Spex, Magellan Utilities ink gas supply agreement

Shell Philippines Exploration BV (Spex) has signed a so-called gas sales and purchase agreement (GSPA) to supply natural gas from Malampaya to the new power station of Magellan Utilities Development Corp. (MUDC).

Spex has three existing GSPAs with the following power plants: the 1,000-megawatt gas-fired Sta. Rita power plant, the 500-MW San Lorenzo power plant, and the 1,200-MW Ilijan Keilco plant. The three power plants are all situated in Batangas.

The Sta. Rita plant is operated by First Gas Power Corp. (FGPC) while the San Lorezo plant is run by the FPG Inc. Both are aligned with the First Philippine Holdings Inc. The Ilijan plant is operated by the Korean Power Corp. (Kepco).

Actual drawing of gas from the fields to the Sta. Rita plant is expected to start by end 2000 while San Lorenzo and Ilijan will start drawing natural gas between 2003 and 2004.

The Malampaya natural gas field is jointly operated by Shell Philippines LL, Texaco Philippines Inc., and Spex with the latter as the principal operator.

Spex managing director David Greer said in a press statement that the agreement represents a step towards increasing the utilization of clean natural gas to increase the country's thrust towards self-sufficiency.

"Spex intends to sell more gas to additional customers that will enable the natural gas business to expand," Greer added.

MUDC is erecting a 320-MW capacity gas-fired power plant in Pinamucan, Batangas, and it will be placed onstream on 2004. It is negotiating with the Manila Electric Corp. (Meralco) for a power supply contract.

Earlier, the Philippine National Oil Co.-Exploration Corp. (PNOC-EC) acquired a 10-percent stake in the Malampaya natural gas project worth $200-million. Earlier, Spex sold 45 percent of its total equity in the Malampaya fields to US oil giant Texaco for an undisclosed sum.

The natural gas field is the biggest gas discovery in the country with potential reserves of 2.5 trillion cubic feet. It is capable of generating 3,000 megawatts (MW) of power over a 20-year period. By 2001, it will be capable of replacing 30 percent of the country's imported fuel requirements for power generation.

It is considered the largest and most significant investment of Philippines business with total portfolio investment of approximately $4.5 billion (P175.5 billion). It will result in significant foreign exchange (forex) savings for the government as it will reduce the purchase of imported coal and petroleum for power generation aside from the positive environment impact.

The well is located some 850 meters underwater and it will take another 3,000 meters underground to reach the field. The pipeline from the well to the central operations and supply base in Tabangao in Batangas will be approximately 540 kilometers.