Government seen to earn $9 B over 20 years from Malampaya natural gas project

The government will earn some $6 billion to $9 billion over the next 20 years from the Malampaya natural gas project of Shell Philippines Exploration B.V. (Spex) which is scheduled to start full production in October.

In a press briefing, Spex managing director David Greer said the amount represents the share of the government in the $4.5-billion project.

Revenues from the project will be shared by Spex and the National Government under an agreement signed previously by the two parties.

Under the agreement, when the project starts producing natural gas in October this year, revenues will be divided thus: 70 percent will go to Spex while the remaining 30 percent will be shared by the NG (18 percent or 60 percent of 30 percent) and other proponents of the project such as Texaco, USA and the Philippine National Oil Co. (12 percent or 40 percent of 30 percent).

Under this scheme, Greer said the National Government will receive approximately $125 million a year for six to seven years, the estimated time in which Spex is expected to recover its $4.5-billion investment in the Malampaya project.

Once Spex recovers its investments in full, the share of the government will increase to $350-$374 million a year, Greer said.

The Malampaya project started in 1998. By June this year, Spex expects the first flow of natural gas in its platform in Palawan. Five wells will be drilled initially to ensure deliverability for commissioning gas on Oct. 1, 2000. The first commercial gas sale is scheduled on Jan. 1, 2002.

Of the $4.5 billion estimated cost of the project, Spex spent $2 billion for the upstream development. During the 20 years that it is expected to be in operation, the Malampaya gas field is expected to produce enough gas that will generate up to 3,000 megawatts of electricity.

Malampaya marks the birth of the Philippine natural gas industry, paving the way for cleaner and more efficient power generation.

The Malampaya project is a prime example of a climate-friendly technology transfer. The gas that will be supplied by Malampaya will replace oil-fired power plants. Projections by the Department of Energy show that the share of oil in the country’s fuel mix will be reduced from 47 percent to only nine percent, thereby reducing the emission of greenhouse gas.

As operator, Spex will sell its natural gas to three downstream buyers: Kepco-Ilijan, Sta. Rita and San Lorenzo power plants, all in Luzon.

It was learned that two other power plants — the Magellan Utilities Development Corp. and San Pascual Co-generation Co. — are in talks for the possible purchase of Malampaya gas.