Alfonso Cusi not keen on extending SC 38 for Malampaya project

MANILA, Philippines — Energy Secretary Alfonso Cusi is not keen on unilaterally extending service contract (SC) 38 covering the Malampaya gas project.

Instead, he is open to renegotiate the Malampaya contract with the current consortium led by Shell Philippines Exploration B.V. (SPEX) on new terms.

“There is no such thing as extension. Maybe if we both agree with the other party, but I have to study what is good for our country. That facility will already be owned by the country. I cannot agree on just extending the same terms. The landscape changes,” Cusi said during the Kapihan sa Manila Bay yesterday.

“The word extending is as if I’m going to extend it on the same terms and conditions. I will not because, as I said before, we already own Malampaya, we already paid for the facility under the contract,” he said.

“Offering to extend the contract is different, they should propose,” Cusi said.

This as the Malampaya consortium submitted a letter to the DOE late last year to inform the agency of its interest to extend  SC 38 as a provision under the contract.

SC 38 of the Malampaya gas field in northwest Palawan will expire in 2024, but this can be applied for extension with the DOE.

SPEX earlier said the Malampaya project still has gas beyond the contract expiry, but new wells have to be drilled. Previous assessment showed there is still gas supply in the project until 2027.

With this, the government is also looking at other options for the future of Malampaya gas project.

Cusi said it could be operated by state-run Philippine National Oil Co. (PNOC) through PNOC Exploration Corp. (PNOC EC) after the expiry of the contract or it could be bidded out.

He, however, cited the need to undertake studies to determine the amount of gas resource available in the project.

“The end of the contract is 2024 and 2027 is the expected depletion of supply. That again is something that we’d like to ascertain by engaging a third party to determine how much resources remain,” Cusi said.

“We also asked SPEX what is the remaining inventory…. I have to be certain because when we make a decision, we want to make sure that it has basis,” Cusi said.

Operating since 2001, the Malampaya gas project supplies fuel to around 40 percent of gas-fired plants in Luzon namely the Ilijan, Sta. Rita plant, San Lorenzo, San Gabriel and Avion plants—which supply 3,211 megawatts (MW) to the Luzon grid.

The Malampaya project is expected to generate $11 billion in revenues by August since it started operating.

The SC 38 consortium—composed of SPEX with 45 percent, Chevron Malampaya LLC with another 45 percent, and PNOC EC with the remaining 10 percent—had previously expressed its interest to extend the license to explore for oil and gas in northwest Palawan until 2039, but was stalled due to the tax issue amounting to billions of pesos slapped by the Commission on Audit (COA).

With the impending expiry of Malampaya’s contract in 2024, the DOE has been pushing for the development of an LNG integrated terminal to replace Malampaya and to develop the country as trading and trans-shipment hub in the Asia Pacific region.