The consortium of the Malampaya deep water-to-gas project, composed of Razon’s Prime Energy Resources Development B.V., Dennis Uy’s UC38 LL, and state-owned PNOC Exploration Corp., said Sunday there were not refusing to sell to the Malampaya banked gas to the 1,200-megawatt Ilijan power plant.
The consortium said in a joint statement there were no legal means by which the sale of banked gas to the Ilijan gas plant in Batangas, owned by SMC Global Power Holdings Corp., could be made.
The banked gas is the accumulated unused gas of the Ilijan power plant, amounting to 108.6 petajoules, due to the underutilization of the plant’s take-or-pay quantity within the period 2002 to 2007.
The consortium said there was no live contract for the supply of gas from Malampaya between SMCGP subsidiary South Premiere Power Corp. and Spex, now Prime Energy.
The group said the Ilijan’s gas sale purchase agreement ended in June.
“Without a live contract, Malampaya gas cannot be sold legally to SPPC,” they said.
SMCGP earlier said the Ilijan facility is on extended outage following the refusal of Spex, now Prime Energy, to supply the 70 petajoules of banked gas from the Malampaya gas project, which SPPC acquired from Philippine National Oil Co. in June.
Meanwhile, the consortium also questioned plans to divert Malampaya gas supply to the Ilijan plant, saying it would be “irregular and illegal without a contract.”
It said the move would deprive other power producers with active contracts in the Luzon grid of natural gas.
SMCGP offered Manila Electric Co. supply from the Ilijan plant at a minimal capital recovery fee of only P1 per kWh on the condition that it looks for gas for the plant. Meralco negotiated with First Gen Corp., but talks are ongoing.
“All natural gas being used for the Luzon grid comes from the Malampaya field and is supplied to other power generators with live and approved contracts,” the consortium said.
“The volume of gas from the Malampaya field, as everyone knows and as verified by the Department of Energy, is nearing maximum reserve drawdown, so the supply covered by Service Contract 38 needs to be fairly distributed,” they said.
They said claims that the Luzon power grid would be affected if the Ilijan power plant was not given priority in Malampaya’s banked gas allocation has no basis.
“If gas is supplied to Ilijan, the sum is the same. This will actually mean less supply to the other power plant customers,” the consortium said.
The consortium also said diverting the gas supply to Ilijan would siphon supply from other power producers and could worsen the power supply situation.
“Supply for the Ilijan power plant is under consideration as additional gas volume is extracted, if possible, following the extension of SC38’s license.
The claim of SPPC is disrupting this process and delaying the resolution that would have provided for a win-win solution for all players in the business value chain of Malampaya,” the consortium said.
The consortium said the banked gas that could be distributed was being distributed as per the contract terms.
“There is no such thing as bank gas stored that belongs to SPPC or anyone else. The consortium parties, which include government agencies, are diligently applying the terms of the contract and ensuring that all that can be done, within the terms of the contracts in place, is done to produce gas and support power generation,” they said.
With Malampaya production capacity naturally declining while an extension of SC 38 is being awaited, the consortium will have to service its existing clients with live contracts, they said.
“The Malampaya is indeed a crown jewel of our country and a shining example of how a public-private partnership has powered the Philippines but let us not tarnish this exemplary reputation by pursuing the vested interest of the few and sacrificing the greater interest of the many,” the consortium said.