Cusi lauds Razon investment in Malampaya natural gas project

MANILA, Philippines — Energy Secretary Alfonso Cusi has welcomed the potential entry of tycoon Enrique Razon in the Malampaya deep-water gas-to-power project through Prime Infra Holdings Inc., which is seen as a much-needed investment to shore up supply from country’s biggest gas resource.

“Their involvement could further improve the financial standing and technical experience of the consortium, and more importantly, facilitate the progress of much needed and urgent development of Malampaya, given the depleting reserves in the existing wells,” Cusi said in a statement yesterday.

If negotiations push through, Cusi said the government expects Shell Philippines Exploration B.V. (SPEX) to prioritize urgent drilling activities  to further develop Malampaya and arrest the depletion.

“Without which, at current depletion rates, Malampaya will only be able to provide gas sufficient for 1,000 (megawatts) of power by 2024 versus 3,000 MW in 2021,” he said.

SC 38 lapses in 2024, but supply from the Malampaya gas field is projected to be depleted by 2027, at the latest.

Currently, the Malampaya project is still operated by SPEX, which is owned by Udenna Corp. through Malampaya Energy XP Pte. Ltd. (MEXP).

“SPEX is presently the operator and what is being sold are shares in or control of SPEX. In that sense, SPEX, the company, continues as the operator in accordance with the consortium agreement. Only control or, ownership, is under discussion under the transaction,” Cusi said.

On Thursday, Prime Infra announced it commenced the acquisition process of a controlling stake in the Malampaya project.

At present, Udenna controls 90 percent of the country’s biggest commercial gas project through MEXP and UC Malampaya Philippines Pte. Ltd.

Cusi  called the potential entry of Prime Infra a “positive development” not only for the Malampaya consortium, but also the power sector as a whole.

“At the outset, it must be emphasized that the uninterrupted operations and supply of natural gas from the Malampaya deep water gas-to-power project remains to be one of the top priorities of the DOE to ensure energy security for the country, especially as the global economy reels from the energy crisis brought about by the conflict between Russia and Ukraine,” Cusi said.

“The keen interest of investors in Service Contract 38, notably from the Razon group, bolsters the position long asserted by the department, that the Malampaya Service Contract remains to be economically viable, and presents an attractive investment opportunity for the upstream oil and gas industry,” he said.

SC 38 is the country’s most successful Petroleum Service Contracts (PSC) of 23 active projects. As the largest natural gas industrial project in the Philippines, it recovered all costs in four years.

Operating since 2001, the Malampaya project is the only local producer of indigenous natural gas. It supplies fuel to around 40 percent of gas-fired plants in Luzon, powering around 3,457 megawatts (MW) of power plants that provide power supply to the Luzon grid.