Malampaya consortium starts $1-B expansion

MANILA, Philippines - The consortium behind the Malampaya oil and gas field in Palawan will start the $1-billion expansion of facilities in the gas-to-power project next week.

New investments and infrastructure will ensure continuous supply of natural gas for three key power plants in Luzon until 2024.

Project operator Shell Philippines Exploration BV (SPEx) said the Malampaya Phase 3 development will start on Dec. 7 with a strike steel ceremony at the Keppel Subic Shipyard Inc. in Cabangaan Point in Subic, Zambales.

This will allow Keppel to start fabricating the substructure and topside modules of the depletion compression platform, which will increase the rate of gas recovery from the wells.

In June, executives of Royal Dutch Shell Plc. and Pilipinas Shell Petroleum Corp. committed to President Aquino a $1-billion investment for the Malampaya Phase 2 and 3 stages.

Malampaya Phase 2 will involve the installation of two new subsea gas wells while Malampaya Phase 3 is composed of new compressors and a platform that will be completed in 2015.

SPEx earlier said the expansion program will sustain the level of gas production committed under existing contracts.

The Malampaya project fuels the 1,000-megawatt (MW) Sta. Rita and 500-MW San Lorenzo power plants of First Gen Corp. and the 1,200-MW Ilijan natural gas power plant of SMC Global Power Holdings Corp., all in Batangas.

It currently supplies fuel for 40 to 45 percent of Luzon’s power generation requirements.

Without Malampaya Phase 2 and 3, the project’s output will decline starting next year. Beyond 2024, SPEx can only provide the fuel needs of 1,000-1,500 MW of natural gas-fired power plants.

The Malampaya or Service Contract 38 consortium is composed of SPEx and Chevron Malampaya LLC with a 45-percent stake each and state-led Philippine National Oil Co.-Exploration Corp. holding the remaining 10 percent.

To date, the SC 38 consortium has drilled 11 wells, of which five wells were used for production.