Luzon grid braces for another ‘perfect storm’ with 20-day Malampaya shutdown

Published June 18, 2021, 2:33 PM

by Myrna M. Velasco

As the Department of Energy (DOE) is not really keen on fixing the country’s power supply problems, Luzon grid may brace for another ‘perfect storm’ that could lead to brownouts and rate hikes with the scheduled 20-day turnaround shutdown of the Malampaya gas field in October this year.

The DOE has been informed by the Malampaya consortium as early as last year on the preventive maintenance schedule of the gas field, but there are no concrete plans laid down by the department yet on how it can avert any unwanted scenarios of rotating brownouts when the gas field will temporarily cease production.

According to industry sources, the Malampaya gas production facility downtime will run from October 2 to 22; and this can no longer be moved because any deferment on required maintenance could weigh down on the field’s operation.

For First Gen, which has the biggest fleets of gas-fired power facilities to be affected, company senior vice president Victor Emmanuel B. Santos Jr. has indicated that they already purchased liquid fuels because their generating units will need to shift fuel usage during the gas facility’s turnaround period.

When asked on preparations being undertaken by the government, DOE officials noted that they have yet to exchange notes and collaborate on targeted actions and measures for this very critical next development in the energy sector.

With Malampaya’s shutdown, more than 3,200 megawatts of power capacity will be perturbed, hence, it will need comprehensive preparation both from the government and the private sector’s end because that could exert pressure on supply and would also trigger hikes in electricity rates, especially so since crude prices in the world market are now surging past US$72 per barrel.

This early, fears are likewise raised that the DOE’s nudging on postponement of the maintenance activities of some power plants may eventually overlap or could spill over to the timeframe of Malampaya’s shutdown, and that may worsen supply troubles in the grid.

Further, sources from the industry emphasized that reports had already been submitted to the DOE as to the state of depleting gas reserves in the Malampaya field– and that has been the main reason for the 75-day restriction in production that happened between March to June this year.

The limited output of the Malampaya facility primarily tamed the scale of electricity generation of the Ilijan plant – and that de-rated its output by roughly 430 to 450MW within March-June stretch.

An energy official admitted that the DOE was indeed apprised of the nearing end of Malampaya’s gas production life cycle; and there are also expectations that “gas restriction will persist as a dilemma for the gas-fired plants in the coming months.”

Asked on the timeframe on when production will really hit rock bottom, the official noted that based on studies submitted by the Malampaya consortium, this could happen as early as 2022.

“Gas output will not necessarily hit zero, but it will already substantially decline by next year, and gas restriction will be a continuing predicament for off-taker plants this year and will worsen next year,” the source said.

The 2022 timeframe, it was stated, had been strategically calculated as the depletion year for Malampaya, and so far, that was the rationale why the gas sale and purchase agreement (GSPA) for the Ilijan plant had only been committed until that year.

To shore up the field’s gas production, it will require drilling of new wells and that shall be supported by the government via an extension of the Service Contract (SC) 38 of the Malampaya project.