The Energy Department denied the appeal filed by PXP Energy Corp., an exploration company controlled by the camp of businessman Manuel Pangilinan, to take over the $4.5-billion Malampaya natural gas project.
Officials of the Energy Resource Management Bureau said the department rejected the bid that PXP Energy filed after the government thumbed down the company’s unsolicited proposal to take over the operations of the Malampaya gas project once the contract of the Malampaya Consortium expired by 2024.
“As to the reconsideration being sought by PXP on their unsolicited proposal for the strategic development and utilization of an Integrated Gas Hub for Malampaya, DOE maintained its position that it cannot accept or entertain any proposal for an existing service contract,” the ERMB said.
The department in November rejected PXP’s unsolicited proposal for the strategic development and utilization of IGH in Malampaya located in northwest Palawan upon the expiration of Service Contract No. 38 in 2024 because “the service area covered by SC 38 is still subject to a valid and existing contract”.
PXP, an upstream oil and gas company whose shares are listed on the Philippine Stock Exchange, subsequently filed a motion for reconsideration in December. The company directly and indirectly owns oil and gas exploration and production assets in the Philippines and indirectly owns an exploration asset in offshore Peru.
“We advised PXP that we cannot take cognizance of their unsolicited proposal.n The reason is very basic,” Energy Assistant Secretary Leonido Pulido III said earlier.
Pulido said that under Philippine Conventional Energy Contracting Program, there are only two ways to obtain the service contracts for oil exploration in the Philippines―one is through pre-determined areas and two is under nomination on open areas.
“However, what they did is they submitted an unsolicited proposal over an area with an existing service contract, so we had to deny the unsolicited proposal of PXP,” the official said.
The Malampaya gas project under SC 38 provides natural gas to the country’s five natural gas power plants with a combined capacity of more than 3,000 megawatts.
SC 38 is controlled by the Malampaya Consortium led by Shell Philippines Exploration B.V. as the operator with 45-percent stake, Chevron Malampaya LLC also with 45 percent and state-run PNOC Exploration Corp. with 10 percent.
Chevron Malampaya sold its stake to the Udenna Group of businessman Dennis Uy but the transaction has yet to be completed.
Under PXP Energy’s unsolicited proposal, the Malampaya infrastructure and distribution network, which is strategically positioned in the West Philippine Sea, is envisioned to support the continued development of the Malampaya resources and the economic development of Sampaguita Field and other nearby prospects under SC 72, which is operated by PXP through Forum (GSEC 101) Ltd.
SC 72 covers a 8,800-square-kilometer area west off Palawan (Recto Bank) and is estimated to contain bigger reserves than the Malampaya gas project. SC 72 was put under force majeure since December 15, 2014 because of the territorial dispute between the Philippines and China.
Energy Secretary Alfonso Cusi ordered a study on the way forward for the Malampaya gas project including the level of gas availability.
The Malampaya gas field is projected to start to be depleted by 2022 but the gas is estimated to last until 2027 to 2030.
PXP said its unsolicited proposal was aiming to ensure energy security to the country from indigenous natural gas resources for the next 25 years and beyond, while bringing in significant revenues to the Philippine government.
“The use of the Malampaya facilities as the integrated gas hub will also support the development of a robust indigenous gas industry. These project benefits are consistent with DOE’s commitment to pursue national development through the two-fold agenda of attaining energy independence and implementing power market reforms as contained in the Philippine Energy Plan, and is aligned with the DOE’s clean fuel strategy, including the reduction of dependence on coal,” it said.
Located 50 kilometers offshore Northwest Palawan, the Malampaya project began its commercial operations in 2001 and has contributed over $10 billion in revenues to the government.