Malampaya

Our big frustration in the old Ministry of Energy was the inability to discover a big enough oil or natural gas reserves in the country. We did extensive exploration onshore and offshore but the most we got were pocket oil deposits in Nido, Cadlao, Matinloc. Because the price of oil was high at the time, these discoveries that would have been deemed sub commercial were developed.

It was not until much later when the Malampaya gas field was discovered by a consortium led by Shell. It was considered substantial enough to justify a big investment in a pipeline that delivered the natural gas from its location in deep offshore Palawan to Batangas where it was used to produce 20 percent of the electricity needed by Luzon. Malampaya had been supplying natural gas to four power plants of First Gas with a combined capacity of 2,011 megawatts.

The Malampaya consortium has also remitted more than $13.5 billion from 2001 to the end of 2023. How our various administrations wasted all that money is another story that should one day be told.

Over the past few years, the foreign oil companies leading the Malampaya consortium were feeling antsy over our government’s lack of response to the question of whether the service contract would be extended to fully develop the field. It was also about the time when big decisions should be made about what to do with Malampaya which was approaching its end of life.

Eventually, one of the major partners, Chevron, decided to bail out. Its interest was bought by Dennis Uy, a Duterte crony with no experience in the oil exploration business. Shell also wanted out shortly after and the same crony tried to gobble that too. But the crony’s appetite was not matched with financial resources so that eventually, a group led by Ricky Razon managed to buy the Shell interest.

The other option was for the government through PNOC-EC to take over. But PNOC-EC did not have the resources to drill new wells that would help extend the boundaries of the resource as well as new wells in adjacent areas that could potentially have additional resources to extend the life of Malampaya. Drilling a required deep water well in the area could cost $100 million with no guarantee of returns. And several wells are needed.

The situation being what it is, many saw Ricky Razon as some kind of a white knight. He is an experienced risktaker with deep pockets and understands how to operate in an international environment. Uy, on the other hand, didn’t have the kind of money needed, only Duterte’s support. The only game on the table was Ricky.

Still, critics of the deal claim Ricky doesn’t have the technical expertise. I sought out Rufino “Boomie” Bomasang, my former co-worker at PNOC during its early days and at the old Ministry of Energy. Boomie, a geologist, was our coal specialist but I understand that after I left, Boomie also was involved in petroleum exploration and headed PNOC-EC at one time.

Boomie said “there is no basis for the allegation from some quarters that there are skills and technology gaps in the current Malampaya upstream operations. After all, the same people running it during the time of Shell are also running it for Prime Energy, including the contractors providing third-party services. Furthermore, Prime Energy is likewise able to access specialized expertise worldwide if and when necessary.

“This was why the Technical Committee that I chaired which evaluated the technical qualifications of Prime as a service contractor and operator concluded that Prime Energy is technically qualified. Thus, among others, Malampaya has been able to operate during its first year under Prime Energy with a perfect safety record and produced enough gas to meet its market commitments.

“Prime Energy has committed to drill an exploration well at the nearby East Malampaya prospect within the SC 38 contract area. It has also committed to re-drill the adjoining Camago reservoir, which was actually the first gas discovery by Occidental Petroleum in 1989. These two could extend the life of the project and preparations to drill said wells are currently ongoing.

“There are also plans to drill other prospects within SC 38, such as Bagong Pag-asa. Furthermore, Prime is currently evaluating blocks of practically all other service contractors in offshore Palawan, including PNOC-EC, who are all inviting Prime to farm-in to their areas.

“The country’s most urgent priority now is obviously to look for an indigenous replacement for the depleting Malampaya, which requires exploration drilling that itself is costly and financially risky. I believe we should all be thankful that Mr. Razon is willing to go into this risky business which others fear to tread.”

The other good news, Boomie said, is that Malampaya has not experienced as steep a production decline as earlier projected. But the best news would be a successful discovery of additional gas reserves within the existing service contract area, such as at East Malampaya, Camago and Bagong Pag-asa. We will never know unless we drill.

Last month, Prime Energy awarded a major contract for the Malampaya Phase IV Project to Noble, one of the largest offshore drilling contractors in the world.

The contract is for the use of Noble’s deepwater drillship “Noble Viking” to drill two deepwater development wells in the Camago and Malampaya East fields, as well as a third exploration well, Bagong Pagasa, approximately 15 kilometers north of Malampaya.

So, it isn’t likely that Razon will go to all the trouble and expense if he is not serious in maximizing all the resources that could be extracted from Malampaya. He took on a big risk that PNOC-EC couldn’t have.

Boo Chanco’s email address is [email protected]. Follow him on X or Twitter @boochanco