The Department of Energy (DOE) indicated it is winding up its discussion with the consortium-members of Service Contract (SC) 38 for the targeted license extension of the Malampaya deep water gas-to-power project that will lapse February next year.

“At the moment, we are still finalizing the talks with the joint venture-partners regarding a potential extension of the contract,” Energy Undersecretary Alessandro O. Sales said.

He conveyed that the Malampaya JV partners, led by new operator Prime Energy of the Razon group, already filed in early November last year a formal request for contract extension.

“As part of the procedure of DOE, we required them for documentary submissions,” the energy official emphasized.

Parallel to the mandated submission of documents, Sales narrated “we have also met with the operator (Prime Energy), as the authorized representative of the joint venture, to establish new terms and conditions that may be applicable to the extended contract.”

The DOE official qualified though that since talks are still ongoing, the relevant parties are not ready to reveal the metrics of their "negotiating toolbox" as well as the requirements for the license extension, including the details of the submitted work program and the budget that the consortium will need to earmark for fresh round of seismic survey and targeting drilling activities within the areas covered by the Malampaya project.

“As part of the requirements on their request for extension, they will have to submit a proposed work program and budget. And DOE, as part of evaluating this has to make sure that the proposed work program actually is appropriate and addresses the needs of that area in terms of ensuring the continued supply of the gas in the Malampaya field,” Sales stressed.

In the past administration – wherein the Malampaya contract extension had also been ‘discussed’ with the previous SC 38-interest holders, into the bargain was the proposal of past DOE officials to adjust the royalty sharing arrangement to 70:30 – in favor of the Philippine government, being the owner of the gas resource.

That will be a modification from the prevailing 60:40 royalty sharing pact as anchored on the prescriptions of Presidential Decree 87 or the Philippine Oil and Gas Law that had been instituted since the regime of President Ferdinand Marcos Sr. in the 1970s.

With the propounded 70:30 royalty sharing deal, it is widely reckoned that the State would be able to corner higher stream of revenues from the targeted continued operations of the Malampaya field.

Beyond the royalty sharing metrics and the mandated work program submission, previous discussions on SC 38 contract extension also touched on other negotiating paradigms, including: the assessment of the remaining reserves in the gas field; as well as lifting the banked gas so it can be delivered to the buyers.

The other major concern being fleshed out in the negotiating table then has been the price of the gas in the event of commercial scale discovery within the ambit of the extended SC 38 contract.

The current Malampaya consortium comprises of field operator Prime Energy; UC38 LLC of businessman Dennis Uy’s Udenna Corporation; and state-run Philippine National Oil Company-Exploration Corporation.