DOE: Gov’t stake sale in Malampaya to private firms justified

THE Department of Energy (DOE) said the grant of Malampaya oil exploration contracts to private firms Prime Infrastructure Capital Inc. and Udenna delivered positive results.

DOE Secretary Raphael Lotilla issued the response when asked by House Deputy Minority Leader France Castro on why the government granted the contracts to private firms rather than let the state-run Philippine National Oil Company-Exploration Corp. (PNOC-EC) do the oil exploration.

In May this year, President Ferdinand “Bongbong” Marcos Jr. signed the renewal agreement for the Malampaya Service Contract 38 (SC 38), allowing the continued production of the gas field for another 15 years.

SC 38 was granted to the consortium of Prime Energy Resources Development B.V., Dennis Uy-led UC38LLC, and PNOC-EC.

The Malampaya gas-to-power facility fuels three gas-fired power plants with a total generating capacity of 2,700 megawatts (MW)—providing up to 30% of the power generation needs of Luzon.

“In our case, the proof of the pudding is in the eating. So far, since we extended the service contract and approved the acquisition of Prime of Shell Philippines Exploration BV in the Malampaya Service Contract 38, the result have been positive,” Lotilla said during the deliberation of the DOE’s P2.5 billion proposed budget for 2024.

He added: “The supply has stabilized, the operations have been there. It has been eight months, and the record will speak for itself. If they are not technically qualified, there will be no natural gas flowing right now.”

Lotilla said the government does not have enough resources to take over Malampaya operations, given the strict procurement laws in contracting out services and the huge capital needed in oil exploration.

“The problem with the government leading the operations is that contracting out services for oil rig operations will be practically impossible. The private sector has more flexibility to contract out services,” he said.

“Plus, it would be very difficult for us to raise the amount needed for drilling because one well alone costs $US 90 million. Where will we source it? In the case of private firms, they can easily raise money, they have easy access to capital as compared with the government,” he added.

The DOE chief said having the private sector as lead operators also shields the government from the big risks that oil exploration entails. (GMA Integrated News)