[OPINION] Malampaya’s Chicken Little lie 1

[OPINION] Malampaya’s Chicken Little lie

Dean Dela Paz

Posted at Dec 08 2021 02:39 AM

In the unfolding drama that is Malampaya, there is a colossal lie too-often repeated that dupes the public into thinking those who grabbed up to 90% of the rights and obligations over the Malampaya gas fields might very soon face their comeuppance and pay for folly many think was inflicted. That may be wishful thinking.

Foremost among the lies is that the life of the gas fields ends in 2024 or, if extensions of the service contracts are granted by the Department of Energy, possibly until 2027 - a total of seven years from the dubious 2020 sale of Chevron’s 45% equity. 

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Abbreviating the remaining commercial life of an investment enough to discourage prospective capital expenditure (capex) and distort internal rates of return was a catalyst in the Malampaya drama.

Recognizing the continuing viability of the gas fields beyond the contractual period, each contractor pleaded for an extension. They were turned down. Some described the response ominous. And for good reason. It forced contractors to consider divesting. However upon the entry of a start-up, pivoting 180 degrees, everyone is now arguing for an extension. 

A Goebellian mantra reminiscent has been repeated often enough that the public thinks the Malampaya gas fields might indeed be barren in the next couple of years. Note serial editorials in online and print tabloids - those go-to rags of whole farm and farmer trolls. 

Critical in catalyzing a sellout, discern the declared disinformation divorced from the data. 

Malampaya Service Contract 38 is comprised of twelve fields of which Malampaya-Camago is only one. As of June 2020, slightly over 70% has been extracted leaving over 863 billion cubic feet (BCF) remaining. With eleven other fields and prospects, the total un-risked (unadjusted based on commerciality) volume is 1,607 BCF.

Do the paper napkin math. Malampaya’s remaining reserves plus the un-risked volume totals 2,470 BCF. There is as much as 85% more enough for 12 to 15 years for a technically pedigreed oil exploration company to invest in incremental capex.

Against these prospects, note the desperate calls for the Senate investigating the sellout to stop. Hacks then called the inquiry “useless”. They then politicize by identifying sellout sponsors as politically harassed by candidates on one end, while on another, alluding to anonymous oligarchical interests envious of a shadowy upper hand.

Hacks go as far as to threaten a deadline. They demand the transferee must be granted “all clearances” and “cleared of controversies and finalized by the start of next year” as they threaten a 2027 doomsday when Malampaya’s reserves “definitely run out”. 

Forked tongues spew forked messages. They claim the newco will commit over P10 billion when it becomes clear their service contract is extended, miraculously altering the geological horizon. 

Greed, as the Jesuits taught at the old school, is a horizon as well. The latest PR ploy is that razzle-dazzle can be catalyzed through Congress - the default refuge for political pushback.

Res ipsa loquitur. Chicken Little machinations that the sky will fall soon are employed as imperatives. While hydrocarbon resources are finite due to declining upward pressure, Malampaya’s scientific data does not put this within three or even five years. 

As gas is extracted from deep-earth reservoir rocks, incremental extraction requires technological capex in the hands of a qualified operator. That a depletion compression platform was designed, built, and operated by real and reputable oil conglomerates like Shell lies at the core of the issue where an inexperienced start-up takes over 90% of Malampaya.

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(Dean dela Paz is a former investment banker and a managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance and Mathematics professor.)

Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.