At least 35 terajoules (TJ) of the “banked gas” had been committed this full year for the utilization of the 97-megawatt Avion and 414MW San Gabriel gas-fired power plants based on an agreement sealed by First Gen Corporation of the Lopez group with state-run Philippine National Oil Company (PNOC), according to a highly placed source from the Malampaya consortium.
With that contractual commitment then, the source indicated that “it will only be First Gen that can use the banked gas this year, and there will be no allotment to other buyers – and the supply of banked gas to the First Gen plants would be from December 2021 to December 2022.”
The source noted that “based on an Offtake Framework Agreement (OFA) signed between PNOC and the Malampaya consortium in December 2014, the lifting of banked gas is only limited to 35 terajoules annually – and currently, that volume is now committed for First Gen.”
As explained by the source, “the extraction of the banked gas shall go along with the committed delivery of gas also under the GSPAs (gas sale and purchase agreements) of Malampaya, and that shall be in keeping with the pressure of the wells, because there’s already technical limitation on the volume that can be drawn from the field.”
The executive from the Malampaya consortium similarly conveyed that “it was the supply to First Gen this year that was formally communicated to us, so that’s the commitment we are complying with now.”
The source expounded “on the volume of the banked gas, that can’t be lifted all at once until 2024, because as assessed and as stipulated under the OFA, extraction will only be limited to 35TJ per year – and the total volume of the banked gas owned by PNOC had been placed at 109 petajoules (or around 109,000 terajoules), so the lifting must be carried out beyond 2014.”
The other buyer of the banked gas is SMC Global Power Holdings Corp of the San Miguel group, which is being lined up for the fuel needs of its Ilijan gas plant.
The energy executive stressed “given the depleting state of the gas field, there might be a need to drill new wells first before the next batch of banked gas can be lifted – so when that happens, there is a need for license extension of the Malampaya project’s Service Contract 38 – and that may warrant extraction of banked gas to be extended until 2026-2027, especially if drillings of new wells would have to be undertaken.”
The banked gas, which is also known as “stored fuel” was originally owned by state-run National Power Corporation (NPC) and it was just intended then for the 1,200MW Ilijan gas-fired power project which was then under build-operate-transfer (BOT) arrangement with Korea Electric Power Corporation.
However, when the Ilijan power facility started its commercial operations in 2001, there had been constraint in the transmission of its ‘generated electricity’ into the Luzon power grid, hence, its allotted fuel from the Malampaya field had not been maximized and that resulted in the accrual of the banked gas.
In 2009, during the Arroyo administration, state-run NPC decided to ‘monetize’ its banked gas and had subsequently sold it to PNOC via a government-to-government transaction.
For several years, PNOC has been trying to divest the banked gas; and it was through the OFA that was signed in 2014 that enabled it to tap other prospective buyers –that would be beyond the intended use of the gas for the Ilijan plant – hence, the state-run firm was able to entice Pilipinas Shell as well as First Gen as gas purchasers.