Gov’t consolidates position in Malampaya off-take issue

The government will present within this week to the Malampaya consortium its consolidated position on the issue of gas off-take under Service Contract 38 or the Malampaya Deep Water Gas to Power Project, an energy official said over the weekend.

"We met last Thursday to coordinate our respective points of view for the negotiations of the gas off-take of the Malampaya project," Power Sector Assets and Liabilities Management Corp. (PSALM) president Edgardo del Fonso said.

The meeting was attended by representatives from the Department of Energy (DOE), Department of Finance, National Power Corp. (Napocor) and PSALM.

"We have agreed to come up with a common position with respect to the outstanding issued of the SC 38 renegotiations. We are ready to present our decision to Spex (Shell Petroleum Exploration B.V) this week," del Fonso said. Spex is the major operator of the Malampaya project with 40 percent share while the other 40 percent is accounted by Chevron-Texaco and the remaining 10 percent by state-run PNOC-Exploration Corp.

Del Fonso said they have to come up with this kind of agreement among the concerned government agencies to be able to resolve the issue. "At least we will know where we are coming from. We have our final position on the terms of the contract," he said.

The PSALM chief, however, does not want to disclose yet the details of the consolidated position of the government. "It will also depend on the renegotiation of the contract," he said.

Discussions on the take-or-pay commitment between the government and the Spex consortium cropped up when the DOE floated the idea of reducing the overcapacity in Luzon.

Energy Secretary Vincent S. Perez, in an earlier interview, said one possible solution to solve the issue of overcapacity is the possibility of reducing the gas off-take from the Malampaya project which will enable the government to reduce the take-or-pay cost and thus cut electricity cost.

But Perez admitted that this proposal will allow gas off-take from the project to be consequently increased in the future.

"We have overcapacity in Luzon. It maybe our interest now to reduce gas off-take at present, or reduce take-or-pay of gas in exchange for a higher utilization of gas in the future," Perez said. As of end-December 2001, the overcapacity in the country stood at 1,253 MW.

The energy chief said this is just proposal and needs to be approved by the industry players. "Lower take-or-pay for the present in exchange for a higher take or pay in the future. That remains to be decided among the players."

Napocor is one of the main proponents of the 1,200-megawatt Ilijan natural gas-fired power plant which sources its gas requirement from Malampaya project.

Aside from Ilijan, the other two power plants that get their natural gas requirement are: the 1,000 MW Sta.Rita and 500 MW San Lorenzo which are both projects of the Lopez-controlled First Gas Power Corp. (FGPC), a partnership between First Gen and BG (British Gas).