DOE studying options after Malampaya closure

by Myrna Velasco – December 5, 2015

from Manila Bulletin

The anticipated production decline in the country’s biggest commercial gas field a decade from now has been confirmed, but the Department of Energy (DOE) is still on “soul searching” as to what steps the government must pursue relative to the post-Malampaya option.

Aside from sounding off that the last recourse will be importation of liquefied natural gas (LNG), DOE acting assistant secretary Patrick Aquino noted that there is really nothing concrete on the table for now.

The needed policy support for LNG infrastructure investments is one thing that the government was asked to sort out, but at this stage, nothing has been fleshed out yet.

Aquino sounded off that the Malampaya consortium led by Shell Philippines Exploration B.V. (SPEX) also lodged its own proposal, but that has to be harmonized eventually with the policies and options firmed up by the energy department.

As to the volume that can still be extracted from the gas field at the lapse of the Malampaya service contract in 2024, he noted that there are already “ongoing technical evaluation of reserves” undertaken primarily by the Malampaya consortium.

Previous reports have indicated that such volume may just be able to power about 1,000MW of gas-fed power capacities, thus, fuel supply shortfall would be imminent.

The country currently has 2,700 megawatts of power capacity running on gas from the Malampaya field; namely the 1,500MW Sta. Rita and San Lorenzo gas plants of the Lopez group’s First Gen Corporation; and the 1,000MW Ilijan gas-fired plant being operated by Korea Electric Power Corporation.

By 2024, these power facilities would still have stretch decades of useful life, hence, a feasible option on gas supply procurement must be readied.

There are willing investors for LNG handling terminals, but the biggest questions at this point are the regulatory frameworks and policies that the government must set forth to underpin capital flow.

The pricier cost of electricity generated from gas plants alone would not be an easy bargaining stance to Filipino consumers, so it would be highly necessary for the State to lay down policies that can make gas an acceptable and viable fix in the country’s power supply portfolio.