MANILA, Philippines - The proponents of the Malampaya deep water gas-to-power project in offshore Palawan are expected to turn over lower royalties to the government for 2015 due to depressed global oil prices.
The Malampaya consortium may remit half of what was turned over for 2014 as oil prices have dropped by half since last year, Shell Philippines Exploration B.V. (SPEX) managing director Sebastian Quiniones said.
“Oil prices have dropped by half so roughly speaking, it’ll probably be half also,” he noted.
The Malampaya consortium is composed of SPEX, the operator and developer of the Malampaya gas field, with 45 percent; Chevron Malampaya LLC with another 45 percent and PNOC Exploration Corp. with the remaining 10 percent.
Last year, the consortium remitted $900 million royalties to the government.
The 2014 remittance was lower than the previous years’ payment because the decline in the prices of oil and gas had an impact on the Malampaya gas pricing.
Quinones said the consortium has already indicated the lower remittance forecast to the government.
“The DOE (Department of Energy), the BIR (Bureau of Internal Revenue) and the DOF (Department of Finance) have asked us already. They are trying to plan the revenues that are coming in. So we have to give them a projection based on what prices of oil are at the moment and how the pricing of Malampaya goes,” he said.
The Malampaya gas project is a joint undertaking of the Philippine government, spearheaded by the Department of Energy, and the private sector under Service Contract 38.
Under the service contract agreement, 70 percent of the gross proceeds from the sale of natural gas would go to the contractor to recover the investment cost while the remaining 30 percent is shared by the government and the consortium on a 60-40 basis, respectively.
Since the project started in 2001, total royalties remitted to the government amounted to $8.5 billion.
SPEX has recently completed the P1-billion second phase and third phase of the Malampaya project, which will maintain the level of gas production to fulfill commitments under existing gas sales agreements until 2024.
Malampaya fuels three natural gas-fired plants in Luzon, with a total generating capacity of 2,700 megawatts (MW), or roughly 45 percent of the island’s power generating requirements.