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Renewal of the Malampaya contract will increase investments and energy security.

The Malampaya Service Contract No. 38 (SC 38) renewal deal was signed, and the Department of Energy (DOE) has welcomed this development since it will help the nation achieve energy security and encourage more investments in domestic power sources.

According to a statement from the DOE, the Malampaya contract will now be extended for a further 15 years, enabling additional natural gas exploration and production from the plant.

President Ferdinand R. Marcos Jr. extended SC 38 on Monday until February 22, 2039.

The DOE stated that the SC 38 Consortium must carry out a minimum work program that includes geological and geophysical research, as well as the drilling of at least two deep water wells, during the Sub-Phase 1 from 2024 to 2029, in addition to continuing the production activities.

To boost Malampaya’s output, it was stated that the work program intends to unlock potential gas supply both in the current gas field and surrounding prospect areas.

“The finding of additional reserves in the Malampaya gas field will aid the country’s effort to secure its energy supply. Additionally, it is anticipated to broaden the Philippines’ energy supply and spur chances for more development in the still-unexplored nation.

DOE Secretary Raphael Lotilla stated in his remarks at the ceremonial signing of the renewal agreement at the Malacanang Palace that his office will support the effective and ethical exploration of the nation’s indigenous energy sources, including the Malampaya gas-to-power project.

The Department of Energy acknowledges its responsibility in assisting with the efficient and sustainable exploration, development, and utilization of our indigenous energy, including Malampaya, Lotilla said. “Under the President’s direction and working with Congress to pursue the country’s energy security agenda,” Lotilla said.

Consortium SC 38

The head of DOE claimed that the organization “meticulously evaluated” SC 38 Consortium’s capacity to manage and explore the Malampaya gas project.

The SC 38 Consortium is made up of Shell Philippines Exploration B.V. (SPEX) and UC38 LLC, each of which has a 45 percent ownership in the project, according to the website of the PNOC-Exploration Corp. (PNOC-EC), which owns a 10 percent stake in Malampaya.

“The examination covered legal and technical as well as financial skills, and it affirmed the consortium’s ability to continue the production operations and fulfill its commitments under the renewal agreement. The consortium’s promise to actively investigate and assess new gas resources was the foundation for the DOE’s recommendation that the service contract be renewed, Lotilla continued.

Following the SC 38 renewal agreement, the DOE stated that the consortium must submit a decommissioning strategy and budget within 30 days of the newly signed agreement taking effect.

essential power source

Being the only natural gas resource in the nation, the Malampaya gas-to-electricity project is one of the nation’s most important power assets.

Although it was founded in 1989, operations didn’t start until 2001, and the initial license is due to expire in February 2024.

It provides five power plants—the 1,200 MW Sta. Rita power plant, the 500 MW San Lorenzo power plant, the 1,200 MW Ilijan power plant, the 414 MW San Gabriel power plant, and the 97 MW Avion power plant—with clean natural gas, meeting 20% of Luzon’s total energy needs.

Because of the falling output from the Malampaya project, the Ilijan power plant, which met 15% of Manila Electric Company’s peak demand, was shut down in June 2022.

The loss of Ilijan, Lotilla said, “has significantly contributed since then to the thin reserves in the Luzon grid and helped push up electricity spot prices.”

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