The Energy Department said Tuesday the $4.5-billion Malampaya natural gas project in northwest Palawan will continue to operate despite the low oil price regime that forced the Galoc oil field to announce the suspension of operation.
Energy Secretary Alfonso Cusi said there was “no threat” of Malampaya gas project shutdown as the project is “completely different” from the Galoc oil field.
The joint venture that includes Oriental Petroleum and Minerals Corp. earlier announced that production at the Galoc oilfield would be suspended in September amid the low oil prices.
Cusi said the Malampaya gas project under Service Contract 38, which powers natural gas power plants with a combined capacity of around 3,000 megawatts, has existing gas purchase and sales agreements with power generators.
He also said “there is demand” for natural gas from Malampaya gas project where the government owns a 10-percent stake through PNOC Exploration Corp.
The benchmark Dubai crude plummeted by about 66 percent to $23 per barrel by end-March from $67 a barrel as of end-December last year.
An industry source said oil and gas firms were expecting oil prices to recover to $40 per barrel so that oil exploration firms could recover their investments.
“There were huge losses per barrel of oil produced at current price,” the source said.
“Once prices go beyond $40 and stabilizes, it will be commercially viable to produce oil and gas again,” the source said.
Oriental Petroleum, a joint venture partner of Service Contract 14, Block C-1 (Galoc block), said in a disclosure to the stock exchange Galoc Production Company set the cessation of the oil field on Sept. 24.
This came after the issuance of the termination notice from the floating production storage and offloading service provider, Rubicon Offshore International.
“The matter has been relayed to the DOE [Department of Energy] and is seeking approval of the initial drawdown on the abandonment fund for the implementation of the suspension plan,” Oriental Petroleum said.
Oriental Petroleum said GPC relayed its total commitment to the long-term future of the Galoc asset “and is currently evaluating several scenarios to retain flexibility for the earliest possible production re-start as and when the market conditions improve.”
Galoc oil field has been in production since 2008 and yielded nearly 20 million barrels. There are four producing wells that flow into FPSO Rubicon Intrepid which has 450,000 barrels of storage capacity.
Crude oil production from the Galoc field has declined in recent years, averaging 2,100 barrels of oil per day last year.