SPEX asked to explain ‘gas supply disruption’ to power plants

Malampaya operator Shell Philippines Exploration B.V. (SPEX) was ordered by the Department of Energy (DOE) to explain the four-day fuel supply disruption to the country’s gas-fired power plants which triggered their shift to more expensive liquid fuels and de-rating of their generation capacity.

Energy Secretary Alfonso G. Cusi primarily directed SPEX “to explain to the public the gas restrictions that affected the delivery of fuel to the natural gas power plants.”

He stressed that “these restrictions affect the electricity prices that consumers pay and they will have to be informed on the causes of price increases.”

However, since the First Gen plants and even the Ilijan power facility are covered by power supply agreements (PSAs) with Manila Electric Company (Meralco), it will be the customers of the utility firm that will eventually bear the brunt of higher prices arising from such gas restriction snags experienced at the Malampaya field.

Power plant owners and operators were taken by surprise that gas supply was temporarily cut off over the weekend for the gas-fired power plants of First Gen Corporation -- primarily for the 1,000-megawatt Santa Rita plant on Saturday (September 11) and the 500MW San Lorenzo gas-fired generating facility on Sunday (September 12).

In a disclosure to the Philippine Stock Exchange (PSE), First Gen formally confirmed that gas from Malampaya was “fully interrupted,” and that prompted the company to run its Santa Rita and San Lorenzo plants with condensate; then its 97MW Avion plant had to be fed with diesel for its electricity generation; while 414MW San Gabriel plant had to be placed on shutdown “because of the absence of natural gas supply from Malampaya.”

The Lopez firm added that it received advice from the Malampaya consortium on Tuesday (September 14) morning that the gas field expects to “slowly start supplying gas (to First Gen plants), and we are hopeful that our plants can all return to gas-fired operation soon.”

Malampaya platform photo

SPEX also informed media that as of Tuesday noon, its platform was “already ramping up gas production,” adding that “Santa Rita would start receiving gas per plan. Then, we will increase Ilijan gas supply Tuesday afternoon. Normal gas delivery levels expected in the evening.”

The gas supply disruption, which lasted for almost four days, happened when oil prices in the world market had been hitting a high of $70 per barrel, specifically for benchmark Dubai crude, which is the pricing reference for Asian oil markets.

The shift of the gas plants to condensate and diesel fuels often results in higher prices in the electric bills of consumers, because liquid fuels are more expensive than the gas being drawn from the Malampaya field.

The 1,200MW Ilijan plant had been continually supplied with gas, but at extremely reduced level, hence, its electric generation capacity had been de-rated to just 360MW in the last four days.

The sudden stoppage of gas supply in recent days had been a precursor to the 20-day preventive maintenance shutdown scheduled for the Malampaya gas production facility on October 2-22, the last repair works to be undertaken before the field’s operatorship will be turned over to Malampaya Energy XP Pte. Ltd of the Udenna group, the buyer of SPEX’s equity in the gas venture.

This early, Cusi is instructing the Independent Electricity Market Operator of the Philippines (IEMOP) – the operator of the Wholesale Electricity Spot Market (WESM) -- to do advance calculations as to what will be the price impact of the scheduled Malampaya maintenance downtime.

But since the spot market relies on the outcomes of offers from power generator-sellers (in terms of price and capacity) – at each trading interval, it was emphasized by sources that it might be difficult for IEMOP yet to provide concrete assessment as to how the Malampaya shutdown will affect market tradings next month. ###