PNOC-EC eyed as Malampaya operator

By Myrna M. Velasco – December 11, 2017, 10:01 PM
from Manila Bulletin

As current reservoir analysis portends additional gas production years for Malampaya field, the initial target of the Department of Energy (DoE) is to place its operatorship under state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) after the field’s contract lapse in 2024.

Energy Secretary Alfonso G. Cusi said the fate of Malampaya’s continued operation will be decided early part of next year – including the bid of the current operating consortium for a 10-year license extension, referring to the previous application of Shell Philippines Exploration B.V. (SPEX) and joint venture partners Chevron Malampaya LLV and PNOC-EC.

As previously communicated by the Malampaya consortium and based on the department’s own evaluation, it was indicated that additional Malampaya gas could still be extracted until year 2027 and could provide fuel to some existing gas plants, minus the 1,200-megawatt Ilijan power plant.

The review task is currently placed under Undersecretary Donato D. Marcos, who reveals that he has been studying the options for Malampaya post-2024, including some number crunching on the economics of potential revenue stream and how that plays out with the ‘lower-for-longer’ state of global oil prices.

“I will be coming up with a recommendation to the Secretary (Cusi) around first quarter of next year, that will be in March,” Marcos said.

Preliminarily, he indicated that there is inclination to tap PNOC-EC as the main operator, then the state-run firm will just seek out farm-in deal from interested and qualified investing parties to arm it with the requisite technical expertise into operating the gas field.

The rationale for that, according to Marcos, is for government to corner 100-percent of the royalties on gas production, instead of just the 10-percent take of PNOC-EC now.

“The basic premise we have to work on is: are we going to extend it (with SC 38) or are we going to give it to PNOC-EC because that will just be a government-to-government arrangement? And then for the dividends, it could have 100% instead of the 10% at present. For its technical partner, it will need to do a farm-in, but PNOC-EC shall be the lead operator,” he reiterated.

Nevertheless, he qualified that it is “not the absolute and final plan yet, but just an option at this point.”

For the energy department, it remains an open-ended recourse to grant extension to Service Contract 38, the license of the Malampaya consortium, but with modified terms and conditions.

“Whether or not we are going to renew it, I will do my economic analysis first then I will present numbers to the Secretary,” Marcos stressed.

On Shell’s part, company president Cesar G. Romero indicated that their priority is to have the pending tax case resolved first with the Commission on Audit (CoA) and at the ongoing arbitration proceedings.

“We remain in constant discussion with them (DoE), but any action we can think about at the moment is on hold, because we need to sort out COA first… it’s difficult to make concrete plans until you sort out that one,” he stressed.