AT the beginning of 2025, the Department of Energy (DOE) issued a vote of confidence about the Malampaya gas field, the country’s sole productive source of natural gas, by approving the drilling of three new wells within the service contract area by the Razon-led Prime Energy consortium. In February of last year, the Malampaya service contract — Service Contract (SC) 38 — was extended for 15 years to February 2039, which was another vote of confidence. Most experts expected the gas field to be depleted to a point where what little natural gas remained could not be tapped by 2029 at the latest.
The completion date for the three new wells was supposed to be sometime in October or November 2025. Yet October and November passed without comment on the project from either Prime Energy or the DOE, leaving the public to wonder what the status of the country’s only productive natural gas reserve really is.
The situation that has developed is called a “tight hole” in oil and gas industry parlance. A “tight hole” is a description for a drilling project that does not result in publicly disclosed information, and the reason is to protect sensitive geological data and proprietary drilling methods from competitors, when unexpected problems with the exploration are encountered. Drilling companies will sometimes keep the details of such operations secret, because competitors might otherwise learn their specific technical methods to overcome drilling problems or to tap difficult to reach reserves.
The problem here is that there are no competitors for the Prime Energy consortium to worry about. SC 38, which was defined more than 20 years ago, encompasses the entire Malampaya field, and thus Prime Energy enjoys a complete monopoly. Competitors might indeed learn some tips and tricks from what Prime Energy is doing with its exploratory wells, but those competitors could only apply the knowledge elsewhere, making that particular concern irrelevant.
Furthermore, the gas resources within the Malampaya field belong to the Filipino people, and not to the contractor hired to harvest them. Prime Energy, or any other entity authorized to tap the Malampaya field, does of course have a claim to the value of a significant part of any gas produced (it is about 70 percent currently), as return on its investment in exploration and production.
Even then, however, the actual gas resources are assets belonging to the Republic of the Philippines and not the contractor. While the contractor can certainly collect a great deal of revenue from its handling of the assets, it cannot without strong justification refuse to provide information about them. The Filipino people have an unquestionable right to this information, but it is a right that is currently being trampled upon, for reasons that are not applicable to the current situation.
Our sources within the energy industry have suggested that Prime Energy’s “tight hole” stance, which is backed by the DOE, is really cover for a “dry hole” scenario, in which the exploratory wells failed to find any useful amount of natural gas. According to these sources, who have worked on the Malampaya field and whose expertise is in oil and gas exploration specifically, the original estimate that the field would be exhausted between 2027 and 2029 is absolutely accurate. There is no more “near field” gas to be had, and so the most likely outcome of the exploratory drilling by the Prime Energy consortium in the Malampaya field is that no gas was found.
While that result may be a costly embarrassment to both the consortium and the DOE because it decisively refutes their shared assumptions that Malampaya would still produce gas for some time to come, the outcome is important for the public to know, because that outcome makes a difference in whether consumers will foot the bill for the Malampaya work, or if the consortium will. In the oil and gas industry, exploration costs are borne by the contractor, whether that exploration is successful or not. They earn their return because the cost for what is produced is borne by consumers. In Malampaya’s case, this is the price of the natural gas used to fuel power plants, which shows up on customers’ electric bills as part of the “generation charges” line item.
This makes public disclosure of the true state of the Malampaya field and efforts to find more gas in it imperative. If the DOE cannot compel that disclosure, then it might be up to Congress or the administration to intervene, and demand an honest accounting.
