Prime Energy sees Malampaya phase 4 wells generating royalties from new gas output

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Malampaya phase 4 gas royalties

Highlights

Prime Energy's Malampaya Phase 4 project expects two new wells to generate about $500 million in additional government royalties over six years.
The Malampaya East-1 and Camago-3 wells add an estimated 222 billion cubic feet of recoverable reserves, capable of generating 31.46 billion kilowatt-hours of electricity.
Service Contract No. 38 was extended by 15 years through 2039, with the Philippine government entitled to 60% of net proceeds, while Malampaya has already produced more than $14 billion in government revenues.

New wells add reserves and revenue outlook

As reported by BusinessWorld Online, Prime Energy Resources Development B.V. expects the two new natural gas wells off Palawan to generate about $500 million, or P31.98 billion, in additional government royalties over the next six years.

Prime Energy President and Chief Executive Officer Donnabel Kuizon-Cruz says initial well tests indicate the nearly $1-billion Malampaya Phase 4 project can produce added government revenue as the new wells begin supplying natural gas. She says the estimate covers royalties from the Malampaya Phase 4 wells alone and excludes remaining royalties from the legacy wells.

The project recently begins delivering natural gas from the Malampaya East-1 and Camago-3 wells, marking the first deepwater drilling campaign at Malampaya in more than a decade. The two wells are estimated to add 222 billion cubic feet of recoverable natural gas reserves to the field and could generate about 31.46 billion kilowatt-hours of electricity.

Power supply role and contract structure

The added reserves are estimated to be enough to meet the annual electricity needs of about 13.11 million Filipino households. Malampaya began commercial operations in 2001 and supplies natural gas to power plants in Batangas serving the Luzon grid.

The project operates under Service Contract No. 38, which is extended by 15 years through 2039 to support the exploration and development of additional gas reserves. Under the contract, the Philippine government is entitled to 60% of the project's net proceeds, while the remaining 40% goes to the contractors.

Since operations started, Malampaya has generated more than $14 billion, or P895.44 billion, in government revenues, according to Prime Energy. The Malampaya consortium comprises Prime Energy, UC38 LLC, Prime Oil & Gas, Inc., and state-owned Philippine National Oil Co.-Exploration Corp.

Previously, we outlined the main factors behind private oil depot investment as the Philippines weighs boosting domestic fuel storage and refining capacity.

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