We categorically state that the Department of Energy (DOE) has not granted any extension for Service Contract No. 38 (SC 38) which is set to expire on 2024. The application is still pending since 2008, when the SC 38 Consortium filed for a 15-year extension application.
However, we emphasize that the Luzon grid is very much dependent on the three (3) power plants fueled by the Malampaya gas. The 3 power plants account for almost 40% of the power generation capacity of Luzon, equivalent to 2,700MW. It is very important that Malampaya gas production remain at present levels otherwise these power plants will shift to more expensive fuels.
In order to sustain the production levels of the project’s natural gas, the SC 38 Consortium made additional investments in the form of Malampaya Phase 2 for completion in 2013 and Malampaya Phase 3 for completion in 2015. Malampaya Phase 2 will install two (2) additional subsea wells and tie manifold with minor modifications in the asset at a cost of US$250 Million. Malampaya Phase 3 will install compressors and self-installing platform at a cost of US$700 Million.
The reason for Malampaya Phases 2 & 3 is to prolong the same volume of gas production until 2024. Available data shows that if no further activities are undertaken, gas production from Malampaya will drop starting 2015 and will run out by 2024.
Malampaya Phases 2 & 3 requires no drilling of wells as stated in the column as recent data has shown that Camago-Malampaya are interconnected. To date, SC 38 Consortium has drilled eleven (11) wells of which five (5) wells are being used for production and the rest are just exploration wells which are not used for production.