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Malampaya consortium denies SMC Global Power’s claim on banked gas delivery

THE Malampaya consortium has denied that it is refusing to deliver banked gas to SMC Global Power Holdings Corp. unit South Premiere Power Corp. (SPPC), the administrator of the gas-fired power plant in Ilijan, Batangas.

“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,” the consortium said in a statement on Sunday.

In June, San Miguel Corp. (SMC) bought the remaining 70.26 petajoules (PJ) of banked gas from Philippine National Oil Co. (PNOC) for $1.2 billion.

“Currently, the Ilijan facility is on extended outage following the refusal of Shell Philippines Exploration BV (SPEx) to supply the 70 PJ in banked gas from Malampaya, that SPPC acquired from PNOC in June 2022,” SMC Global Power said in a statement issued on Dec. 4.

The statement came after SMC Global Power, the power arm of SMC, offered the 1,200 megawatts (MW) capacity of its Ilijan natural gas to Manila Electric Co. (Meralco).

Members of the Malampaya consortium are the contractors behind Service Contract (SC) 38, which covers the Malampaya gas field. They are Prime Energy Resources Development B.V., which has a 45% stake; UC38 LLC, and PNOC Exploration Corp., which own a 45% and 10% interest, respectively. The Malampaya concession is set to expire by 2024.

SMC claimed that the banked gas would support the projected fuel requirements of SPPC’s Ilijan power plant until February 2024. However, SMC Global Power said that PNOC has yet to deliver the banked gas. Ilijan’s natural gas supply agreement expired in June.

“Without a live contract, Malampaya gas cannot be sold legally to SPPC,” the Malampaya consortium members said.

It also said that diverting supply to Ilijan is illegal because it would deprive other power producers with active contracts in the Luzon grid.

“The volume of gas from the Malampaya field, as everyone knows and as verified by the Department of Energy (DoE), is nearing maximum reserve drawdown, so supply covered by Service Contract 38 needs to be fairly distributed,” it said.

The Malampaya gas field supplies up to 20% of Luzon’s total electricity requirements. However, it is expected to be depleted by 2027.

“There is no basis to the claim that the Luzon power grid would be affected if the Ilijan power plant was not given priority in Malampaya’s banked gas allocation,” the consortium said.

In its statement, the consortium said that diverting supply to Ilijan would not generate additional power as it would only mean less supply to other power plant customers.

“Diverting gas supply to Ilijan at this time would siphon off supply from other power producers and worsen the power supply situation,” the consortium said.

Meanwhile, Meralco has said that it is considering the offer of SMC Global Power for the output of the 1,200-MW Ilijan power plant.

Jose Ronald V. Valles, Meralco’s first vice-president and head of its regulatory management, told reporters last week that Meralco would negotiate with First Gen Corp. to divert Malampaya gas to Ilijan as it is fully allocated to the company’s plants. — Ashley Erika O. Jose

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