The Malampaya consortium led by Shell Philippines Exploration B.V. (SPEX) is being asked to return the $1.2 billion payment for the 70 petajoules (PJ) of banked gas that had been sold by state-run Philippine National Oil Company (PNOC) if the “stored fuel” in its reservoir can no longer be lifted and delivered.
PNOC President and CEO Jesus Cristino Posadas sounded off in a Congressional hearing that “if the natural gas will not be delivered, it is our position that the money that was taken by the consortium be returned back to the Philippine government because we consider this as public funds.”
It could be recalled that PNOC had sealed a gas sale and purchase agreement (GSPA) with South Premier Power Corporation (SPPC) of the San Miguel group in June this year for the sale of its remaining banked gas that has yet to be extracted from the Malampaya field.
Nevertheless, sources from the Malampaya consortium indicated that an offtake framework agreement (OFA) limits the lifting of the banked gas to 35 terajoules (TJ) a year and the volumes for 2022 had already been committed to the gas plants of First Gen. One petajoule is equivalent to 1,000 terajoules.
Prospectively, the consortium conveyed that supply of banked gas may resume by 2023, but that will depend on well pressure and if there would still be gas that could be extracted prior to the expiration of the initial term of Service Contract 38 by February 2024. Otherwise, new well drilling has to be carried out first by the forthcoming new operator of the gas field.
Posadas expounded that the GSPA between PNOC and SPPC for the banked gas had been “approved and passed on by PNOC Board” – that was still under the tenure of former Energy Secretary Alfonso G. Cusi of the Duterte administration.
“The 70 petajoules that was sold by PNOC to SPPC will be delivered preferably before February 2024 and if it will not be delivered by that date, if it can be extended up to the life of the reservoir,” the PNOC chief executive stressed.
The estimated value of the banked gas that the government-run firm expects to be returned to the State would be the scale of proceeds it had fetched for the fuel as sold to SPPC; hence, it is PNOC’s belief that the government is not left with an “empty bag” on that deal.
When asked on the terms of the banked gas transaction and on the delivery dates of the fuel, Energy Secretary Raphael P.M. Lotilla told the media that those questions should better be addressed to the chief executive of PNOC.
Meantime, San Miguel has been lining up its purchased banked gas to be used for electricity generation at the 1,200-megawatt Ilijan gas-fired power plant, which had been recently turned over to it by the Power Sector Assets and Liabilities Management Corporation (PSALM) following the lapse of the facility’s build-operate-transfer (BOT) contract in June this year.
The banked gas was initially allocated for the Ilijan plant, but it had been unutilized in the starting years of operation of the facility because of constraints on the wheeling capacity of the transmission line – thus, the stored fuel accrued within years 2001 to 2004.
The state-owned National Power Corp. was the original owner of the Malampaya banked gas, but it decided to monetize the asset via a government-to-government sale with PNOC that was consummated during the Arroyo administration.