Napocor, Shell near agreement on Malampaya gas offtake issue

Energy Secretary Vincent S. Perez is expecting the National Power Corp. (Napocor) and the Shell Philippines Exploration B.V., consortium operating the Malampaya Deep Water Gas to Power project to come up with an agreement to reduce gas offtake from Malampaya anytime soon.

"Last Thursday, Napocor and Spex entered into a final stage of agreement which may result to lowering of natural gas off-take of Napocor from the Malampaya project and may eventually lead to changing of the take-or-pay agreement of Napocor," Perez said.

Perez, who is also the Napocor vice-chairman, said they would be announcing the result of the negotiations between Napocor and Spex very soon.

Discussions on the take-or-pay commitment between the government and the Spex consortium cropped up when the Department of Energy (DOE) floated the idea of reducing the overcapacity in Luzon.

Perez earlier said one possible solution to solve the issue of overcapacity is the possibility of reducing the gas off-take from the Malampaya project which will enable the government to reduce the take-or-pay cost and thus cut electricity cost.

But Perez admitted that this proposal will allow gas off-take from the project to be consequently increased in the future.

"We have overcapacity in Luzon. It maybe our interest now to reduce gas off-take at present, or reduce take-or-pay of gas in exchange for a higher utilization of gas in the future," Perez said. As of end-December 2001, the overcapacity in the country stood at 1,253 MW.

The energy chief said this is just proposal and needs to be approved by the industry players. "Lower take-or-pay for the present in exchange for a higher take or pay in the future. That remains to be decided among the players."

Napocor is one of the main proponents of the 1,200-megawatt Ilijan natural gas-fired power plant which sources its gas requirement from Malampaya project.

Aside from Ilijan, the other two power plants that are getting their natural gas requirement include the 1,000 MW Sta.Rita and 500 MW which are both projects of the First Gas Power Corp. (FGPC), a partnership between First Gen and BG (British Gas) plc.

For his part, Eliseo Santiago, Spex managing director, said the company is committed to come up with an agreement with the government to resolve the issue of the gas off-take.

"We will continue to discuss until we reach an agreement. It is important to reach an agreement on the way forward," Santiago said.