November 12, 2019 / 5:37 AM / 24 days ago

Philippines' PXP eyes Malampaya facilities for South China Sea gas project

MANILA (Reuters) - PXP Energy Corp said on Tuesday it has submitted an unsolicited proposal to the Philippines’ Department of Energy to develop and utilize the Malampaya natural gas facilities in the South China Sea for a planned integrated gas hub venture.

The Malampaya gas-to-power project, developed and operated by Shell Philippines Exploration BV on behalf of joint venture partners Chevron Malampaya LLC and state-owned PNOC Exploration Corp, began commercial operations in 2001.

Malampaya, which fuels power plants with a combined capacity of more than 3,000 megawatts, is expected to be depleted within the next decade, with the government-issued Service Contract No. 38 covering the project expiring in 2024.

PXP said it is looking to take control of the facilities after the contract expiry, “to support continued development of the Malampaya resources as well as the economic development of Sampaguita Field and other nearby prospects”.

Sampaguita is a natural gas prospect in the Reed Bank in the South China Sea covered by Service Contract No. 72 issued to PXP’s Forum Energy unit.

The project has been hampered since late 2014, when the government indefinitely suspended drilling activities in the Reed Bank amid a territorial dispute with China.

The Malampaya infrastructure and distribution network is “strategically positioned in the West Philippine Sea”, PXP said in a stock exchange filing, using the local name for the South China Sea.

“The project intends to ensure energy security to the country from indigenous natural gas resources for the next 25 years and beyond, while bringing in significant revenues to the Philippine government,” it said.

Energy Secretary Alfonso Cusi told Reuters he has “not seen and studied the proposal”.

PXP also said it has expressed interest to buy Chevron’s 45% ownership of Service Contract No. 38.

It did not disclose financial details of the twin proposals.

PXP is among several groups looking to develop an integrated gas hub ahead of Malampaya’s depletion.

Power producer First Gen Corp, which has partnered with Japan’s Tokyo Gas Co Ltd, has completed “significant pre-development work” for a planned liquefied natural gas (LNG) terminal.

In March, Phoenix Petroleum Philippines Inc and Chinese partner CNOOC Gas and Power signed a deal to add state-owned Philippine National Oil Company, parent of Malampaya stakeholder PNOC Exploration, to a planned LNG hub venture.

Australia-listed Energy World Corp Ltd is also in the race, with an LNG project in Pagbilao province in Luzon nearing completion.

Reporting by Enrico dela Cruz; Editing by Christopher Cushing

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