Negotiate for equal interest in Malampaya, Lopez urges Duterte | Inquirer News

Negotiate for equal interest in Malampaya, Lopez urges Duterte

/ 12:42 AM November 23, 2016

The chair of the PNOC Exploration Corp. (PNOC-EC) has urged President Duterte negotiate for an increase in the government’s share of the Malampaya natural gas project when the current contract with a consortium expires in 2024.

In a letter to President Duterte, Gemiliano Lopez Jr., also a former mayor of Manila, said the government and consortium partners Shell and Chevron should each get an equal share of 33.3 percent if the government decides to renew and renegotiate the service contract. Under the present contract, which expires in Feb. 2024, the government-owned PNOC-EC has only a 10 percent share while Shell and Chevron have 45 percent each.


The Malampaya gas field supplies natural gas to three power plants in Batangas, which in turn supply up to 30 to 40 percent of the power demand of the entire Luzon.

Lopez said that a request for the extension of the contract was submitted by Shell as the Malampaya operator on behalf of the consortium. It is now pending at the Department of Energy.


2 scenarios

In his recommendation to Mr. Duterte, Lopez provided two scenarios. In the first, the government grants an extension of the contract with the PNOC-EC, Shell and Chevron getting equal interests in the project of 33.3 percent each. The additional interest in the government’s share “will be paid from the corresponding additional income that will be generated because of the additional stake.”

He said that lately, Shell and Chevron have been disposing of their global assets because of low crude prices. “This,” he said, “may be the opportune time to convince them to partially divest.”

Under this first scenario, the PNOC-EC can better protect the interest of the government as it will have the “swing” vote in all decisions of the consortium.

In the second scenario, the government will deny the extension and undertake the project jointly with a competent and technically and financially capable strategic partner. The government will have up to 49 percent interest and the strategic partner 51 percent. With the PNOC-EC holding only a  minority interest, the operations of the project will not be subject to stringent government regulations, thus ensuring the smooth operation of the project.

Lopez, who is awaiting his replacement as head of the government-owned and -controlled corporation, said he is leaving the matter to the wisdom of the national leadership.

“I took it upon myself, with the national interest as foremost and paramount consideration, to express my thought on the matter,” Lopez wrote the President.

The Malampaya gas field, discovered in 1991 and in operation since 2002, lies 80 kilometers northwest of Palawan and 3,000 meters below sea level. It is estimated to hold about 8.1 trillion cubic meters of natural gas reserves and 85 million barrels of condensate.

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TAGS: Gemiliano Lopez Jr., Malampaya Natural Gas Project, Philippine news updates, PNOC Exploration Corp.
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