Malampaya consortium weighs gas sale to SMC’s Ilijan power plant

MANILA, Philippines — The consortium behind the Malampaya deep water-to-gas project said supply of gas to the 1,200-megawatt (MW) Ilijan power plant in Batangas operated by San Miguel Global Power unit South Premier Power Corp. (SPPC) is under consideration once additional gas volume is extracted.

However, at present, the consortium said there is no live contract for the supply of gas from Malampaya between SPPC and Shell Philippines Exploration BV (SPEX), now Prime Energy.

In a statement yesterday, the consortium composed of the Philippine National Oil Co-Oil Exploration (PNOC EC), UC38 and Prime Energy said there  was  no refusal to sell to Ilijan because there was no legal means by which the sale of gas to the plant could be made.

“The Ilijan gas sale purchase agreement (GSPA) ended in June 2022 when after more than 20 years of supply from Malampaya, the GSPA expired in accordance with its terms,” the consortium said.

“Without a live contract, Malampaya gas cannot be sold legally to SPPC,” it added.

The original gas supply agreement of the Ilijan plant with Malampaya expired in June.

SMC has earlier issued a statement stating that the Ilijan facility is currently on extended outage following the refusal of SPEX to supply the 70 petajoules (PJ) in banked gas from Malampaya, that SPPC acquired from PNOC in June 2022.

The Malampaya consortium, however, argued that diverting supply to Ilijan, which would be irregular and illegal without a contract, would result in depriving the other power producers with active contracts in the Luzon grid of natural gas.

It said all natural gas being used for the Luzon grid comes from the Malampaya field and is supplied to other power generators with live and approved contracts.

“The volume of gas from the Malampaya field, as everyone knows and as verified by the Department of Energy, is nearing maximum reserve drawdown, so the supply covered by Service Contract (SC) 38 needs to be fairly distributed,” it said.

The consortium also pointed out that diverting gas supply to Ilijan at this time would siphon off the supply from other power producers and worsen the power supply situation.

According to the consortium, supply for the Ilijan power plant is under consideration as additional gas volume is extracted, if possible, following the extension of SC 38’s license.

“Finally, all bank gas that can be distributed is being distributed as per the contract terms. There is no such thing as bank gas stored that belongs to SPPC or anyone else,” it said.

“The consortium parties, which include government agencies, are diligently applying the terms of the contract and ensuring that all that can be done, within the terms of the contracts in place is done to produce gas and support power generation,” the consortium added.

The Malampaya project is one of the country’s most important power assets, as it produces natural gas to power plants in Batangas City that power up to 20 percent of the Luzon’s total electricity requirements.

The Malampaya Service Contract 38 (SC 38) consortium’s license for the project set to expire in 2024.

With Malampaya production capacity naturally declining while an extension of SC 38 is being awaited, the consortium said it would have to service its existing clients with live contracts.