IN August 2023, during the Philippine Congress’s budget deliberations, Department of Energy Secretary Raphael “Popo” Lotilla made a rather momentous statement to justify the awarding of the Malampaya service contract to tycoon Ricky Razon’s Prime Energy Resources. He said, “the proof of the pudding is in the eating,” referring to what he called positive results in the continued gas production at the Malampaya Gas Field eight months into the contract. Malampaya had been producing gas for the past 24 years. Eight months was not a proof that things were A-OK. Six months after the pudding statement, Malampaya reported “zero to extremely reduced output.” Even before the service contract was awarded, local petroleum experts expressed serious doubts about Prime’s technical qualifications, having never been involved in any phase of oil and gas exploration or production. Mr. Lotilla, however, chose to ignore the warnings and recommended Razon’s approval to President Bongbong Marcos. Ricky Razon is one of the President’s closest friends.
Mr. Lotilla claimed that since gas continued to flow in Malampaya, it proved that Mr. Razon’s company was qualified to run it. Unfortunately, the gas flow has stopped. It is significant to mention at this point that former President Ferdinand E. Marcos Sr. signed Presidential Decree 87 or the Oil Exploration and Development Act of 1972, regarding the specific qualifications required for any oil service contractor, who should be financially capable, technically and legally qualified.
Mr. Lotilla chose to ignore the law.
The Malampaya gas production used to be run by highly qualified multinational oil companies Chevron, Shell, and our own Philippine National Oil Company. When incidents of gas restriction or maintenance shutdowns were imminent, the operator, Shell Philippines Exploration B.V., would immediately send advisories to its customers to plan for low pressure contingencies months ahead.
A source in the private sector (First Gen) had to send a formal inquiry to Prime Energy regarding the lack of Malampaya’s gas output before an explanation was forthcoming. The biggest concern is a recurrence of a zero or reduced output during this year’s El Niño-saddled dry months which would compel power plants to shift to more expensive LNG supplies, resulting in hefty hikes in power rates, and worse, a complete disruption of electricity services. It has become painfully clear that not only is Prime Energy technically unqualified to run Malampaya, it has also chosen to hide the reality of a reduced gas output to the detriment of its customers. Who will take responsibility?
Prime Energy’s Ricky Razon made no official statements about the shutdown. It took officials of the Department of Energy themselves to come to Prime’s defense. Energy Undersecretary Alessandro Sales tried to explain on February 13 that “the shallow water platform [or SWP] initiated normal plant shutdown to manage high gas export pipeline pressure owing to LNG commissioning activities at the First Gen plants resulting in very low Malampaya draw rates.”
He said “Prime Energy discovered corrosion in a section of the SWP…and permanent repairs needed to be pursued.”
How unnerving it is to realize that the Philippine government itself is protecting this private contractor to the detriment of customers. Secretary Lotilla has claimed that the PNOC did not have the technical expertise (even after 40 years of experience in oil and gas exploration and production) nor the financial wherewithal to take over as service contractor. He chose Razon’s Prime Energy Resources instead. It was a betrayal of the trust that our people have placed in their government. It is clear that there were irregularities in the awarding of the service contract to Prime. There is also a lack of concern and responsibility on the part of Prime management, which failed to foresee the shortfall and to report to it in a timely manner. It shows a distinct disregard for public opinion and an apparent belief that Prime can commit any offense and not be called to answer for it. Secretary Lotilla, the buck stops with you. The pudding is rotten to the core and the stink is undeniable.
DR. CELIA LAMKIN
Founder and Global Chair
National Youth Movement for the West Philippine Sea
