Flow of gas from Malampaya to continue — Spex

Shell Philippines Exploration B.V. (SPEX) assured yesterday that the flow of gas from Malampaya will continue even as the company expressed willingness to negotiate with the government to resolve the issue of overcapacity.

"As a supplier, we recognize the difficult situation in the power sector right now. We are in a dialogue with the government and First Gas (Power Corp.) to see first how to come together and generate structural solutions to the issues," SPEX managing director Jeremy Cliff said in a press conference during the visit of Royal Dutch/Shell Group of Companies managing director Malcolm Brinded. Brinded is in the country to renew Shell’s long-term commitment to do business in the Philippines.

Cliff was reacting to reports that SPEX and First Gas are exploring the possibility of revising some terms in their contract to address the problem of not meeting the required off-take that First Gas is supposed to get from SPEX because of some issues including the transmission line constraints and the existing 10-year supply contract between Manila Electric Co. and the National Power Corp. (Napocor).

Though admitting that the two firms are discussing this issue, Cliff denied reports that SPEX is willing to stop production of the Malampaya project just to address the issue of overcapacity in the power industry. Official estimates show that as of end-December 2001, the power industry had an excess capacity of 1,253 MW.

"The bit that I emphatically refute is that First Gas and ourselves are talking about stopping gas supply," Cliff said. "There is an existing contract (between the two firms)."

Cliff said the talks between SPEX and the government involve structural reforms. Sources from Malacañang said President Arroyo will be announcing a major policy decision on Jan. 28 during the inauguration of San Lorenzo plant in Batangas.

SPEX, a major developer of the $4.5-billion Malampaya Deep Water Gas to Power Project, supplies power to the 1,000-MW Sta. Rita and the 500-MW San Lorenzo gas-fired power plants owned by First Gas which sells the electricity to Meralco.

At present, Sta. Rita and San Lorenzo’s combined capacity of 1,500 MW is not being used up because of some factors such as absence of transmission line to accommodate the power coming from the gas-fired facilities.