Malampaya extension plan still a go if operator exits — Cusi

Energy Secretary Alfonso G. Cusi — PHILSTAR

THE consortium involved in developing the country’s sole natural gas field will still proceed in applying for the project’s extension despite the imminent exit of its operator.

Shell Philippines Exploration B.V. (SPEx) on late Wednesday said it was considering the sale of its 45% stake in the Malampaya gas-to-power project under state-awarded Service Contract (SC) 38 as part of its rationalization efforts.

“As part of an ongoing portfolio rationalization to simplify and increase the resilience of its business, Shell is exploring its options with a view to divest its interest in SC 38 (Malampaya),” SPEx General Manager Rolando J. Paulino, Jr. said in a statement.

But its upcoming exit in the project will not affect the Malampaya consortium’s plan to apply for the extension of its operations beyond 2024, according to the Department of Energy (DoE).

“Even if [S]hell is planning to sell their share, the consortium will proceed with their application for extension or new contract,” Energy Secretary Alfonso G. Cusi told BusinessWorld in a mobile message.

SPEx heads the group behind the deepwater natural gas field near Palawan island, along with Dennis A. Uy’s UC Malampaya Philippines Pte Ltd., which acquired the 45% interest of Chevron Malampaya LLC in March. Government-owned Philippine National Oil Co. Exploration Corp. (PNOC-EC) holds the remaining 10% stake.

The consortium claims gas resources can still be tapped from the field beyond the end of its contract period. It has yet to disclose when it plans to formally file a contract extension.

Meanwhile, SPEx will “ensure a smooth transition of the asset to a credible buyer who would be well placed to optimize the value from Malampaya,” according to Mr. Paulino

“The Philippines remains an important country for Shell after over a century of successful operations, and Shell will continue to pursue opportunities where it can leverage its global expertise in line with its strategy,” he added.

The crash in refining margins as an impact of the global coronavirus disease led Pilipinas Shell Petroleum Corp. last month to announce the permanent shutdown of its 110,000-barrels-per-day refinery in Tabangao, Batangas. The plant will be converted into an import terminal so it can continue to supply petroleum products in Luzon and the northern Visayas.

Shares in Pilipinas Shell inched down 0.71% to close at P16.84 each on Thursday.

According to the DoE, the Malampaya natural gas field is projected to be completely depleted in 2027.

PNOC-EC, where Mr. Cusi is the ex-officio board chairman, is preparing a study on the country’s various sedimentary basins with potential gas and oil resources that can replace the Malampaya reserves.

Year-to-date, the Philippines is able to produce 73,388 million standard cubic feet (mmcsf) of natural gas, while consumption stands at 69,856 mmcsf, based on DoE’s latest monitoring.

The Malampaya field provides 3,200 megawatts of power, which accounts for 21.1% of the country’s gross power generation in 2019.

Rotational brownouts in Luzon are feared if the dwindling supply in the natural gas depot is left unresolved, Senator Sherwin T. Gatchalian said in a statement over the weekend.

Besides locating other indigenous natural gas spots, the country is also looking to import more liquefied natural gas (LNG) supplies.

Four private groups have applied with the government for the construction of imported LNG terminals, including a group led by businessman Lucio C. Tan and the Lopezes’ First Gen Corp. — Adam J. Ang

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