GAS EXTRACTION IN MALAMPAYA GETS 15-YEAR EXTENSION
PRESIDENT Ferdinand “Bongbong” Marcos Jr. has approved the renewal agreement for the Malampaya Service Contract 38 (SC 38) for an additional 15 years, the Department of Energy (DOE) said on Monday, May 15, 2023.
The DOE said SC 38, which was originally set to expire by Feb. 22, 2024, has been renewed for a final 15 years or until 2039.
“This will allow for the continued production of the Malampaya gas field, ensuring that the remaining gas reserves are further explored and utilized,” the agency said.
The SC 38 consortium is also required to undertake a minimum work program during Sub-Phase 1 from 2024 to 2029, including geological and geophysical studies, as well as the drilling of at least two deep water wells. These efforts aim to unlock the potential of the existing gas field and nearby prospect areas, leading to incremental production.
The renewal agreement permits drilling activities farther away from the Malampaya production area within the service contract.
Failure to comply with the requirements of SC 38 would oblige the consortium to relinquish a portion of the exploration areas, according to the DOE.
“The discovery of additional reserves in the gas field will boost the country’s quest for energy security. It is also expected to encourage opportunities for further exploration in the country, which to date remains underexplored and to add to the Philippines’ energy portfolio,” the agency said.
“In consonance with international oil and gas exploration practice, the SC 38 Consortium is required to submit a Decommissioning Plan and Budget covering the abandonment of wells and decommissioning of facilities in accordance with applicable international standards, to include timing and costs, within 30 calendar days from the effectivity of the Renewal Agreement for approval by the Department
of Energy,” it added.
The Malampaya Service Contract is an agreement between the Philippine government and private companies for the extraction of natural gas from the Malampaya field, located offshore in northwest Palawan.
The contract was awarded to Shell Philippines Exploration BV (Spex) in 1990, granting them the rights to explore, develop and produce natural gas in the area for 25 years. In return, the Philippine government receives a share of the profits from gas production.
The Malampaya Deepwater Gas-to-Power Project commenced commercial operations in October 2001, delivering cleaner-burning natural gas to five power plants in Luzon, namely Sta. Rita (1,000 megawatts), San Lorenzo (500 MW), Ilijan (1,200 MW), San Gabriel (414 MW) and Avion (97 MW).
As of December 2020, the government’s share from the project’s revenues totaled $11.9 billion.