DOE clarifies additional SC 38 investments

This is in reply to Neal Cruz’s column titled “Another scam in the making?” (Inquirer, 3/26/12)

We categorically state that the Department of Energy has not granted any extension for Service Contract No. 38 (SC 38). The contract is set to expire in 2024. In 2008, the SC 38 Consortium filed an application for a 15-year extension. The application remains pending.

We emphasize that the Luzon grid is very much dependent on the three power plants fueled by Malampaya gas. These plants account for almost 40 percent of the power generation capacity of Luzon, equivalent to 2,700 MW. It is very important that Malampaya gas production should remain at present levels, otherwise these power plants will shift to more expensive fuels.

The reason for Malampaya Phases 2 and 3 is to prolong the same volume of gas production until 2024. Available data show that if no further activities are undertaken, gas production from Malampaya will drop starting 2015 and will run out by 2024. For the record, Phases 2 and 3 are part of the existing work program and commitment of the SC 38 Consortium.

In order to sustain the project’s production levels of 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 additional subsea wells and tie manifold with minor modifications in the asset at a cost of $250 million. Malampaya Phase 3 will install compressors and self-installing platform at a cost of $700 million.

Malampaya Phases 2 and 3 require no drilling of wells as stated in the column, as recent data have shown that Camago-Malampaya are interconnected. To date, the SC 38 Consortium has drilled 11 wells, of which five are being used for production; the rest are exploration wells which are not used for production.

—JOSE RENE D. ALMENDRAS,

secretary, Department of Energy