At last, some good news: Malampaya

If some of you guys think I enjoy writing all that bad news about the economy, you are wrong. It gets to be really tiresome, which is why I welcome even some specs of good news like Rudy Albano's story about his home province of Isabela. This week we have something much bigger – Malampaya.

The natural gas reserves being developed by a consortium led by Shell Exploration is like a welcome shower in a long period of drought. The $4.8-billion project is the largest foreign investment project here and is expected to earn the government some $10 billion in royalties over its expected 20-year life. In fact, our cash strapped government plans to cash in early by securitizing an initial $500 million of its future earnings. It also displaces up to 30 percent of our oil imports.

They had this fancy and over dramatic multi-screen presentation during the inaugural cocktails at the NBC Tent in Fort Bonifacio last Tuesday that failed to fully grasp the significance of the project. That happens when you allow purely show-biz production people to take control. It would have been nice if the presentation took note of what made Malampaya possible.

The presentation, for all its high tech imagery and bombast, didn't have a historical perspective. I felt shortchanged. Malampaya was made possible by those who worked to make this country's investment climate for hydrocarbon exploration attractive. Current Energy Secretary Vince Perez made a passing acknowledgement of the role of the late Pat dela Paz, which I thought, was totally inadequate.

The service contract law that brought the world's large petroleum companies to the Philippines was the handiwork of Pat dela Paz, who crafted it under the direction of then Energy Secretary Ronnie Velasco. Without this law, Malampaya would still be nothing more than a spot off the island of Palawan. Pat dela Paz died of cancer some years ago, but I don't remember seeing Pat's widow, SSS President Cora dela Paz last Tuesday evening. I doubt if anybody remembered to invite Ronnie Velasco to the celebration.

In fact, Malampaya came to be because of Camago, a nearby well that was not commercially exciting. But as Dr. Art Saldivar-Sali, our pioneer geo scientific expert, used to tell us, even a dry well is a technical success in the sense we now know more about a structure than we did before. Pat dela Paz used the information from Camago to convince Occidental Petroleum to consider Malampaya. Occidental later sold out to Shell Exploration.

But because Malampaya was in very deep water and we didn't have a ready domestic market for natural gas, its economic viability was questionable. Shell thought long and hard before making the decision to go ahead. It was the decision of First Gas to put up the power plants to use the Malampaya gas and our investor friendly service contract law that was written by Pat dela Paz that convinced Shell it made good business sense to take the risk. Pat signed the service contract that got Malampaya going.

The other notable footnote in the Malampaya story is how PNOC Exploration got its 10-percent interest. In the past, PNOC-EC only got involved in drilling prospects that were too risky to attract private sector capital. This is why it never made money and PNOC eventually had to buy back private investors who bought EC shares from the stock market.

Sometime in the early 90s, Boomie Bomasang who headed EC after working with Pat dela Paz at the Office of Energy Affairs, proposed to Shell to allow EC to buy an interest in Malampaya. He proposed to pay for it rather than just demand a carried interest. That was a fantastic move. Not only did it give government an insider's view of the project; it would also earn substantial returns. Those who refused to sell back their EC shares should be smiling now.

A Shell Exploration official told me last Tuesday that even from a technical point of view, the Malampaya project is a marvel, the first of its kind anywhere in the world. The technology they used to make it possible are state-of-the-art, definitely improved on what was used in the North Sea. It is also the deepest. As an added bonus, they are working on producing some amount of oil – a light crude that is prized in the market.

I realize that current political realities tend to blur historical accuracy. Unfortunately, a project like Malampaya takes so long to realize, making it easy to rewrite history. I think historical revisionism is wrong, if only because we might forget just what made something like Malampaya possible. That said, let us now sit back and enjoy a God-send in this season of depressing news.

Mother Spain

Last week, I was invited with a number of writers to a briefing of the Spanish Ambassador about the assistance program of the Spanish government here. I didn't even realize they had such a thing. By their own admission, Spain was itself in need of foreign aid just 20 years ago. This is why, the Ambassador said, they can empathize with what developing countries need.

Spanish aid to the Philippines through Cooperacion Espanola started in the early 90s. Perhaps because of an emotional tie to a former colony, the Philippines is taking 55 percent of Spain's aid budget for the Asia Pacific region. They had been working quietly through the years and I was amazed at how much they have done from the Ilocos region to Mindanao.

Some of the projects are pretty basic and obviously needed like the assistance given to fight tuberculosis, provide primary health care in Caraga and Cebu and family planning services in Maguindanao. They are helping put up water systems in Camiguin and Vigan. They are into micro-finance and small-scale tourism. They are helping modernize the National Archives and rehabilitating the Padre Burgos Museum in Vigan. One of their biggest commitment of funds will establish a modern eye center at the Philippine General Hospital and they will name it after Jose Rizal.

Best of all, they are conducting their projects with the personal touch of young Spanish NGO volunteers, a kind of Spanish Peace Corps. I think this is a fantastic way of starting fresh with Mother Spain. I am sure even Jose Rizal will now approve.

Pinoy humor

Reader Bobby Tordesillas e-mailed me something that is typical Pinoy humor. Here is part of that.

Why is a WTC style terrorist attack nearly impossible in Manila?

Well … that's because in Manila, we have a natural anti terrorist inclination.

1. We do not have tall buildings. The only large structure that can be seen from above is the President Marcos monument in Ilocos and terrorists are welcome to target that.

2. We all get on the job late in the morning, specially government employees, so at 8:45 there won’t be too many people to kill (well, even at 10 am!).

3. Fire fighters and police officers hardly ever get to the crime scene quickly, unless they pulled it off. They will get there just when everything is over, so there will be no casualties among them.

4. If a terrorist lived in Manila for a year, he would’ve been robbed and molested so many times he would’ve given up and gone back to his home country a long time ago.

You see... in Manila, even terrorists are terrorized!

(Boo Chanco's e-mail address is [email protected])