The next phase: The country’s largest natural gas field enters a new period of growth and development

The 1991 discovery of the Malampaya gas field by Shell Philippines Exploration and the subsequent monetisation of the prospect is arguably the single most important energy play ever developed in the Philippines, and remains the largest active hydrocarbons play today. The natural gas reservoir single-handedly boosted the country’s natural gas output from less than 400m standard cu feet (scf) prior to inauguration of the new field in 2001 to more than 100bn scf by full commercialisation in 2005.

It has continued to provide much-needed fuel to power plants by supplying the power hungry Luzon electricity grid at a critical time in the country’s economic development. Without Malampaya, the financial and environmental cost of replacing the substantial output of the thousands of megawatts of installed gas-fired generating capacity along with the foregone industrial and transportation applications would likely have impeded the strong economic growth witnessed over the past decade. However, as the initial production stages of Malampaya come to a close, the continued stability of output levels is now contingent upon the successful implementation of new investments made in the field.

Major Discovery

First discovered in 1992, the Malampaya gas field, located just off Palawan Island’s west coast, accounts for nearly all of the Philippines’ domestic natural gas output, with the much smaller and older Libertad gas field chipping in smaller levels of natural gas amounting to less than 1% of the national total. Production from Libertad fell 37% in the first half of 2014 to 27m scf compared to 43m scf over the same time period the previous year.

By contrast, the Malampaya gas field produced 64bn scf over the same six-month period in 2014. Net daily production during 2014 averaged 118m scf of natural gas and 3000 barrels of condensate. Domestic production peaked at 140.4bn scf in 2011, before declining to 124bn scf over the next two years until the second phase of the development led to a resurgence in production in 2014.

Producing at a depth of approximately 840m, the Malampaya Deepwater Gas-to-Power project is run as a joint venture by operator Shell Philippines Exploration (45% share), Chevron Malampaya (45% share) and state-run Philippines National Oil Company (10%). The project includes an offshore platform, nine production wells and a 505-km pipeline from the platform to the Batangas onshore natural gas plant. From here the vast majority of the gas is channelled into three power plants: the 1000-MW Santa Rita power plant, the 500-MW San Lorenzo power plant and the 1200-MW Iliajan power plant, which provide electricity for the populous Batangas province through the Luzon grid.

Additional natural gas is diverted to the Pilipinas Shell Petroleum’s refinery in Tabangao, as well as for conversion into compressed natural gas for a government-sponsored mass transportation pilot project. Industrial users purchase a smaller amount of the remaining supplies, consuming between 2.2bn scf and 3.3bn scf of natural gas each year from 2006-14.

A New Era

After a decade of production, portions of the gas field, which is estimated to contain proven reserves of between 2.5-3.5trn cubic feet of natural gas, are beginning to mature and to show signs of declining productivity. As volume and pressure within the deposit decrease, the use of additional compressors and other techniques will be required to maintain production levels.

These processes were recently carried out by the operator under Malampaya Phases 2 and 3 of the project from 2011-15. Work on Phase 2 began in 2011 and was completed in 2013, when the first production from two new infill wells started. Malampaya Phase 3, which involved the design, fabrication and installation of a new depletion compression platform valued at $756m, started production in September 2015.