The 30-day maintenance shutdown of the Malampaya natural- gas facility in Palawan will push through starting March 15 and the company in charge of operating the facility said it would do its best to finish the work ahead of schedule.
Shell Philippines Exploration B.V. (Spex), the upstream company of Shell in the Philippines in charge of operating the Malampaya Deep Water Gas-to-Power Project, will install a $765-million platform to maintain fuel supply to the power-generating plants providing about half of Luzon’s electricity needs.
The installation will coincide with the maintenance shutdown of the Malampaya gas facility.
“We will try,” SPEX Managing Director Sebastian Quiniones said when asked if the 30-day time frame for Phase 3 work could be shortened.
“Thirty days is our contractual obligation. Malampaya has always fulfilled its obligations. We have such good technical people. We’re still talking to the government,” Quiniones said.
Phase 3 is meant to keep up the volume of gas production. “The reservoir is depleting, so in a bid to boost the gas, we are undertaking Phase3,” the SPEX official added.
Phase 2 involved the installation of two additional subsea wells at a cost of $250 million.
Malampaya is a joint undertaking of the Philippine government and the private sector. The project is spearheaded by the Department of Energy (DOE), and developed and operated by SPEX on behalf of joint-venture partners Chevron Malampaya Llc. and PNOC Exploration Corp.
Luzon grid is dependent on Malampaya as it fuels three power plants—Santa Rita (1,000 megawatts), San Lorenzo (500 MW) and Ilijan (1,200 MW). The Santa Rita and San Lorenzo power plants are owned by Lopez-led First Gen Corp., while Ilijan is owned by Kepco Philippines.
Rate hike
The 30-day shutdown of the Malampaya natural-gas facility will definitely result in higher power rates by at least P1 per kilowatt-hour (kWh), the Philippine Independent Power Producers Association Inc. (Pippa) had said.
“I guarantee that there will be a spike because that happens whenever Malampaya shuts down,” said Luis Miguel Aboitiz, Pippa president.
The power plants fueled by the Malampaya facility will have to shift to liquid fuel to keep them running.
“Once the gas plants shift to liquid fuel, there’s around P1-per-kWh automatic increase,” said Aboitiz, who was referring to a spike in generation charge, the largest component of an electricity bill.
A Manila Electric Co. (Meralco) bill is composed of the following charges: generation, distribution, transmission, taxes, system loss, and lifeline subsidy.
Aboitiz said he sees April 5 to 15 as the critical period, just right after the Holy Week, as demand peaks coinciding with the Malampaya shutdown which will last until April 14.
Meralco Vice President and Head of Utility Economics Lawrence Fernandez agreed that the rate hike is estimated to reach at least P1 per kWh.
“So, that’s during the March to April supply period that will be reflected in the April to May billing period,” Fernandez, who was referring to the implementation of the higher power rates, said.
GE Philippines CEO Jose Emmanuel de Dios said that cheaper oil prices could also temper power- rate increases. However, Aboitiz was quick to point out that it won’t help much because “last year’s spike came from the shift to liquid fuel alone.”
“The moment these gas plants use liquid fuel there’s automatically around P1-per-kWh increase. That’s excluding increases in WESM [Wholesale Electricity Spot Market] and other charges,” Aboitiz stressed.
But Pippa is hopeful that the market cap imposed by the Energy Regulatory Commission (ERC) will help temper a rate hike.
“But it won’t be as bad [as 2013] because we’ve got a lower primary cap at the WESM and a secondary cap,” Aboitiz said.
The ERC has put in place a secondary price cap of P6.245 per kWh once the P9-per-kWh threshold was breached.
Aside from the secondary price cap, the ERC had also put in place a primary bid cap of P32 per kWh.
In July last year, Energy Secretary Carlos Jericho L. Petilla announced the probability of a looming power shortage of at least 700 MW that will affect Luzon during summer this year. The scarce energy reserve has pushed the government to come up with alternative solutions to avert its impact which include the Interruptible Load Program (ILP) for large commercial electricity consumers.
The program, however, is only voluntary. Hence, it can’t compel the private sector to actually fulfill their promise to use their power generator sets instead of sourcing power from the grid.
Still, the private-sector companies and organizations are now teaming up to help the government in mitigating or ideally preventing the disruption of power.
“We have been given the heads up since last year. If I am factory owner, I will do my part. ILP is a DOE initiative. As a stop-gap measure it works but they also have to recognize that it needs long-term solution,” de Dios said.
The DOE and Meralco have already secured commitment of hundreds of participants totaling 323 accounts with an aggregate potential deloading capacity of 617 MW.
Moreover, the DOE is banking on additional combined capacity of over 700 MW from various power projects that are expected to come online anytime from February to May this year.
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Guaranteed sweat season this year! Good summer for malls!