MANILA (UPDATED) — President Ferdinand Marcos Jr. on Monday renewed a contract that would allow at least 2 oil giants to continue extracting natural gas from a portion of the Malampaya gas field for 15 more years and share profits with the government.

The Malampaya Service Contract No. 38 (SC 38) was supposed to expire in 2024. But under a new agreement, the contract will be extended until February 22, 2039, the Department of Energy (DOE) said.

“This will allow for the continued production of the Malampaya gas field, ensuring that the remaining gas reserves are further explored and utilized,” the agency said in a statement.

“The discovery of the additional reserves in the Malampaya gas field will boost the country’s quest for the energy security,” it added.

“It is also expected to encourage opportunities for further exploration in the country, which to date remains underexplored, and to add to the Philippines’ energy portfolio.”

In his speech during the signing ceremony, Marcos said the renewal of the Malampaya service contract is key to the Philippines' drive towards energy security.

“Needless to say, this project wll reduce our contry's dependence on oil imports and ensure a more stable supply of cleaner energy from an indigenous local source,” he said, noting that SC 38 covers about 20 percent of Luzon’s energy needs.

“Through our strategic partnerships, we will remain on course, stay the course towards the attainment of our goals of total electrification of our country and of energy adequacy, reliability ang affordability all for the beterment of the lives of the ordinary Filipino,” he said.

The government is also expected to “continue to generate revenues from the project thru a favorable sharing scheme,” the President said.

“Through the project the government was able to generate P374 billion revenues. In 2022 alone, the project has yielded about P26 billion in government revenue,” he said.

The Malampaya SC 38 covers around around 830 square kilometers and supplies natural gas to the Sta. Rita (1,000 megawatts), San Lorenzo (500 megawatts), Ilijan (1,200 megawatts), San Gabriel (414 megawatts), and Avion (97 megawatts) power plants in Luzon, according to the Philippine National Oil Company (PNOC).

The agreement was first awarded to Shell Philippines Exploration in 1990, but the oil giant eventually sold its 45 percent stake to Enrique Razon’s Prime Infrastructure Capital Inc. Dennis Uy’s Udenna Corp holds another 45 percent stake, after acquiring it from Chevron.

The state-owned PNOC Exploration Corp holds the remaining 10 percent.

Under the new renewed agreement, contractors are now “required to conduct a minimum work program consisting of geological and geophysical studies and the drilling of at least 2 deep water wells… from 2024 to 2029,” the DOE said.

“Should there be a failure to comply, the SC 38 consortium is obligated to relinquish portion of the exploration areas,” the agency said.

Data from the PNOC showed that total government share from the revenues of the project as of December 2020 was at $11.9 billion.

“In addition to the government’s 60 percent share in the net revenues, the project also reduces oil imports, ensuring a more stable supply of cleaner energy from an indigenous resource and meeting up to 20 percent of the country’s energy requirements,” it said.

Former PNOC President Ed Manalac earlier appealed to Marcos to take over Malampaya after the contract expires, saying the government could earn around P100 million per day should it take over the gas facility.

The Malampaya gas field operates off the shores of northwest Palawan in a portion of the West Philippine Sea. It first became operational in 2001.

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— with reports from Alvin Elchico, ABS-CBN News

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