The firms comprising the Malampaya consortium are already preparing for fresh round of ‘capital expenditures call’ to bankroll their committed drilling of 2-3 wells as one of the major conditions in their 15-year contract extension, according to Energy Secretary Raphael P.M. Lotilla.

“The cash flow from the present operations is going to be available as sources of funding for the drilling,” the energy chief said.

Lotilla qualified that in the extension of Service Contract (SC) 38 for Malampaya, “there are terms and conditions for that extension, that they would have to drill two wells within certain period.”

When the Malampaya contract extension was announced this year, field operator Prime Energy indicated that the scale of investment to be shelled out per well would be $80 to $90 million; hence, the drilling of 2-3 wells could sum up to $240 to $270 million.

Based on the work program submitted to the Department of Energy (DOE), the planned exploration and drilling activities shall kick-off next year and that will stretch until 2029.

Apart from Prime Energy of the Razon group, the two other consortium-members in Malampaya are UC38 LLC of Davao businessman Dennis Uy with 45-percent stake; while state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) holds the minority equity of 10%.

Malampaya’s original 25-year contract will lapse February next year; and the challenge that the new consortium needs to overcome is to extend the field’s production longevity through the drilling of new wells that could yield fresh wave of gas discoveries.

Lotilla noted that any successful outcome from the planned Malampaya drilling will serve as a sensible indicator to all other investors that the upstream petroleum sector of the Philippines is really back in business; and it will likewise showcase if Filipino companies can really shine in such highly technical venture.

“The current Malampaya production is important and then the next leg is also important because that would be giving a signal to how the rest of the upstream will be developed,” the energy chief stressed.

He highlighted that with the new round of drilling activities at Malampaya, “we can show that there is a market for natural gas in the country; and it’s a continuing one, then there is an incentive for the upstream investors to invest in exploration.”

As targeted, the new Malampaya consortium will undertake drilling within near-field sites of the SC 38 block to determine if there would be additional commercial-scale gas that can still be lifted from the field.

Once that is proven, the consortium-members will need to firm up new contracts for the extracted volumes, because the existing gas sale and purchase agreements (GSPAs) for the Malampaya output will also lapse next year.

At this point, however, the Malampaya consortium has to win over hurdles of tightening markets for offshore drilling rigs, with exploration ventures already encountering 2-3 years of delay even in markets with high prospectivity of oil and gas production.