Shooting for bottomline
By chance, it seems, a hidden agenda unraveled in the inquiry being held at the Senate on the recent Malampaya transactions that gave the Udenna group control of the project.
Sen. Sherwin Gatchalian, chairman of the probe panel, wanted the Department of Energy (DoE) to bid out an operation and maintenance (O&M) agreement for the natural gas field, similar to the concession deal in the transmission network service that has been the source of multiple headaches for the government.
According to the senator, such a contractor is needed so the gas field can continue operating without hitches beyond the expiration of its service contract in 2024.
He is lobbying for a technical group, which he said will be the most prudent step the government can take.
He also apparently is in a rush as Gatchalian said the DoE “must already start preparing for a bid now,” as he explained that the DoE should be quick since it still has leverage to select the most technically qualified operator prior to the expiry of Service Contract 38 in 2024.
Gatchalian is pushing for a technical operator, “including a highly experienced international exploration and production (E&P) players, as the most feasible option,” rather than extending the service contract.
“Since the plan of Udenna anyway is to also engage a technical contractor to operate the facility, because it lacks experience and the expertise when it comes to upstream facility operations,” Gatchalian claimed as he pushed the scheme.
The DoE, however, is not inclined into being drawn into Gatchalian’s master plan since it had indicated that it is treating the recent withdrawal of the oil giants Royal Dutch Shell and Chevron Corp. from Malampaya as business transactions that the government does not want to intervene in. Gatchalian’s insistence on a government concession deal will, thus, become a first since the choice of a contractor intervenes with the business decisions of the new owner, which is not even necessary.
Malampaya Energy, the new operator, has retained all the personnel of Shell Petroleum Exploration Corp. who have been running the natural gas facility after the contract was awarded in December 1990.
The goal of Malampaya Energy is to tap the talents of the technicians, which between them have more than 10 years of upstream operations capability, to maximize the gas field and extend its known life expectation.
It is also setting out to immediately reverse “the seven-year hiatus on exploration activities” in the field off Palawan.
Malampaya Energy warned that unnecessary intervention by the government may jeopardize the project, which is approaching an urgent situation where new investments and the industry’s best exploration and development capabilities to drive growth from the depleting assets are required.
The Malampaya project’s viability runs in competition with six liquefied natural gas (LNG) terminals in which some P82.93 billion will be invested.
FGEN LNG Corp. is investing P13.28 billion for an interim floating storage and regasification unit LNG terminal in Batangas City, which is expected to be completed by the third quarter of next year. Other FSRU LNG terminal projects that will also rise in the second half of 2022 include the 4.4-MTPA project of Excelerate Energy L.P., with investments amounting to P6.39 billion; the 3-MTPA LNG terminal of Atlantic Gulf & Pacific Company of Manila Inc., with project cost amounting to P15.33 billion; and the 3-MTPA project of Shell Energy Philippines Inc. worth P2.52 billion.
The lobby apparently from the new investors is that instead of competing with Malampaya, their expensive projects should be integrated for a measure of assurance for their viability.
Gatchalian’s rush is thus understandable as a political exercise if happening next year while the energy companies are experiencing jitters over their huge investments.
“Instead of competing with Malampaya, their expensive projects should be integrated for a measure of assurance for their viability.
“Gatchalian’s insistence on a government concession deal will become a first since the choice of a contractor intervenes with the business decisions of the new owner.