MANILA, Philippines – The government may end up operating the Malampaya deep water gas-to-power project if it decides not to extend the service contract of the consortium led by Shell Philippines Exploration B.V. (SPEx), Energy Secretary Carlos Jericho Petilla said.
Petilla said if the consortium’s offer is not that good, the government may opt to just run the project after SPEx’s contract expires in 2024.
At the same time, he also said that the government may agree to extend the contract by 15 to 25 years if SPEx submits a proposal that is advantageous to the government.
“I am after what we will get in return. I am asking Shell, what is your offer? If it is the same, the government can just run it,” Petilla told reporters.
The consortium is asking for an extension given the possibility of more oil and gas in the 83,000-hectare project in Northwest Palawan.
Petilla said the consortium has not made any offer yet, which is why the Department of Energy has not made any decision on the group’s plan to extend its Malampaya contract for 15 years.
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The government earlier targeted to decide on the matter this year.
“They have not given anything at this point,” Petilla said.
While he declined to provide details on what a “good offer” would be, Petilla said it should be “significantly better” than the terms of the existing contract.
The Shell-led consortium wants a 15-year extension of Service Contract 38 to 2039 as it wants to do more exploration and is also planning more investments for the project.
The consortium is already working on Phase 2 and 3 of the project, for which it offered an additional investment of $1 billion.
According to Shell, the second phase expansion will involve the installation of two new subsea gas wells by 2014 while the third phase is composed of new compressors and a platform that will be completed in 2015.
The Malampaya project supplies natural gas to three power plants in Luzon with a combined capacity of 2,700 megawatts or roughly 36 percent of Luzon’s power generation requirements.
The consortium is composed of SPEx, Chevron Malampaya LLC, with a 45-percent stake each and state-run Philippine National Oil Co.-Exploration Corp. with the remaining 10 percent.