David Young
OGJ Online
MANILA, Oct. 16 -- As the Philippines inaugurated its first gas field Tuesday, President Gloria Marcapagal-Arroyo unveiled an energy strategy centered on natural gas.
She said the plan will largely depend on new price negotiations with producers. Shell Philippines Exploration BV operates the $2 billion Malampaya deepwater gas-to-power project, which will cut 52% from the nation's annual fuel import bill.
The field is 50 km northwest of Palawan Island and 600 km southwest of Manila. Opened in 1992, it has reserves of more than 3 tcf of gas and 120 million bbl of condensate.
President Marcapagal-Arroyo announced that all onshore gas projects will be deregulated, the country's power station network will be partially privatized soon with the condition that new investors convert from burning oil to gas. She also announced that next year the government would start a program to convert all public transportation to compressed natural gas.
However, the president said those policies depend on price negotiations with existing and new producers. Shell has 45% of Malampaya, Texaco Philippines BV 45%, and the Philippines National Oil Co. 10%.
In an event at Batangas, where Malampaya gas is landed for treatment, President Marcapagal-Arroyo told Royal Dutch/Shell Group Chairman Philip Watts Tuesday, "The cheaper the gas is, the more you will be able to sell."
However, Shell's scope is limited, as most of Malampaya production for its estimated 20-year life is committed. Contracts are in place for 400 MMcfd, leaving 100 MMcfd available for sale.
The program set out by the president, therefore, can only be achieved if Shell discovers more associated gas in the Malampaya oil rim project and other smaller offshore projects are developed in the future. Shell is also well-placed to take advantage of any deregulation of the onshore industry. It has advanced plans to build a 100 km pipeline from Batangas to Manila, the Batman pipeline, to supply a power station that currently uses diesel.
Watts said, "Predicting prices is a fool's game. What we want is less volatility and more sustainable stability for the customer."
The Philippines president said that the possible opening up of the land-based gas industry had already attracted the interest of companies from Europe, Japan, Malaysia, and from within the Philippines, who had already expressed an interest in becoming involved in the Batman pipeline, which would eventually be extended to Bataan, further south.
She said, "This will provide a direct impact to the consumer through lower electricity prices and reduce our future energy costs under a competitive generation of power.
"We would say to our friends at Shell that any drop in revenues from lower gas prices would be offset by higher gas sales volume."
President Marcapagal-Arroyo said seven small gas discoveries in the Philippines had the potential to be developed, with the first two to be developed likely to be the Libertad prospect in Cebu and the Sultan Sabangawis prospect in Maguinanao.
However, she said that to maintain the growth of the nation's national gas industry, the country would consider importing LNG.
"Malampaya's success, however, makes us hopeful that there are still many things that are under our waters. This event underscores the importance of an unparalleled industrial investment in a nation that is waging its war against poverty."
Separately, Shell said the production platform, which began operations last month, would operate with only a day shift once satellite control systems are commissioned next year. Currently, a Philippines staff has the day shift and a staff of mainly expatriate Shell employees has the night shift.
Contact David Young at [email protected]
