Philippines' Marcos signs 15-year Malampaya gas contract renewal

MANILA, May 15 (Reuters) - Philippine President Ferdinand Marcos Jr. on Monday signed an agreement extending the production contract for the country's Malampaya natural gas block by 15 years and allowing the operator to drill new wells as it seeks to boost output.

The Malampaya gas field off Palawan province, in an area of the South China Sea not claimed by China, has fuelled four power plants owned by First Gen Corp. (FGEN.PS), opens new tab that supply about 2,000 megawatts to the main Luzon island.

It had also fuelled San Miguel Corp.'s (SMC.PS), opens new tab 1,200 MW Ilijan power plant until a supply contract expired last year.

The current 25-year contract covering Malampaya operations is set to expire in February 2024. With its annual output dwindling, the gas field is estimated to run dry by 2027.

"As we renew, we optimistically look forward to the continued production and utilization of the remaining reserves of the Malampaya gas field, as well as further exploration and development of its untapped potential," Marcos said in a statement.

Prime Infrastructure Capital Inc, the privately-held company of Philippine tycoon Enrique Razon which owns the 45% operating interest in the Malampaya project, aims to put new wells into commercial operation in 2026.

The company is also seeking other fields around Malampaya to ensure long-term gas output, chief executive Guillaume Lucci told Reuters in March.

The Department of Energy, in a statement, said the consortium involved in the contract renewal, which includes state-owned Philippine National Oil Company with a 10% interest and UC38 LLC of the Udenna Group with a 45% stake, is required to drill at least two wells between 2024 and 2029.

As Malampaya's output declines, however, the Southeast Asian country has opened its doors to liquefied natural gas imports, ensuring continued operations of existing gas-fired power plants.