MANILA, Philippines — The Marcos Jr. administration is keen on siphoning every last drop from the Malampaya gas field as the government renewed its production contract with private companies for the last time.
In a statement on Monday, the Department of Energy confirmed that President Ferdinand Marcos Jr. signed the renewal agreement for the Malampaya service contact No. 38 (SC 38). This move extends the duration of the 25-year production deal for a final 15 years, or until February 22, 2039.
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The service contract was renewed less than a year before it was set to expire.
The renewal of the extraction agreement came amid a looming power crisis in the country. The Luzon grid nearly blacked out in May as supply lines from power plants were tripped, as demand skyrocketed as a result of the dry season and El Nino.
As it is, the state allowed a Razon-led Prime Infrastructure Capital, Inc. unit to buy a 45% stake in SC 38 from Shell Petroleum N.V. in October 2022.
SC 38 comprises the Malampaya extraction project in northwestern Palawan. The Malampaya gas field was discovered in 1989, which the state began extracting from in 2001.
The SC 38 consortium houses the production stake of UC38 LLC holding (45%), and PNOC Exploration Corp. (10%).
The renewal agreement also required the SC 38 consortium to conduct geological and geophysical studies and drilling of at least two deepwater wells in the sub-phase 1 spanning 2024 until 2029.
The DOE noted that the drilling will be conducted “further away” from the Malampaya production area that is covered under the service contract. They indicated that this is a requirement for the consortium to retain access to the exploration areas and failure to comply would compel the state to relinquish access.
Likewise, the renewal requires the SC 38 consortium to submit a decommissioning plan and budget for wells and facilities within 30 days of the DOE’s approval of the agreement.
“The assessment encompassed legal, technical, and financial capabilities, and confirmed the Consortium’s capacity to sustain the production operations and meet its obligations under the Renewal Agreement,” Energy Secretary Raphael Lotilla said in a statement.
“The DoE recommended the renewal of the service contract, anchored on the commitment of the Consortium to actively explore and evaluate additional gas resources,” Lotilla added.