NG expects $250M in royalties from Malampaya

The government is expected to collect $250 million in royalties from the $4.5-billion Malampaya deep water gas-to-power project.

PNOC president Eduardo Mañalac said this is $50 million higher than the $200 million collected last year.

Mañalac said the Malampaya consortium composed of Shell Petroleum Exploration B.V. (45 percent) , Chevron Texaco (45 percent) and PNOC-Exploration Corp. (10 percent) is expected to fully recover its cost, thus making the share of the government higher.

"The proceeds for the government and contractor would be bigger, as the 70 percent for cost recovery would no longer be taken from the proceeds," he said.

The PNOC official said they hope to achieve full-cost recovery very soon. "Expected cost recovery is some time this year, maybe before the second half. By cost recovery — that means the biggest bulk used for the development would be recovered, but of course there would be operating expense year after year, which would be cost recovered, but no longer substantial," he said.

But he said while the government’s royalties in the project would increase, PNOC’s share, on the other hand, is seen to decline.

"That’s another reason why our (PNOC-EC) revenues from the Malampaya would go down, as the 70 percent would no longer be incorporated.

The low-end of the targeted total royalties to be accrued by the National Government from the Malampaya project is $9 billion while the high-end could reach up to $13 billion over a period of 20 years.

The cost recovery program agreed by the project proponent and the government allows the SPEX-led consortium to recover 70 percent of the cost incurred in the project. 

After the project proponents recoup their costs, the government and the consortium will divide the remaining 30-percent revenues generated from the project. Sixty percent of the 30 percent will go to the consortium while the remaining 40 percent to the National Government.

Once fully recovered, the formula would shift. The whole 60 percent goes to the government and 40 percent would go to the consortium.

The royalties to be paid by the consortium developing the Malampaya project is benchmarked on the prices of international crude.

The earnings from the $4.5-billion Malampaya project, known to be the biggest single investment in the country so far, could also help the National Government narrow down its budget deficit.

Production from the Malampaya gas field provides fuel for the 2,700- megawatt (MW) combined-cycle gas turbine (CCGT) power plant in Southern Luzon starting 2002.

These are the 1,200-MW Ilijan being managed by the Korea Power Corp. and the National Power Corp. (Napocor);  1,000 MW-Sta.Rita and 500-MW San Lorenzo combined-cycle gas turbine plants in Batangas, being run by the First Gas Power Corp. of the Lopez group.