Malampaya’s govt share to drop 50%
The consortium that operates the Malampaya natural gas field said Thursday it expects government royalties to plunge 50 percent this year, amid the significant decline in world oil prices.
“Oil prices have dropped by half so roughly speaking, it’ll probably be half also, if we follow more or less international prices to a certain formula,” Sebastian Quiniones, managing director of Shell Philippines Exploration B.V., the operator of the project, told reporters.
The Malampaya consortium in 2014 remitted $900 million to the national government, representing royalties from the Malampaya project.
The government under the service contract 38 must receive royalties from the gross proceeds of the natural gas production. The contractor has a 70-percent share in gross proceeds to recover its investment, while the balance of 30 percent goes to the government and the consortium, with a 60-40 split.
The government’s share in the project actually fell from an average of $1b billion in annual royalties in the previous years, as oil prices started to decline in the last quarter of 2014.
World oil prices fell to around $50 per barrel to date from $100 per barrel last year amid the US supply glut.
Quiniones said the Energy and Finance Departments and Bureau of Internal Revenues had asked the consortium to submit the projected royalties this year.
“More or less [it was half of last year]. The DoE, BIR, DOF, asked us already. They are trying to plan the revenues that are coming in, so we have to give them a projection based on what prices of oil are at the moment and how the pricing of Malampaya goes,” he said.
Spex, which operates the Malampaya gas project located northwest off Palawan, owns a 45-percent stake in service contract 38. Other consortium members are Chevron Malampaya LLC (with 45 percent) and state-owned PNOC Exploration Corp. (with 10 percent).
The consortium has turned over a total of $8.5 billion to the national government from the start of the project in 2001.
The Malampaya gas field in northwest Palawan powers three power plants with a combined capacity of 2,700 megawatts. The natural gas field is projected to be depleted by 2024.
Former energy secretary Carlos Jericho Petilla earlier said there was still more than P100 billion from the Malampaya fund as of August 2015 that could be used to fund energy related projects.
Petilla said the Malampaya fund should only be utilized for energy projects.
Section 8 of Presidential Decree 910 states that “all fees, revenues and receipts of the board [Energy Development Board] from any and all sources including receipts from service contracts and agreements such as application and processing fees, signature bonus, discovery bonus, production bonus; all money collected from concessionaires, representing unspent work obligations, fines and penalties under the Petroleum Act of 1949; as well as the government share representing royalties, rentals, production share on service contracts and similar payments on the exploration, development and exploitation of energy resources, shall form part of a Special Fund to be used to finance energy resource development and exploitation programs and projects of the government and for such other purposes as may be hereafter directed by the President.”
Petilla said President Aquino spent about P15 billion from the Malampaya fund for projects such as the P4 billion allocation for the diesel power gensets for Mindanao, P2 billion for the Pantawid Pasada program, among others.