Shell chairman reaffirms commitment to invest in RP

Visiting Royal Dutch Shell Group chairman Phil Watts reiterated yesterday his company’s continuing commitment to invest in the Philippines despite various international and local oil-related setbacks.

Watts is in the country to witness the inauguration of the group’s $4.5-billion landmark Malampaya project today. President Arroyo will be the guest of honor in today’s program in Tabangao, Batangas.

"This undertaking is the largest private sector investment in the Philippines. This signifies our continuing commitment to the Philippines," Watts said.

The Shell chairman said the group is "delighted to take a key and lead role in the development of the natural gas industry in the country.

He said that aside from the upstream development, the Shell group is also studying various options to explore the downstream prospects of the natural gas business.

Shell Philippines Exploration B.V. (SPEX), the Shell group’s exploration vehicle in the Philippines, is the major operator of the Deep Water Gas to Power Project in Northwest Palawan.

SPEX managing director David Greer said they are now in the process of developing a commercial framework for the downstream development of the natural gas market.

He said part of the plan would be to put up a Batangas to Manila (Batman) natural gas pipeline and a natural gas-fired power plant in Sucat, Parañaque. He said they would spend about $80 million for the Batman gas pipeline that would link Batangas to Sucat.

According to him, the commercial framework would be ready by mid-2002 a few months after the first commercial sale of the natural gas to end-users in January next year.

The gas-fired power plant project would require a new investment of about $600 million.

He pointed out that the investments for the downstream development of natural gas would come on top of the $4.5 billion estimated investment for the exploration of the gas in Palawan.

Based on their initial plans, Greer said they would be talking to the National Power Corp. (Napocor) to purchase the old Sucat sub-station and put up a new 600-megawatt plant.

"The demolition and cleaning up of the place would cost about $600 million," he said, noting that this plan is consistent with the privatization efforts of the state-owned power generation firm.

Napocor decommissioned the diesel-fired power plant sometime last year as part of the government’s effort to develop indigenous sources of energy.

If the framework is firmed up in the middle of 2002, he said they would probably start with the joint pipeline and power plant project in 2005.

"We have to do the pipeline and the power plant at the same time. It has to go hand-in-hand. So we could justify the significance of the pipeline," he said.

He said SPEX is now exploring the possibility of tapping its present partners in Malampaya to join them in downstream development project.

"We are negotiating with the other members of the consortium if they are willing to join in this project," Greer said, adding that they have also informed the Department of Energy (DOE) of the plan.

Aside from SPEX owning 45-percent of Malampaya, the other members of the consortium include: Texaco of USA (45 percent) and Philippine National Oil Co.-Exploration Corp. (PNOC-EC), 10 percent.

The Malampaya project entails the construction and installation of several components necessary to retrieve the natural gas and condensate from deep beneath the sea, treat the gas and transport it to an onshore gas plant from which clean fuel will be delivered to the power plants in Batangas namely: Sta. Rita, San Lorenzo and Ilijan.

Malampaya contains natural gas reserves of at least 2.7 trillion cubic feet and 85 million barrels of condensate – enough to provide 2,700 to 3,000 MW of power for an extensive period of more than 20 years.

The government stands to earn about $9 billion from royalties in the Malampaya project. Development of the Malampaya project took off in May 1998 upon the determination of the commercial viability of the project. The commissioning of the natural gas to power plants begun in Oct. 21 this year.