‘Government must bid out Malampaya contract’


The next operator of the Malampaya Deep Water Gas-to-Power Project must be determined via an auction, according to Senate Energy Committee Chairman Sherwin Gatchalian.

The contract to operate the gas field will expire in 2024. Once the contract comes to an end, Gatchalian said, “everything will revert to government.”

“The Filipino people will enjoy all the revenues and profit coming out of Malampaya. On the other side of that, government will be operating the gas field,” said Gatchalian during the general meeting of members of the Management Association of the Philippines held Tuesday afternoon.

Under Service Contract (SC) 38, 70 percent of the gross proceeds from the sale of natural gas would go to the contractor to recover the investment cost. The remaining 30 percent is shared by the government and the consortium on a 60-40 basis, respectively.

SC 38 was awarded to the Malampaya consortium, which is currently composed of UC38 LLC, a subsidiary of Udenna Corp. (UC), 45 percent; state-owned PNOC Exploration Corp., 10 percent; and Shell Philippines Exploration B.V. (SPEX), 45 percent.

However, a deal was sealed between SPEX and another UC firm controlled by Davao businessman Dennis Uy. Malampaya Energy XP Pte. Ltd. signed a deal with SPEX to sell its 45-percent operating interest in Service Contract 38, which includes the Malampaya gas field. The turnover to Malampaya Energy is expected to be concluded in December this year.

The consortium’s contract with the government will end in 2024.

Gatchalian said government must bid out the gas facility’s operations once the contract expires, regardless if there will be a new operator prior to the expiration of the contract. 

“This is a decision that government needs to make and analyze because government by itself has a lot of constraints in terms of operation. But the basic principle here is if ever government decides to get an operator, it has to bid it out. That’s the only way for us to get the best price, get the best operator and get the best option.

My view here is after 2024, if government will do decide to look for a new operator…or even the existing operator, they have to bid it out,” said Gatchalian.

SPEX is the current operator of the Malampaya gas facility that supplies fuel to around 40 percent of gas-fired plants in Luzon namely the Ilijan, Sta. Rita plant, San Lorenzo, San Gabriel and Avion plants—which supply 3,211MW to the Luzon grid.

SPEX said the Malampaya gas facility is predicated to produce gas until 2027.

Image courtesy of www.shell.com

Read full article on BusinessMirror

Leave a Reply