By Myrna M. Velasco
Several firms are in the roll of the Department of Energy (DOE) as prospective investors in new oil and gas exploration ventures in the country, but their ‘real interest” would only be known during the bid submission date in August.
And according to experts and studies, the intrepidity of investors to inject fresh investment-dollars into the country’s petroleum blocks will be measured vis-à-vis remaining critical concerns such as the unresolved diplomatic tussle at the West Philippine Sea (WPS) and the yet-to-be finalized ‘partial award’ on the arbitration case of the multi-billion Malampaya project.
Amid these concerns, global analyst like the Harshavardhan Reddy Nagatham indicated that the Philippines is confronted with the pressing need for immediate capacity shoring up on its power supply,” with it stressing that “the growing population is driving electricity consumption.” And without addressing that promptly, this country may be plunged into unwarranted brownouts again.
Analysts have similarly propounded that for the sake of energy independence and security, future power capacity for the country could be best addressed with indigenous resources, such as any residual gas from the Malampaya field that it could still extract beyond 2024.
“The problems in the country’s oil and gas exploration initiatives only make the situation worse as investors have been taking a wait-and-see stance due to currently unresolved issues that pit the government auditors against the Department of Energy,” it was noted.
Relative to the ruling of the International Chamber of Commerce (ICC) on the Malampaya case to be fully resolved and implemented, it needs a local court ruling – and this is perceived best initiated by the DOE so investors could take on the right signal on matters of policy enforcement.
As noted by First Solutions Macro Research, a unit of the Fitch Group, the oil dependency of the Philippines across its energy sub-segments already hovers at significant 48-percent, hence, non-replacement of gas resource from the Malampaya field could further erode the country’s energy independence.
It was emphasized that “although many investors have expressed interest on doing oil and gas exploration in the Philippines, very little headway has been achieved towards transforming this interest into concrete steps.”
The Fitch report further stipulated that “the Philippines remains in dire need of more oil and gas exploration as existing reserves decline and as its sole producing Malampaya gas-to-power project approaches the end of its production life.” The Malampaya field accounts for 98-percent of the country’s oil and gas production.
And Fitch stated the situation may even turn worse “due to a growing demand for refining feedstock – next to continued declines in oil and gas production.”
The investing consortium-members of the Malampaya project as governed by Service Contract 38 already sounded off keen interest to continually pursue exploration activities and extend the life cycle of the Malampaya field – but it needs firm decision and approval from the DOE on its license extension for this to happen.
The Malampaya service contract expires in 2024, but gas-production cycle could still be stretched until 2030 at best provided the SC 38 license is extended.