The government should expect a steep fall in 2015 royalties from the Malampaya natural gas project given continued price declines, the operator of the deepwater facility said.
“If we follow international prices to a certain formula, the remittance will be more or less half of last year,” said Sebastian Quiniones, managing director of Shell Philippines Exploration, B.V. (SPEX).
From over $1 billion in previous y ear, the government received $900 million as its 2014 royalty share from Malampaya. Quiniones earlier this year also attributed the decline to falling oil and gas prices.
On Monday, he told reporters: “Oil prices have dropped by half so roughly speaking, it’ll (2015 remittances) probably be half also.”
Concerned government agencies have asked for an update on expected royalties for this year, Quiniones said.
“The DOE (Department of Energy), BIR (Bureau of Internal Revenue) and DOF (Department of Finance) asked us already; they are trying to plan the revenues that are coming in,” he said.
SPEX projections, he said, would be “based on what prices of oil are at the moment and how the pricing of Malampaya goes.”
“Malampaya pricing is six months delayed,” Quiniones added.
The Malampaya project is a joint venture of SPEX, Chevron Malampaya LLC (Chevron) and state-run Philippine National Oil Company- Exploration Corporation (PNOC-EC).
Since 2001, the consortium has been able to remit $8.5 billion in royalties to the government.
The government uses the royalties for projects such as the fuel requirements of National Power Corp.’s Small Power Utilities Group (SPUG) and its Pantawid Pasada Program.
Under the service contract agreement, 70 percent of gross proceeds from the sale of natural gas will go to the contractor to recover the investment cost. The remaining 30 percent is shared by the government and the consortium on a 60-40 basis, respectively.