Malampaya Consortium commits $600 million for further exploration, drilling –DOE

The Malampaya Consortium, led by Enrique Razon’s Prime Energy Resources Development BV, committed to investing about $600 million (roughly P33.7 billion) for further exploration and drilling activities beyond the existing production area within the Service Contract 38 (SC 38).

At a virtual press briefing on Tuesday, Energy Undersecretary Alessandro Sales said that the consortium committed exploration and drilling of at least two new deep water wells during the first phase (2024 to 2029) of the work program under the 15-year renewed production contract.

“In total, for two wells and the tieback for production, this would amount to about $600 million,” Sales said.

The Energy official said that the consortium was looking at $80 million to $90 million per well.

“Aside from the well cost, if the production wells become successful, we would need to spend another $330 million to $360 million for the tie back and the subsea facilities to allow the field wells to reproduce,” Sales said.

The consortium, however, indicated that they were preparing to drill for three wells.

“So this is above the committed program in the renewal contract,” Sales said.

On Monday, President Ferdinand Marcos Jr. signed the renewal agreement for the Malampaya SC 38, allowing the continued production of the gas field for another 15 years.

The SC 38’s 25-year production contract — set to expire on February 22, 2024 — was renewed until February 22, 2039.

The Department of Energy (DOE) said the contract renewal “will allow for the continued production of the Malampaya gas field, ensuring that the remaining gas reserves are further explored and utilized.”

The Malampaya gas-to-power project supplies natural gas to power four generation plants in Batangas —Santa Rita, San Lorenzo, San Gabriel, and Avion— with a combined capacity of 2,011 megawatts (MW).

“The present best estimates for the near field is about an additional 210 billion cubic feet of gas,” Sales said.

Aside from Prime Energy, a subsidiary of Prime Infrastructure Capital Inc., other members of the SC 38 Consortium are Dennis Uy-led UC38 LLC and the state-run Philippine National Oil Company-Exploration Corp. (PNOC-EC).

For his part, Energy Secretary Raphael Lotilla said that “this is the first extension ever granted to a natural gas producing Service Contract in the Philippines.”

“We hope that it will not be the last of its kind. That there are attractive prospects within the same Service Contract area worthy of an extension beyond the initial period shows promise in exploration activities in the Philippines,” Lotilla said.

“We also note that this is the first consortium backed up entirely by Filipinos and run entirely by Filipinos. A remarkable milestone in the maturation of the Philippine petroleum industry,” the Energy chief said.

Lotilla said that while new drilling activities will take a few years before additional gas flows from SC 38, “we will direct our efforts at making sure that LNG (liquefied natural gas) is imported to make up for the shortfall in Malampaya gas, and ensure stability of power supply and availability at fair prices.”

“This is a significant development for our national energy security and independence. The Malampaya asset will continue what it has started in operating this world-class installation for further exploration and utilization of the country’s remaining gas reserves, as well as open up the other potential near field areas for future production,” Razon said in a statement.

Sales said the 60-40 sharing, in favor of the government, has been retained under the renewed contract. This means that the consortium shall remit 60% of the net proceeds from SC 38’s petroleum operations to the government.

From October 2001 to December 2022, the SC 38 consortium remitted more than $13.14 billion to the government. — DVM, GMA Integrated News