Asian giant San Miguel Corp. was accused anew of gaslighting yesterday as the Malampaya consortium disputed SMC's allegations that banked gas is being withheld from it since its energy arm lost its supply privilege.

In a joint statement, the consortium of state-run Philippine National Oil Company — Exploration Corp, UC38 of the Udenna Group, and Prime Energy, formerly Shell Exploration B.V. or SPEX, said "there are no legal means to sell gas to the Ilijan power plant operated by SMC unit South Premiere Power Corp.

"The consortium strongly refutes SPPC's claim and maintains that there is no refusal to sell to Ilijan because there are no legal means by which the sale of gas to the plant could be made."

Last June, SPPC terminated a supply deal with Malampaya simultaneously as it took over ownership of Ilijan after its independent power purchase authority or IPPA lapsed.

The Ilijan gas sale purchase agreement also ended in June after more than 20 years of fuel supply from Malampaya. Consequently, it bought from PNOC-EC the banked gas for $1.2 billion.

It may turn out the purchase may have been useless without a supply deal. Nonetheless, a supply deal with SMC is being considered once it gets an extension of Service Contract 38 that covers Malampaya and which expires in 2024.

Last 4 December, SMC issued a statement that "currently, the Ilijan facility is on extended outage following the refusal of SPEX to supply the 70 petajoules in banked gas from Malampaya."

"Without a live contract, Malampaya gas cannot be sold legally to SPPC," the consortium reiterated.

"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 explained.

Currently, the Malampaya gas-to-power plant supplies all of the natural gas used by the Luzon grid, including the supply to power generators with live and approved contracts.

Disrupting process
The consortium also belied claims that the Luzon power grid would be affected if the Ilijan power plant is not prioritized in Malampaya's banked gas allocation.

"If gas is supplied to Ilijan, the sum is the same. This will mean less supply to the other power plant customers," the consortium said.

"Diverting gas supply to Ilijan at this time would siphon off the supply from other power producers and worsen the power supply situation," it added.

The volume of gas from the Malampaya field, verified by the Department of Energy, is nearing maximum reserve drawdown. Thus, the supply covered by SC 38 "needs to be fairly distributed."

All banked gas that can be distributed should follow contract terms and there is no bank gas stored that belongs to SPPC or any other generation companies.

The consortium also noted that the "supply for the Ilijan power plant is under consideration as additional gas volume is extracted, if possible, following the extension of SC 38's license."

However, the claim of SPPC disrupts the process and delays the resolution that "would have provided for a win-win solution for all players in the business value chain of Malampaya."

Suspended contract
The 670-megawatt Power Supply Agreement between SMC Global Power and power distributor Manila Electric Co. was suspended based on a 60-day temporary restraining order obtained from the Court of Appeals.

The so-called restrictions in the natural gas supply were among the reasons that SMC cited for its petition for a rate increase that the Energy Regulatory Commission rejected since the regulator compelled SMC to follow the fixed pricing term in the deal.

To offset the impact of the PSA cessation, SMC offered the capacity of its Ilijan plant exclusively to Meralco. The Ilijan plant remains idle, however, since it is on an extended shutdown as it does not have a fuel supplier as it can't access the banked gas it bought, while its liquefied natural gas terminal project faced delays.

The company said that the offer to operate Ilijan will only cost Meralco a minimal P1 per kilowatt-hour in capital recovery fee, or half of its capital cost on the facility.

Various estimates, however, point to several hidden costs in the offer and putting them together will translate to a power rate of from P6 to P9 per kilowatt hour.

Since Ilijan is on an extended shutdown, without a fuel supplier, the offer could mean that Meralco would purchase the natural gas Ilijan needs.

SPPC bought from Psalm the banked gas meant for the Ilijan plant last June for $1.2 billion but First Gas already has the first crack at the Malampaya allocation for this year.

Nonetheless, a Meralco source said aside from the P1 capital recovery fee under the SMC offer, operations and maintenance will be around 30 centavos plus P5 for fuel or P6.30 per kilowatt hour "all in."