DOE mulls proposal to extend Malampaya contract

MANILA, Philippines – The Department of Energy (DOE) is still studying a consortium’s proposal to extend the service contract for the Malampaya offshore gas-to-power project in northwest Palawan.

“They filed a letter of request for extension, which is already a reiteration of their request two years ago,” DOE Undersecretary Jose M. Layug Jr. said.

The consortium, which is led by Shell Philippines Exploration B.V. (SPEx), wants a 15-year extension of service contract (SC) 38 given indications of interest from oil buyers, Layug said.

The license for SC 38 that allows the exploration of the Malampaya gas field in northwest Palawan will expire in 2024.

Layug said SPEx marketed in 2008 around 150-billion cubic feet of gas.

“After the marketing of that gas, the result is that potential buyers indicate that they would buy new gas if there is an extension of a service contract. We are still studying it,” Layug said.

The consortium is composed of SPEx as the operator, Chevron Malampaya LLC with a 45-percent stake and state-led Philippine National Oil Co.-Exploration Corp. (PNOC-EC) holding the remaining 10 percent.

Layug said the second and third phase of the $4.5-billion Malampaya project will ensure the consortium’s supply commitment under three existing deals despite depletion and pressure reduction in the reservoir.

The consortium sought for an extension of SC 38 after deciding to proceed with the second and third phase of the Malampaya project estimated to cost $1 billion. The project was earlier estimated to cost $1.5 billion but has been downscaled after the design package was finalized.

Layug said excess output will be subject to a new gas sale agreement.