Malampaya consortium: There’s no refusal to sell gas to Ilijan power plant

MANILA, Philippines—The Malampaya consortium sought to refute claims that it refused to supply fuel for the Ilijan power plant in Batangas province.

The consortium—composed of Prime Energy Resources Development B.V. and UC38 LLC—said in a statement that the Malampaya gas cannot be sold to any entity sans a live contract.

“The consortium strongly refutes SPPC’s (South Premiere Power Corp.) claim and maintains that there is no refusal to sell to Ilijan because there is no legal means by which the sale of gas to the plant could be made,” they said in a statement.

SPPC, a subsidiary of San Miguel Corp. through its power arm SMC Global Power Holdings Corp. (SMCGP), is the operator of the 1,200-megawatt (MW) Ilijan power plant in Batangas province.

“Second, diverting supply to Ilijan, which would be irregular and illegal without a contract, will result in depriving the other power producers with active contracts in the Luzon grid of natural gas,” it added.

The Malampaya consortium noted that the gas sale purchase agreement with the Ilijan power plant lapsed in June this year when, after more than 20 years of supply from the gas-to-power facility, the said agreement expired in accordance with its terms.

“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,” said the Malampaya consortium.

The gas platform, as the companies asserted, is “nearing maximum reserve drawdown” so the supply covered by Service Contract 38 “needs to be fairly distributed.”

“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,” it added.

Likewise, the Malampaya entities debunked claims that power supply in the Luzon grid would be affected if the Ilijan power plant was not given priority in Malampaya’s banked gas allocation.

The consortium particularly said no additional power would be generated by the unwarranted priority distribution of banked gas to the Ilijan facility and diverting supply to Ilijan “would siphon off the supply from other power producers and worsen the power supply situation.”

“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.

“Supply for the Ilijan power plant is under consideration as additional gas volume is extracted, if possible, following the extension of SC38’s license,” it added.

The Malampaya consortium made the statement after SMC earlier said the Ilijan power plant was on extended outage which means it is not operating at the moment.

The listed conglomerate had attributed this to Shell Philippines Exploration BV’s (SPEX) refusal to supply 70 petajoules (PJ) in banked or unused gas from the Malampaya field.

At present, repair work is being conducted in the Ilijan power plant to improve its fuel and generation efficiency.

In a separate statement, however, SPPC said while it has no “direct agreement” with the consortium, it has a contract with state-owned Philippine National Oil Co. for 70 petojoules of Malampaya banked gas.

“SPPC bought the Malampaya banked gas owned by the government through PNOC for US $1.2 billion,” SPPC said in the statement.

It said SPPC signed a Gas Supply and Purchase Agreement worth P1.2 billion with PNOC for the banked gas on June 23, 2022.

“With gas volumes from Malampaya on the decline, the prioritization of the SPPC and PNOC contract over the banked gas is widely considered to be more advantageous to the government,” SPPC said. “It was bought by SPPC at a significantly higher contract price compared to those of existing gas supply agreements from Malampaya with another power company,” it added.

SPPC said supplying gas to Ilijan would benefit consumers and “reintegrate” at least 1,200 megawatts of baseload capacity to the Luzon power grid.

“Historically, Ilijan contributes up to 10% of the net reliable capacity in Luzon,” SPPC said. “However, since Ilijan was cut off from Malampaya supply since June 2022, the system demand and supply situation has been very fragile with elevated and volatile electricity spot prices,” it said.

“With no new major baseload capacities expected in the coming months, it is crucial for government to reintegrate Ilijan’s 1,200MW capacity into the (Luzon) grid in the interest of energy security,” SPPC added.

TSB