DOE, Shell, Malampaya group tie up for compressed natural gas project

The Department of Energy (DOE), Pilipinas Shell Petroleum Corp. (PSPC) and the Malampaya consortium signed yesterday a memorandum of agreement (MOA) formalizing their cooperation in the commercial use of compressed natural gas (CNG) for public transport.

The Malampaya group is composed of Shell Philippines Exploration B.V. (Spex), Shell Philippines LLC, Chevron Texaco Malampaya LLC and PNOC-Exploration Corp. (PNOC-EC).

The agreement was signed by Energy Secretary Vincent S. Perez, Spex managing directors Jeremy Cliff and Peter Van Driel, Chevron Texaco vice-president Karl L. Cottrell, PNOC-EC president Rufino B. Bomasang and PSPC president Eliseo B. Santiago.

"This agreement is a milestone in our effort to develop the downstream natural gas industry. We are setting new standards in air quality in the transport sector with the use of CNG-fueled buses and at the same time decrease our reliance on imported fuel," Perez said.

The seven-year pilot project aims to study and evaluate the commercial viability, technical requirements and market demand of CNG-fueled public utility buses.

Specifically, the pilot project will provide participants with experience and knowledge in operating CNG-fueled buses and CNG-related infrastructure.

The MOA calls for the establishment of a so-called "mother-daughter" refueling system prior to the construction of a natural gas pipeline that will transport the natural gas from its onshore gas plant in Batangas to end-users in Metro Manila.

Spex, in behalf of the Malampaya consortium, will finance the design, construction and operation of a CNG "mother" station located within the Malampaya onshore gas plant in Batangas.

PSPC, on the other hand, will finance the design and construction of a "daughter" station in Batangas City or Laguna. The mother station will serve the CNG requirements of the daughter station, which in turn can supply the gas needs of about 70 to 200 CNG-fed public utility buses.

RRCG Transport Systems, Inc. and Philtranco, which have franchise operations plying the routes of Batangas-Manila and vice-versa, are expected to use the Malampaya gas as fuel source upon availability

RRCG has recently received P87 million in funding support from the Development Bank of the Philippines (DBP) for the purchase of 20 brand new CNG-fired buses. Philtranco, for its part, has committed to acquire 100 CNG-fueled buses.

According to Perez, the refueling system is expected to be operational by February 2004.

Based on the agreement, the Malampaya consortium will sell CNG to PSPC for the next seven years from the start of the operation of the refueling system. PSPC, on the other hand, will sell CNG to bus operators at an average of 40 percent discount from the prevailing diesel pump price.