy security,” he added.

Last week, he secured the commitment of party leaders for the passage, before Congress adjourns sine die, of most if not all of the 13 priority measures of the administration that were pending at the House.

Among the priority measures is the amendment of the Electric Power Industry Reform Act.

Sen. Francis Joseph “Chiz” Escudero on Monday said he wants to find out the details of the extension of the Malampaya Service Contract 38.

Escudero said it is “within the power” of the President to extend the contract “without congressional approval.”

“If you remember, we were receiving billions in dividends prior to [former president] GMA’s (Gloria Macapagal-Arroyo) extension of the contract during her incumbency,” he said in a text message.

“So how much did we forego this time around, if any?” Escudero said. “Also, why hasn’t government been able to muster enough expertise to operate it after its expiration?”

“Or if not in government’s plan/interest, was it renegotiated to the advantage of the people or just the same as before — when GMA extended it?” Escudero said.

Asked whether it should be under the same contracting parties and under the same terms, he said, “For me, it should, ideally be an improvement of the past extension contracts given the lessons government learned in the past.”

With Bernadette E. Tamayo