Malampaya loses 1,200MW supply contract from Ilijan – Manila Bulletin

The depleting Malampaya field lost the 1,200-megawatt Iljan plant as a major gas offtake (buyer) of its capacity as of June 6, as the buyer will no longer renew its expiring gas supply and offtake agreement (GSPA) with the consortium led by Shell Philippines Exploration BV

The Ilijan facility is currently operated by Korea Electric Power Corporation (KEPCO). It is owned by the state Power Sector Assets and Liabilities Management Corporation (PSALM), a transfer company of the assets and liabilities of the National Power Corporation (NPC) as part of its privatization.

But with the plant’s Build-Operate-Transfer (BOT) agreement also expiring this month, June, sales discussions with South Premiere Power Corporation (SPPC), a subsidiary of SMC Global Power Holdings Corp. of the San Miguel Group, which won the contract as the plant’s Independent Electricity Producer Administrator (IPPA) when the plant’s supply contract was privatized in 2010.

Under PSALM’s privatization terms for the supply contracts, ownership of the plant must be transferred to the IPPA at “zero value” upon expiry of the plant’s BOT contract, provided that all outstanding obligations are resolved by mutual agreement between the parties involved.

SPEX asset manager Albert Emas has stated in a media statement that “Malampaya is in the process of finalizing its gas supply and purchase agreement with National Power Corporation for the supply of domestic natural gas to the 1,200 MW Ilijan gas-fired power plant.

For the past two years, Malampaya’s gas supply to the Ilidan facility has suffered from repeated “gas restrictions” that have required the facility’s power generation to be downgraded (reduced) frequently by 500 to 600 megawatts.

According to sources, there was “not much interest” from PSALM or even its potential owner San Miguel to renew the gas contract with Malampaya, so the Ilidan plant will no longer get its fuel supply from the Malampaya gas field.

Irene Joy Garcia, President and CEO of PSALM, previously told reporters that the government-run company would only agree to an extension of Ilidan’s gas supply contract if the Malampaya consortium can demonstrate that it can still produce enough gas to meet its needs plants to supply entire customers with electricity.

That being said, the company indicated that alternative gas sourcing needs to be sought — especially if the sale of the plant is already finalized with its IPPA.

The San Miguel Group is already considering a timeline for introducing imported liquefied natural gas (LNG) by August this year, and this will be the fuel it will feed into its gas-fired power plants, including those at the Ilijan plant.

Even First Gen Corporation’s gas plants will partially rely on LNG for their fuel use by the end of the year after their offshore import facility goes into commercial operation.

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