PNOC-EC to extract add’l gas from Malampaya field

By Myrna M. Velasco – June 17, 2018, 10:00 PM
from Manila Bulletin

State-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) is expected to be given a mandate to extract additional 100 billion cubic feet (bcf) of natural gas from the Malampaya field that could partly fuel power capacity of 1,000 megawatts after the gas production facility’s service contract expires in 2024.

As noted by Energy Undersecretary Donato D. Marcos, prospective drilling and production of that additional gas from the east side portion of the Malampaya field will likely be carved out from Service Contract (SC 38), the existing license for the Malampaya gas field project under the operatorship of Shell Philippines Exploration B.V.; in which PNOC-EC is also a minority equity holder.

“There is the Malampaya East for another 100 billion cubic (feet)… it was included in the work plan of SC 38, but since the reserves would not be that big and it’s not profitable and economically viable for the big consortium to address, there is a consideration that PNOC-EC might carve it out and do the drilling for itself,” the energy official noted.

Marcos added this is one of the studies “we are taking into consideration,” with him referring mainly to the anticipated immense decline of gas production from the multi-billion dollar Malampaya gas field project. By then, the remaining gas extraction may only be able to feed 1,000MW of electricity generation.

For the 100 bcf gas yield, the DOE official admitted that this may only be good for one year supply to some gas-fired power facilities in the country; hence, the country’s gas industry reset into having a liquefied natural gas (LNG) terminal will still be highly necessary.

Further, the Philippine government, via the DOE, is also now giving firmer assertions on a  definitive timeframe as to when it will decide on the proposed license extension for the Malampaya field.

As Marcos has indicated, the decision point on the matter will be year 2020, or four years prior to the lapse of the gas production facility’s service contract. Marcos is the designated official to spearhead a study and to come up with a solid recommendation to Energy Secretary Alfonso G. Cusi on what action the government must take on extension bid for SC 38.

“We, the DOE and PNOC-EC, are on a comprehensive study to come up with an objective recommendation that will be one of the significant basis of the Secretary in coming up with a decision – which will then be endorsed to President (Rodrigo) Duterte for his approval,” Marcos stressed.

He added that “tentatively, we are seeing fourth quarter of this year or early part of next year on the recommendation.”

The energy department’s inclination at this point is for PNOC-EC to take over the Malampaya field’s operatorship and will just then tap a technical partner on the production as well as performance side of the business.

This way, Marcos argued, the Philippine government can corner bulk of the remaining revenues from the field, and the technical operator will just be warranted its operation and maintenance fees.