The restricted gas output of the Malampaya field since March this year has reduced overall electricity generation in the country by more than 400 megawatts, according to Manila Electric Company.

Meralco Vice President Lawrence S. Fernandez conveyed that the slowdown in production from the field started on March 31, “and has continued to this day,” and there had been no definitive timeframe yet on when that fuel production dilemma will ease.

“There is no advice on when the restriction may be lifted,” the Meralco executive noted, while emphasizing that the overall impact on the power grid is slashed electricity supply.

“The effect has mainly been the reduction of available capacity from the gas plants by 433 megawatts,” Fernandez stated. Meralco has capacity off-take agreements with the gas-fired power facilities that are all drawing their fuel from the Malampaya field, including those of the 1,200-megawatt Ilijan; 1,000MW Santa Rita, 500MW San Lorenzo, and 414MW San Gabriel plants.

In fact, in the previous billing cycles, the cost hike in the electric bills had been partly attributed to the Malampaya gas restriction predicament.

Fernandez emphasized “the restriction aggravated the plant outages being experienced by the grid,” especially during the summer months when electricity consumption typically hits peak because of the scorching weather.

The Meralco executive added that “even though the gas plants could produce more power, they are forced to reduce output due to lack of fuel.”

It is widely perceived in the power sector that Malampaya’s gas output will start to drastically dwindle next year, hence, the owner of gas-fired power fleets – primarily First Gen Corporation and South Premiere Power Corporation (SPPC) of the San Miguel group – are now placing their bets on imported liquefied natural gas (LNG) as their next fuel source.

For the 1,200MW Ilijan gas plant that is due for turnover to SPPC next year, its gas sale and purchase agreement (GSPA) with Malampaya is set to expire by July 2022, hence, that will be a major market loss to Udenna Corporation, which is anticipated as the next operator of the gas field once it closes its deal with Shell.

Relative to Meralco’s supply portfolio that is being strained by the twin impact of Malampaya’s gas restriction and the forced outages of power plants, the company has entered into an “emergency supply procurement” to tie it over through the summer season and the remaining months of the year, since supply tightness has been projected to last until August.

The power firm has underwritten an interim power supply agreement with Masinloc Power Partners Co. Ltd. of the San Miguel group, for additional supply of 220 to 260 megawatts so it can beef up electricity supply into its load network, especially during the critical periods of the year.

That emergency supply sourcing is subject for DOE approval because part of Meralco’s plea is to have that exempted from the competitive selection process (CSP) policy in the sector.