Malampaya Gas Field

The Malampaya gas field is the Philippines’ only significant domestic natural gas resource, located offshore Palawan in the South China Sea. It has supplied natural gas to three Luzon power plants since 2001 under Service Contract 38 (SC 38). The field is in advanced depletion — its decline is one of the most consequential supply-side facts shaping the PEP 2023-2050 energy transition strategy [PEP 2023-2050 Vol. I, pp.53–55, 2023].

Service Contract 38 (SC 38)

SC 38 covers the Malampaya gas field in offshore Northwest Palawan. The original contract concluded on 22 February 2024. The Gas Sales and Purchase Agreement (GSPA) for the Ilijan power plant had already expired on 5 June 2022 [PEP 2023-2050 Vol. I, p.54, 2023].

President Marcos Jr. signed the SC 38 Renewal Agreement on 15 May 2023, extending the contract for 15 years to 22 February 2039. As of the renewal date, remaining reserves stood at 147 BCF [PEP 2023-2050 Vol. II, pp.2–3, 2023].

Under the renewal, the SC 38 Consortium (operated by Prime Energy Resources Development B.V.) is required to drill at least two deep-water wells during Sub-Phase 1 (2024–2029) [PEP 2023-2050 Vol. II, p.3, 2023]. See Petroleum Service Contracts (PSCs / SCs) for the full SC framework.

Production Decline

[PEP 2023-2050 Vol. I, p.55, 2023]

Natural gas production has been on a sustained downtrend. The decline accelerated in 2022:

• Supply restrictions to the Ilijan and San Gabriel power plants were implemented January–May 2022
• Condensate output also declined as the field’s reservoir pressure drops

Power Sector Impact

Malampaya-sourced natural gas feeds Luzon baseload plants that collectively represented approximately 16% of total national power generation (17.9 TWh out of 111.5 TWh) as of 2022. This share will shrink as the field depletes, removing reliable baseload generation from the Luzon grid over the medium term [PEP 2023-2050 Vol. I, p.53, 2023].

Natural gas fuel input to power generation fell 6.3% to 2.5 MTOE in 2022 as a direct result of the field’s declining output.

Strategic Significance for PEP 2023-2050

Malampaya’s decline is the primary supply-side driver of the CES scenarios’ urgency around:

• Offshore wind (OSW): CES-1 targets 19 GW, CES-2 targets 50 GW — both partly motivated by the need to replace Malampaya gas baseload capacity. See Offshore Wind (OSW) .
• Nuclear: 1,200 MW by 2032 under CES — designed to fill the baseload gap left by Malampaya. See Nuclear Energy Program (Philippines) .
• Energy import dependency: with domestic gas gone, the Philippines becomes even more dependent on imported coal and oil for dispatchable generation unless RE alternatives are deployed at scale. See Energy Import Dependency .

The REF scenario assumes gas generation declines naturally as Malampaya depletes with no major new domestic gas source, contributing to rising coal dependence and worsening energy security.

Statutory Protection of Indigenous Gas Priority (RA 12120, 2025)

RA 12120 (§23) establishes a statutory priority for indigenous natural gas (including Malampaya output) over imported LNG [RA 12120, §23, 2025]:

• Procurement and utilization of indigenous gas — including by gas-fired power plants — is mandated to be prioritized over imported gas, subject to energy security and consumer welfare
• Power generated from indigenous gas has priority over other conventional energy sources
• DOE must set a minimum percentage of electricity demand to be sourced from indigenous gas, reviewed and adjusted as needed
• Indigenous gas suppliers must provide fair and open access in a non-discriminatory, transparent manner

The VAT exemption under RA 12120 reinforces this: indigenous gas and aggregated gas (blends with an indigenous component) are VAT-exempt; pure imported LNG is not [RA 12120, §38, 2025]. See Philippine Downstream Natural Gas Industry (PDNGI) for the full aggregation framework.