The energy sector is receiving mixed signals from the legislature with regards to addressing the imminent depletion of one of the country’s most valuable resource, the Malampaya natural gas, which needs to be surveyed to determine until when its reserves will last.
To do that, the operator of the energy project should have a guarantee that the government will not suddenly halt the project.
A senator, however, warned the Department of Energy (DoE) against extending Service Contract 28 covering the natural gas field that will expire in 2024, claiming that such a move during the current administration constitutes a “midnight deal extension.”
Senator Sherwin Gatchalian, chair of the Senate Committee on Energy, explained his assessment about a rushed deal, indicating that by the time the Malampaya Energy XP Pte. Ltd.-Shell Philippines Exploration B.V. deal is consummated, the Duterte administration will be on its twilight months.
He was clearly referring to past contracts where the government may have been disadvantaged due to the rush involved.
Former Supreme Court (SC) Chief Justice Renato Corona’s posting as head of the judiciary was similarly criticized as a midnight appointment, since it was handed down during the final months of the term of then President Gloria Macapagal-Arroyo.
The SC struck down the allegations against Arroyo, citing the judiciary’s exemption from the prohibition, since it is necessary that a vacuum does not exist in the Judicial branch.
A similar urgency is called for in the natural gas project, since the new operators will have to undertake new oil drilling for the continued operation of the gas field, the viability of which can only be ensured through the extension of the energy deal.
Malampaya Energy, which bought out Shell Philippines Exploration (SPEX) as operator of the initiative, stressed that “the situation is now urgent and requires new investment and the industry’s best exploration and development capabilities to drive growth from the currently depleting asset.”
“Any further delay is hugely detrimental to Filipino consumers and the economic prospects of the nation. We need to focus on augmenting the Malampaya gas supply now to ensure fewer brownouts and safeguard long-term energy security,” it added. Gatchalian raised the option of the government appropriating the Malampaya field through the Philippine National Oil Company, which goes against the privatization thrust.
The DoE had made its stand when it said that the Malampaya deals are purely private business transactions.
SPEX, as early as 2016, stated that the drilling of new wells is needed, but the Malampaya operators needed some form of assurance through a license extension for the gas field until 2026 to 2027 or even longer.
The SPEX team that runs Malampaya remains on board, indicating that nothing has changed in terms of technical capability.
Delaying the exploration activities through the non-extension of the contract will in turn open more opportunities for importers of natural gas, which are betting on full operations without competition from the depleted Malampaya.
The investors are apparently lobbying to deny an extension of the contract and Gatchalian, with an election up the road, is just happy to oblige.