Malampaya gas field now on declining state of production

Published December 17, 2019, 10:00 PM By MYRNA M. VELASCO

https://business.mb.com.ph/2019/12/17/malampaya-gas-field-now-on-declining-state-of-production/

The country’s Malampaya gas field can already feel the pinch of production decline with nine-month output this 2019 faring considerably leaner from last year’s peak output.

Data from the Department of Energy (DOE) showed that production from the Malampaya field for January to September just hovered at 96.473 billion standard cubic feet (SCF), which redounds to roughly 64% compared to last year’s record gas extraction of 150.804 billion scf on full 12 months.

According to sources from the energy department, marked decline in gas production has already been noted and that they are not expecting 2019 results to be as colossal as last year’s level.

Previous forecasts portend that massive downswing in gas output in the field could be experienced starting year 2022 – two years prior to the expiration of the field’s Service Contract (SC) 38 by 2024.

The field is still seen feasible yielding additional gas up until 2030, but the field operator indicated that this could only be feasible if the project’s license will be extended so required additional investments for new well drilling could be warranted.

The propounded license extension, nevertheless, is the biggest puzzle hounding the future of the gas field – with government pronouncements on it still treading on wobbly grounds.

And as the field’s service license inches closer to its end, several developments have been turning up that will likely re-shape Malampaya’s near term future.

Just last month, Davao businessman Dennis Uy’s Udenna Corporation announced that he is buying into the 45% stake of American super giant Chevron in the Malampaya gas field venture. The transaction is still subject to closing conditions and regulatory approvals.

On parallel, the PXP Energy Corporation of tycoon Manuel Pangilinan also forwarded an unsolicited proposal to the Department of Energy (DOE), with it seeking to acquire the facilities of the gas field project at the lapse of its contract in 2024. The first proposal was thumbed down, but PXP Energy opted to file a motion for reconsideration.

With the uncertain future of the Malampaya field, the policy landscape of the Philippine gas sector is shifting on to importation of liquefied natural gas (LNG) – chiefly to satiate the country’s fuel needs for the long-term.

The energy department had already given go-signal to various LNG import terminal projects, but the prospective developers have yet to advance to construction to truly prove their seriousness in undertaking their proposed projects.

Four LNG projects are currently in the line-up, all underpinned by a notice-to-proceed (NTP) imprimatur issued by the DOE – and these range from floating storage regasification unit (FSRU) facilities to onshore import terminals.

With the LNG import facilities, the gas needs of the country’s more than 3,000 megawatts of gas-fed generating capacities will be assured for the long-term – and this could also assure Philippine power system of flexible capacity that it badly needs given the well-anticipated integration of more renewable energy (RE) into its electricity system.

Beyond the existing gas plant capacities, the proposed import facilities also come in tandem with targeted greenfield gas-fed generating assets that will help satiate the country’s future power requirements.