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Shell wants Malampaya gas contract extended until 2030

Shell Philippines Exploration B.V. is seeking a six-year extension of Service Contract 38 or the Malampaya natural gas project to explore other areas in northwest Palawan.

“We heard that Shell is willing to explore more around that area. In fact, there are three or four potential areas around SC 38 and that will eventually extend the same quantity,” Senator Sherwin Gatchalian said in an interview with reporters.

Gatchalian, the chairman of the Senate energy committee, said Spex was seeking to extend its contract to 2030. The Malampaya consortium’s SC 38 contract will expire by 2024.

The consortium is composed of Spex as the operator and with a 40-percent stake, Chevron Malampaya Llc with a 40-percent stake and PNOC Exploration Corp. with a 10-percent stake.

Gatchalian said Spex wanted an extension of the contract because it intended to explore other areas near SC 38 which could yield more natural gas and extend the life of the Malampaya well until 2030.

“That is only a briefing to us by Shell but we also want to understand how that will affect the LNG terminal knowing there are now new prospects. Because if I am the LNG terminal, why would I import if there is still [gas] by 2030. My $2 billion [investment] will be sleeping,” he said.

Gatchalian said he would coordinate with the Department of Energy on the strategy for LNG development given the new development.

The Energy Department earlier issued notices to proceed to two groups for the LNG projects.  These include Tanglawan Philippine LNG Inc., the $2-billion LNG venture of Phoenix Petroleum Philippines and China National Offshore Oil Corp. and FGen LNG Corp., a wholly-owned subsidiary of First Gen Corp. 

Sources said Shell applied for service contracts around SC 38 under the first Philippine Conventional Energy Contracting Program which remained to be approved by the Energy Department.

The Shell Companies in the Philippines announced in December that it would push for more oil and gas exploration to discover another Malampaya gas field instead of putting up an import terminal for LNG.

“The economic question in LNG, if those who will use it are the existing ones we have, which are around 3 gigawatts of capacity.  Then actually if we can drill and find one more [gas field], that’s enough to feed the five plants,” SCIP chairman Cesar Romero said.

Romero said LNG terminals could face the risk of being stranded once a new gas discovery was made.

“The risk of LNG terminal is who will be your customer. If sensibilities prevail, indigenous always trumps…over imports. The import terminal, then if there is discovery, hopefully, us, the LNG facility may be stranded,” he said.

Topics: Shell Philippines Exploration B.V. , Malampaya natural gas project , Sherwin Gatchalian
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