Philippines will sign $1.5 billion natural gas project expansion in Malampaya

The Philippines will forge a deal with consortium partners next month to develop the $1.5 billion second and third phases of the Malampaya natural gas project to increase production at the gas field southwest of the Philippines.

The government, through state-run PNOC-Exploration Corp (PNOC-EC), holds a 10 percent stake in the Malampaya project. The rest is owned equally by Shell Philippines Exploration B.V., a unit of Royal Dutch Shell (RDSa.L) and Chevron Malampaya LLC, a unit of the U.S. energy firm.

"We have formed an inter-agency team to get the permits," Energy Secretary Jose Rene Almendras told reporters. "We are also asking PNOC-EC to get ready for its share of investments."

He said the second phase of the project would likely begin early next year and was expected to be completed in four years.

Malampaya supplies gas to power plant operators First Gas Power Corp, a unit of First Gen Corp, and San Miguel Energy Corp, a unit of conglomerate San Miguel Corporation

The project currently supplies enough gas to generate up to 2,700 megawatts of power a day, providing more than 30 percent of the power needs of the country's main island of Luzon.

Energy department officials previously said the Malampaya consortium was planning to increase gas sales by enough to generate an additional 300 megawatts. The group has committed to supply gas to power producers for a period of more than 20 years.

The consortium had spent about $1.2 billion to develop the first phase of the project between 2002 and 2006. At that time, the project was the largest by any foreign investor in the country.

Energy Secretary Rene Almendras said Friday that the government is set to sign deal to expand production capacity at the Malampaya natural gas project offshore the central Philippines.

The expansion will entail an additional investment of $1.5 billion by the consortium that operates the gas field, Almendras told reporters.

The expansion comprises a new platform at an estimated cost of $1 billion that has facilities to inject pressure into the gas reservoir to boost output and a horizontal drill at a cost of $500 million to determine the extent of reserves at the nearby Camago oil field.

The consortium is led by Shell Philippines Exploration and Chevron Philippines, which each own a 45% stake in the Malampaya project. State-owned PNOC Exploration Corp. (PEC.PH) owns the remaining 10%.

The consortium has the right to operate the project until 2026. Almendras said the agreement may be extended in consideration of the new investments.

The Malampaya field contains an estimated 2.7 trillion cubic feet of natural gas and 85 million barrels of condensate--gasoil, naphtha, and other relatively light hydrocarbons--some 3,000 meters below sea level, according to the consortium's website.