Malampaya shutdown can derail power supply, hike rates

by Myrna Velasco – September 20, 2016

from Manila Bulletin

Probabilities of shutdown of the Malampaya gas field operations will not only adversely affect the country’s power supply, but it can also trigger upticks in electricity rates.

The latest threat is being ignited by the new water quality and general effluent standards set for enforcement by the Department of Environment and Natural Resources.

Shell Philippines Exploration B.V., the operator of the Malampaya gas field, already sounded off that they may not have any other recourse but to cease operations because there is no technology that they can employ in their operations yet that could keep pace with the shift in standards of water quality and waste discharge into bodies of water.

For the country’s biggest power utility firm Manila Electric Company (Meralco), it cautioned that such move will result in de-rating of the gas plants, hence, extremely tightening power supply that in turn could trigger hikes in power rates.

“That will be a major issue, but these (gas-fired) plants are able to run on liquid fuel, so in terms of availability, there will be some degree of probably de-rating,” Meralco President Oscar S. Reyes has noted.

He emphasized that “the other impact would be on cost of power generation,” thus, the utility firm indicated that “hopefully, if there would be any interruption on the operations (of Malampaya), it will be limited.”

Contractually, Malampaya’s operations is already inching close to winding down – with the 25-year deal with the Philippine government set to expire by year 2024.

The power industry, however, is still very much apprehensive of an energy future without Malampaya and how its share in the country’s fuel supply could be plugged with alternative sources.

The inauspicious consequence of the gas field’s shutdown is already known to many Filipino consumers – especially in the Luzon grid – with the perils experienced during its maintenance downtimes in 2013 and 2015.

The year 2013 had been what the industry viewed as its ‘perfect storm’ when power rates had gone up by up to R5.00 per kilowatt hour (kWh) due to ‘extraordinary tightness’ in supply because of the simultaneous shutdowns of power plants and the scheduled maintenance of the Malampaya gas production platform.

The same industry menace had been raised another round in 2015, with the specter of power crisis amplified then by the Department of Energy (DOE) as not much new capacity additions were expected due to delays in many power projects.

With the anticipated decline in Malampaya’s gas output, the government has already been scouring for options – but it would still be a long way to go for plans on setting up the country’s liquefied natural gas (LNG) import facilities.

 

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