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Malampaya still capable of supplying gas up to 2029

MANILA, Philippines — The Malampaya deepwater gas-to-power project can still supply gas up to 2029, but operators need to hurdle the tax dispute with the Commission on Audit (COA) to be able to extend its contract beyond 2024, a ranking official said.

The Malampaya project still has gas supply beyond the expiration of its contract in 2024, Shell country manager Cesar Romero said in an interview with reporters late Wednesday.

“Based on what we know (and) depending on the drawdown, we still have supply until 2027 to 2029, within that range,” he said.

The license for Service Contract (SC) 38 that allows the exploration of the Malampaya gas field in northwest Palawan will expire in 2024 but this can be applied for extension with the Department of Energy (DOE).

Shell Philippines Exploration B.V. (SPEX), a local unit of energy giant Royal Dutch Shell, leads the Malampaya consortium with 45 percent, Chevron Malampaya LLC with another 45 percent and PNOC Exploration Corp. (10 percent).

Even if Malampaya will still be able to supply beyond 2024, the government will still proceed with its $2-billion liquefied natural gas (LNG) terminal, DOE Secretary Alfonso Cusi said yesterday.

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The country’s integrated LNG hub should consist of five million metric tons per annum (MTPA) of storage, liquefaction, regassification and distribution facility, as well as a reserve initial power plant capacity of 200 megawatts (MW).

It is targeted to be operational before 2022, or before the depletion of the Malampaya gas project. It is also envisioned to make the Philippines an LNG hub for Asia, complementing those in Japan and Singapore.

However, to be able to extract available gas, Romero said the consortium still has to resolve its tax issue with COA, which said the project has a tax deficiency amounting to billions of pesos.

Once hurdled, only then can Shell firm up investments to extend the Malampaya contract, he said.

“We’re in discussions with government on how it goes. So far, why it’s so difficult to think about these things is the COA case is still pending. It’s difficult to make concrete plans until you are able to sort out the issue with COA,” Romero said.

“Any action we think about at the moment is put on hold because we have to sort out COA first,” he said.

The SC 38 consortium earlier expressed interest to extend its license to explore for oil and gas in northwest Palawan until 2039.

In 2012, the consortium embarked on a P1-billion expansion program for the Malampaya project through two new project phases, which was completed in 2015.

This expansion will maintain the level of gas production to fulfill commitments under existing gas sales agreements until 2024, ensuring the steady supply of natural gas to power the Luzon electricity grid.

But in an April 6, 2015 decision, COA upheld its 2009 findings that more than P50 billion were uncollected by the consortium operating the Malampaya project.

SPEX has filed two arbitration cases over its P53.14-billion tax dispute from the Malampaya project — one with Singapore International Arbitration Center in Singapore in late 2015 and another with International Center for the Settlement of Investment Dispute in July 2016.

The gas field has proven reserves of 2.7 trillion cubic feet to 3.2 TCF, of which around one TCF has already been consumed.

Operating since 2001, the Malampaya gas project supplies fuel to around 40 percent of gas-fired plants in Luzon namely the Ilijan, Sta. Rita plant, San Lorenzo, San Gabriel and Avion plants — which supply 3,211 megawatts to the Luzon grid.

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