PNOC mulls taking over Malampaya after 2024

MANILA, Philippines — The oil and gas exploration arm of state-run Philippine National Oil Co. (PNOC) is looking into the possibility of continuing to run the Malampaya deep water gas-to-power project without its present partners, a ranking official of the Department of Energy said.

The energy department has tasked PNOC Exploration Corp. (PNOC EC) to conduct a study on the possible scenarios for the Malampaya project once its contract expires in 2024, DOE Assistant Secretary Leonido Pulido said in a Senate hearing yesterday.

He said there are two parts to the study, the first one will determine whether it will be commercially viable and more beneficial to the national government for PNOC EC to continue the agreement. The second part, on the other hand, is intended to determine if drilling an additional source with 1,000 megawatts (MW) of capacity east of the Malampaya project is commercially feasible.

“The DOE has to look for different alternatives as far as the sourcing of energy is concerned. The mandate is we’re supposed to give a recommendation to the secretary by the end of the year.”

Service Contract (SC) 38, the license 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 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 (45 percent) and PNOC EC (10 percent).

The SC 38 consortium expressed interest to extend its license to explore for oil and gas in northwest Palawan until 2039, but was stalled due to tax issues.

With the PNOC EC study, the DOE is hopeful the uncertainty of gas supply from the Malampaya project would be cleared out.

“The priority is if we will not extend (the contract of Malampaya), we might as well allow PNOC EC, which is already part of the consortium, to take over,” Pulido said.

While the DOE is fast-tracking the decision on the operation of the Malampaya project, Sen. Sherwin Gatchalian is not cool to the idea of PNOC EC taking over the gas field since the government is inherently not a good operator.

“Personally, I am not confident the government can operate it properly. We have a bad history of operating projects, if you look at MRT, LRT, and the airports,” he said.

Another thing to consider is PNOC EC’s technical capability to operate the gas project, said Gatchalian, who chairs the Senate Committee on Energy.

However, the DOE official said the agency needs to look at other options to secure gas supply for the country’s gas-fired power plants.

“We will find another source like Malampaya in the future especially once the geopolitical situation stabilizes,” Pulido said.

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 MW to the Luzon grid.