DOE: Razon-led Malampaya consortium to spend $600-M for exploration, extraction
MANILA, Philippines — The Department of Energy reckoned that the Razon-led consortium that won exploration and extraction rights on the Malampaya gas field is expected to spend $600 million.
The amount was disclosed by the DOE in a briefing on Tuesday. The national government renewed the Malampaya service contract No. 38 (SC 38) for the final time on Monday.
Energy undersecretary Alessandro Sales, noted that the consortium will need to spend more as costs have risen. The SC 38 consortium will need to spend $80-90 million per well, as the renewal agreement required the drilling of deepwater wells from 2024 until 2029.
“The new drilling will take a few years before additional gas flows from SC 38,” Energy Sec. Raphael Lotilla said.
The DOE noted that the consortium initially indicated the drilling of three wells in its proposal.
As it is, SC38 comprises the Malampaya extraction project in northwestern Palawan. The Malampaya gas field was discovered in 1989, from which the state began extracting in 2001. The SC 38 consortium houses the production stake of UC38 LLC holding (45%), and PNOC Exploration Corp. (10%).
The state allowed a Razon-led Prime Infrastructure Capital, Inc. unit to buy a 45% stake in SC 38 from Shell Petroleum N.V. in October 2022.
If the exploration stumbles onto gas, these wells will be connected for production to the Malampaya oil fields. By then, the SC 38 consortium would need to spend an additional $330-360 million for connecting these wells and for subsea facilities that will enable near-field wells to be produced.
The DOE estimated that the near-field well is projected to produce an additional 210 billion cubic feet of gas.
The state has earned P374 billion in royalties since operations began in the Malampaya oil field. In 2022, the public’s shares hit P26 billion. That said, the DOE retained that 60:40 royalty sharing agreement following the renewal, with the state raking in the larger share.
“Normally you increase incentives but we retained the previous split to allow contractors some leeway in and around Malampaya,” Sales added.
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