‘Midnight deal’
The Department of Energy (DOE) has been cautioned on granting a ‘midnight deal extension’ for the license or the Service Contract 38 of the Malampaya venture.
Senator Sherwin T. Gatchalian, chairman of Senate committee on energy, issued this caution given that by the time the Malampaya Energy XP Pte. Ltd.- Shell Philippines Exploration B.V. (MEXP-SPEX) deal will be firmed up, the remaining office term of the Duterte administration will just be roughly 5-6 months.
This also developed as the MEXP of the Udenna Group has been prodding government on the urgency of new oil drilling that it must be allowed to carry out at the gas field even if it has yet to close its acquisition of the 45-percent stake of. (SPEX) by yearend.
In a statement to the media, Malampaya Energy executive Belinda Racela stressed that “the situation is now urgent and requires new investment and the industry’s best exploration and development capabilities to drive growth from the currently depleting asset.”
She added “It’s clear that any further delay is hugely detrimental to Filipino consumers and the economic prospects of the nation. We need to focus on augmenting Malampaya gas supply now to ensure fewer brownouts and safeguard long-term energy security.”
It has to be noted that the license extension application was first filed with the DOE in 2012 by technically equipped operator SPEX along with the other members of the Malampaya consortium which was still Chevron then and state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC); then it was re-filed with the department under the leadership of Energy Secretary Alfonso G. Cusi in 2017, but that was not also granted by the current administration.
But Gatchalian noted the re-filed application of SPEX in 2017 even carried a ‘sweetener’; wherein a pipeline from Malampaya’s landing facility in Batangas shall be built and that will be connected to the economic zones so it could spur the growth of the country’s manufacturing sector, yet the DOE still failed to act on that application.
In Gatchalian’s view, instead of approving a license extension for Udenna at this point which may have serious legal implications because of the timeframe and the questions on technical capacity of MEXP, the government must instead take ownership of the Malampaya field via Philippine National Oil Company (PNOC) by 2024 – that’s upon the expiration of its service contract; and then the government shall bid out an operation and maintenance (O&M) or technical services agreement to a technically-qualified operator for the field, because even Udenna will actually be leaning on the help of technical consultants in operating Malampaya.
As early as 2016, SPEX has been constantly sounding off to the government that drilling of new wells would have to be done and this has to be underpinned by a license extension for the gas field – that way, the production life cycle of the Malampaya facility could be stretched until 2026-2027 or even longer; but that call was also unheeded by the energy department.
But now, with Udenna’s entry, it has been intensifying its pitch with the DOE for it to be given permission already to undertake new well drillings.
And while the company has not officially verbalized its wish yet for Malampaya’s license extension, sources from the DOE indicated that the Uy-led firm is now “strongly lobbying for that.”
Udenna’s technical capacity in operating upstream petroleum facility like Malampaya is a major question at this stage; and it was the company itself which manifested in a Senate hearing that it will have to rely on foreign consultants and contracting of technically-equipped companies for the targeted well drilling and production life extension for the field.