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OTC 14038

Malampaya Deep Water Gas To Power Project - An Overview - Powering The


Philippines Into The New Millennium
David J. Greer, C.Eng. FIMechE
Malampaya Project Director
Copyright 2002, Offshore Technology Conference
This paper was prepared for presentation at the 2002 Offshore Technology Conference held in
Houston, Texas U.S.A., 69 May 2002.
This paper was selected for presentation by the OTC Program Committee following review of
information contained in an abstract submitted by the author(s). Contents of the paper, as
presented, have not been reviewed by the Offshore Technology Conference and are subject to
correction by the author(s). The material, as presented, does not necessarily reflect any
position of the Offshore Technology Conference or its officers. Electronic reproduction,
distribution, or storage of any part of this paper for commercial purposes without the written
consent of the Offshore Technology Conference is prohibited. Permission to reproduce in print
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abstract must contain conspicuous acknowledgment of where and by whom the paper was
presented.

Abstract
The Malampaya Deep Water Gas to Power Project (the
Malampaya project) reached a major milestone when the
Declaration of Commerciality for the project was signed in
May 1998. In just less than 31/2 years, Shell Philippines
Exploration B.V. (SPEX), as Operator, successfully completed
this remote deep water gas project, and successfully
accomplished two additional major milestones by landing gas
for power plant commissioning to its downstream buyers by
October 1st 2001 and commencing commercial sales deliveries
shortly thereafter on January 1st 2002.
This paper describes the history behind this landmark
undertaking, the trade-off between alternative deep water
development solutions, the contracting strategies employed as
well as the many venture management, technical, HSE,
commercial and sustainable development challenges that were
undertaken by SPEX to successfully transform this exciting
deep water project from a vision into a reality.
The Malampaya project marks the dawn of the natural gas
industry in the Philippines, illustrating the crucial importance
of integrating the development of gas markets with the rapid
construction and successful operation of the necessary deep
water and onshore infrastructure. The Malampaya
development comprises five novel subsea wells in 820 metres
of water, producing via a subsea manifold and two 30 km
long, 16 inch flowlines to a concrete gravity platform located
in 43 metres water depth. These wet gas flowlines, with their
large vertical displacements and mixture of gas and liquids
have pushed deep water subsea gas development technology

to higher levels. The platform production facilities were


installed on a concrete gravity substructure that was built in
Subic Bay, Philippines and completed some 3 months ahead
of schedule. The topsides facilities were fabricated in
Singapore and were towed over 2200 km to the Philippines on
March 1st 2001. The gas and condensate is treated on the
platform to export specification. Gas is compressed and
transported via 504 km long 24 inch pipeline to an onshore gas
plant at the site of the Shell Refinery at Tabangao (Batangas,
Luzon Island). The condensate is stored in the platform
concrete substructure caisson and exported approximately
every two weeks via shuttle tankers. The Malampaya pipeline
is a major engineering accomplishment in its own right,
traversing rugged sea floor topography through seismically
active and environmentally sensitive regions. An onshore gas
treatment plant, built to remove the H2S content of the gas will
serve as the delivery point to the buyers.
The project schedule to meet the 1st October 2001 first gas
flow commitment to the gas buyers was very tight from the
outset. The project goals were achieved by continued attention
to the six project tenets of cost containment: schedule
attainment, use of innovative technology, high system
availability, exemplary Health, Safety, Environment and
Security (HSES) management, and Sustainable Development.
As the very demanding and challenging Malampaya Project
development phase has now drawn to a close, the memories of
the many successes achieved throughout this intense period of
activity are still vivid. A large number of substantial gains
have been achieved on the technical, operational, contracting,
organisational, human resources and reputation-management
fronts which are considered to be of great value to other major
projects being planned or implemented in developing
countries. At the same time, the structures, procedures and
shared staff values necessary to successfully complete a major
deep water project safely, on time and within budget in an
environment with very limited E&P history or infrastructure
have been successfully implemented. The lessons gained from
this particular project should not be forgotten as they will
hopefully be of great value to future deep water projects in
remote locations and to the E&P industry at large.

D. GREER

INTRODUCTION
In 1989, Occidental Philippines, Inc (Oxy) discovered gas in
the Camago-1 well in the area covered by Service Contract
No. 38 (SC-38), offshore Palawan in deep water and 500 km
away from the nearest potential market (Fig.1). The area was
known to be gas prone: Shell itself had been involved in two
earlier gas discoveries elsewhere in the block, which were
then considered uncommercial.
In 1990, Shell Philippines Exploration B.V. (SPEX) farmed-in
taking a 50% interest and operatorship of Block SC-38 thereby
providing the necessary deep water technology, and financial
strength to develop this resource. As part of the farm-in deal,
Shell drilled three wells, the second discovering the large
Malampaya gas field with its 400 to 600 metre gas column and
56 metre oil rim, connected to the Camago structure. The
promising discovery was further appraised by three additional
wells. An integrated petroleum engineering study was carried
out using the latest proprietary 3-D carbonate reservoir
modeling techniques and incorporating the Pre-Stack Depth
Migrated (PSDM) re-processed 3-D seismic data set. By
1995, it had been demonstrated that Malampaya, with proven
recoverable volumes of 2.5 Tscf gas and 85 MMstb
condensate, represented a significant opportunity for a
commercial gas development for Shell and the Philippines.
These volumes were declared commercial on 14th May 1998.
Shell acquired 100% interest in SC-38 following the global
Shell-Oxy asset swap executed on 15th September 1998.
Subsequently on 5th November 1999, Texaco Philippines Inc.
farmed-in, to acquire a 45% working interest in SC-38. PNOC
farmed-in to acquire a 10% working interest on SC-38 on 22nd
December 1999.
HISTORY
The Malampaya field, located some 80 km NW of the Island
of Palawan, is an elongated structure consisting of two
culminations separated by a saddle some 12.5 km long with a
width that varies between 1.5 and 3.5 km (Fig.2). The
reservoir is a high relief Oligocene to Early Miocene
carbonate build-up (Nido Formation) at a depth of some 3,000
metres subsea, developed over tight platform carbonates of
Late Eocene age.
Two exploration wells (Camago-1 and the Malampaya-1) and
three appraisal wells (Malampaya-2, 3, and 4) delineated the
field prior to development, which has a maximum gas column
of some 600 metres and proven reserves of 2.4 Tscf. The
expectation reserves are 3.2 Tscf, with a P15 of 4.1 Tscf. The
gas column is partly underlain by a 56 metres oil rim with a
STOIIP of 244 - 378 MMbbls. Exploitation of the Malampaya
reserves was a recognised deep water challenge and Shells
unrivalled experience in this arena enabled the company to
pursue the commercial development of Malampaya. Initially,
three development concepts were evaluated. For the combined

OTC 14038

development of oil and gas, a Tension Leg Platform (TLP) and


a Floating Production Storage and Off-loading (FPSO) facility
were considered. During the appraisal campaign, it became
evident that the oil development was marginal from an
economic perspective given the thickness of the oil rim. The
FPSO option was rejected on the grounds of the technical
complexity associated with the number of gas risers and
swivel design particularly for the large diameter high pressure
gas export pipeline. A TLP option was also rejected in favour
of a less expensive capital cost alternative for the gas only
development, comprising a deep water subsea tieback to a
shallow water platform, thereby resulting in the most
competitive landing price for the gas. The subsea tieback to a
shallow water platform could also be brought on stream one
year earlier than the TLP alternative thereby enhancing the
project economics. A further major technical concern with the
TLP was the unknown behavoiur and reliability of tension
piles in calcareous soils with respect to creep. Although the
oil rim was not part of the original field development, efforts
are now being made to dynamically test the oil leg of the
reservoir to assess the viability of an independent oil
development with gas export combined with that of the main
gas development. Test results to date have been encouraging.
Aside from the technical, logistical and development cost
challenges, the commercial challenge of developing a gas
market in the Philippines remained. The economics of
developing such a remote deep water gas field were always
known to be marginal and therefore the venture needed to
establish a market that could off-take high volumes as soon as
the gas would flow. Only the power sector could provide such
a market. A study in 1994 confirmed that there would be a
requirement around 2000-2002 for 3,000 MW of gas-fired
power generation at base load. At this throughput level, the
gas could compete with alternative fuels, including its main
competitor, coal. Gas plants cost less and required less time to
build and, using combined cycle gas turbine technology, have
a higher efficiency than coal plants. The outcome of the study
was endorsed by the Philippines Department of Energy (DoE)
who assumed responsibility for the promotion of a 3,000 MW
market for Malampaya gas.
The DoE allocated 1,500 MW to the National Power
Corporation (NPC), a Government owned corporation and the
main power generator in the Philippines, and 1,500 MW to
Meralco, the main distributor of electricity in Metro Manila
and the industrial growth area south of Metro Manila. NPC
and Meralco, in turn, set out to appoint independent power
producers (IPP) who would build the power plants and supply
electricity to them.
NPC, being a Government owned entity enacted to resolve the
power crisis that almost crippled the Philippines economy in
the eighties, proceeded under the Build-Operate-Transfer law.
NPC awarded a competitively tendered Energy Conversion
Agreement to the successful IPP and, in early 1995, issued its

OTC 14038

MALAMPAYA DEEP WATER GAS TO POWER PROJECT - AN OVERVIEWPOWERING THE PHILIPPINES INTO THE NEW MILLENNIUM

invitation to tender for a 1200 MW power plant to be


constructed at Ilijan, Batangas (the Ilijan plant). NPC selected
Korea Electric Power Corporation (Kepco) to build and
operate the Ilijan plant in December 1996.
Meralco, as a private company, did not need to follow the
BOT route and could appoint an IPP of choice; choosing First
Gas Power Corporation (FGPC) a joint venture between the
First Philippine Holdings Corporation (60%), which is also
involved in the management of Meralco, and British Gas
(40%). FGH incorporated two subsidiaries, one to build a
1,000 MW power plant at Santa Rita, Batangas, the other to
build the adjacent 500 MW San Lorenzo power plant.
By the beginning of 1995, the key players that would
transform this deep water gas to power project from a vision
into reality had been identified.
THE COMMERCIAL CHALLENGES
At the outset, it was recognised that the Malampaya Deep
Water Gas to Power project could only succeed if the
upstream project was fully integrated with the three
downstream power projects. This meant aligning the interests
of the Government (involved in both the upstream and through
NPC in one of the key downstream projects); SPEX in the
upstream; NPC, the Lopez Group and British Gas in the
downstream, and synchronising investment decisions of about
$US 4.5 billion in total value. The Department of Energy
(DoE), in view of its involvement in several aspects of the
project, declined an active role in the negotiating process. It
did, however, organise a forum for all relevant departments
and Government agencies through which it would oversee
progress and support the project as required.
The upstream projects viability depended entirely on the
realisation and dispatch of the power projects. By contrast,
the power project developers were less dependent on the
upstream as their plants are dual-fired, i.e. they can run on
liquid fuel and gas; furthermore, their combined purchasing
power could support a LNG importation scheme. In favour of
the upstream option was the fact that the development of the
indigenous resources of Malampaya best serves the national
interest and economy.
SPEX marketed the gas on the basis that its price would have
to underpin the upstream economics. At the same time, gas
would have to be competitive with coal-fired power
generation, on a total cost basis, and cheaper than LNG, taking
into account the price of LNG, its shipping cost and the cost of
storage and re-gasification in the Philippines. The agreed gas
price adjustment formula furthermore links the gas price to oil
price fluctuations, thus providing a measure of
competitiveness with oil based power plant fuels.

In view of the limited time between final agreement of the


GSPAs in May 1998 and the planned first gas to platform in
June 2001, a contracting strategy was adopted that
incorporated the six project tenets described earlier. Separate
contracts were placed for the five main upstream project
components: pipeline fabrication, coating and installation;
platform engineering, procurement, construction, installation
and commissioning; subsea engineering detailed design,
fabrication and procurement, drilling rig rental for
development drilling and the onshore gas plant detailed design
and construction.
Project components with a precise
definition of scope and well identified risks, such as pipelines,
were awarded as lump sum contracts. Areas such as the
production platform, onshore gas plant and subsea facilities in
which significant challenges remained in respect of
technological innovation, meeting availability and schedule
targets, were awarded under reimbursable contracts. These
contracts were structured using a combination of traditional
reimbursable payments combined with risk reward
mechanisms, with system availability and life cycle costs
taking precedence over capital cost.
THE UPSTREAM PROJECT
The upstream project development plan comprises nine subsea
gas wells connected to subsea manifolds located on the seabed
over Malampaya, at a water depth of approximately 850
metres (Fig. 3). Five wells were drilled initially to ensure
delivery of commissioning gas on 1st October 2001 and first
commercial gas sales on 1st of January 2002 (gas for the
commissioning of onshore power plants was delivered 3
months prior to commercial sales gas delivery to Buyers).
Development drilling started in February 2000 and progress
achieved throughout the programme was excellent. The first
group of five wells have been clustered around a subsea
manifold located between the Malampaya-1 and Malampaya-4
wells. The drilling of the subsequent four wells is planned for
2009 and may involve a second manifold near the Camago
area. It is expected that two of these four wells could be
drilled from the initial northern manifold, while the two other
wells may be tied back from a southern manifold, targeting the
Camago area of the accumulation. The plans for the number
and phasing of wells for the second phase of reservoir
development will be subject to reservoir performance during
early years of production. The wells are of a 7 inch monobore design with horizontal Christmas trees, providing high
production capacities with a simplified design for long service
life. The wells will have permanent downhole gauges to
accurately monitor reservoir performance and facilitate
effective reservoir management.
The wells have been tied-back to the platform via two 30 km
long 16 inch corrosion resistant alloy clad flowlines. The
platform and associated condensate storage and loading
facilities are located on the NW Palawan Shelf, some 50 km
west of Palawan Island and 400 km Southwest of Luzon

D. GREER

Island in a water depth of 43 metres. The high CGR well


stream, which contains CO2 and H2S, is separated and treated
by the platform process to meet transport specifications for gas
and condensate. The gas is conditioned to water and
hydrocarbon dew point specifications ( 0 deg.C) by a simple
Joule Thompson process followed by re-compression and
export via a 504 km long, 24 inch carbon steel gas export line
to the onshore gas plant located at Tabangao, Batangas on
Luzon Island. There, the dry gas is treated to Buyers quality
specifications. Condensate is stabilised to a RVP of 10 psia for
storage and transport requirements. The platform has a
capacity to process 508MMscf/d of gas and 32,800 b/d of
condensate. Methanol storage, recovery and injection facilities
for hydrate prevention are a significant, additional feature of
the platform process. The platform comprises an integrated
deck of three levels for process, utilities and living quarters
installed on a Concrete Gravity Substructure (CGS) with
condensate storage in the base. Condensate storage is based on
the dry-cell principle to avoid any contamination of the marine
environment and has a working capacity of 385,000 bbls.
Condensate is exported via shuttle tankers, which connect to a
Catenary Anchored Leg Mooring (CALM) offshore loading
system, approximately every two weeks.
Maintaining sufficient deliverability capacity from the field
will require additional compression around the year 2015 and
installation of an additional 16 inch flowline from the subsea
manifold to the platform in the year 2020 to reduce flowline
back pressure and wellhead pressures. The last stage of
development prior to abandonment will consist of re-wheeling
the compressors to accommodate lower suction pressures.
THE TECHNICAL CHALLENGES
Malampaya will deliver gas for the generation of some 2,700
MW of electrical power for which natural gas will be the
primary fuel source. As such, the total Malampaya production
facilities from the deep subsea wells to onshore gas plant will
require high system availability. The principal technical
challenge is therefore to ensure continuous delivery of sales
specification gas throughout the production chain whilst
containing costs and maintaining HSES standards.
Development Well Planning
Each of the five earlier Exploration & Appraisal (E&A)
wells for Malampaya yielded geological surprises that
changed the view of the field, leaving significant residual
subsurface uncertainties at the start of development drilling.
The crestal reservoir drainage philosophy is exposed to the
risk of vertical compartmentalisation. This risk was assessed
with scenario modeling with a detailed 3D reservoir model.
A significantly improved 3D PreSDM seismic dataset was
used to provide excellent velocity control within the reservoir
and more accurate determination of the depth of a tight, and
potentially vertical barrier, the Intra Nido layer. The heavily

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fractured Intra Nido was an anticipated drilling hazard


believed to be prone to losses from the high mud overbalance
at depth. Using a seismic inversion derived reservoir model
and simulation, paths were identified within the Intra Nido to
facilitate sufficient vertical reservoir communication
In planning to meet the well objectives, a fit for purpose
approach for the well design and data gathering was adopted.
The up-front process of rationalisation and prioritisation was
very effective in steering the design and execution efforts in
delivering safe and cost effective high rate gas production
wells.
A minimum inflow performance criterion was
developed, based on a draw-down threshold that would not
unduly accelerate future field development activities. This
allowed the definition of the minimum reservoir penetration
required for each well, thus minimising the exposure to losses
whilst drilling long intervals in a large gas column with
increasing overbalance.
The locations of the five initial gas development wells
were targeted within the proven area of good reservoir so as
to ensure high well deliveries with access to large gas
volumes. The first three wells (MA-5, 6 and 7) were located
in the most likely area for high porosity zones and were
expected to be capable of producing at initial rates in excess of
200 MMscf/day each. Additionally MA-5 was located to
appraise the oil rim in an area where good porosities were
expected in the water leg, lying equidistant between MA-1 and
2, where the maximum difference in oil rim thickness had
been observed. With confidence that these wells would secure
the initial demand, the last two wells (MA-8 and MA-9) were
placed in less well-defined areas of the field, where there were
facies or connectivity uncertainties. The first phase wells,
therefore, provide complete coverage of the northern
Malampaya culmination for drainage and depletion
monitoring using tandem permanent down hole gauges in
each well.
Deep Water Well Engineering
A number of very special challenges had to be tackled and
overcome to deliver the five initial deep water subsea gas
wells in accordance with the tight Malampaya Project
schedule. These challenges related to the deployment of
leading edge technology well systems in an environmentally
pristine and remote area within a country which has an
extremely limited upstream E&P infrastructure for support and
very long logistics and supply lines. The definition and
management of good performance within this context and the
management of the many interfaces with all other disciplines
working in parallel towards the same project end-goal required
unique ways of working to be established. Within the
technical arena, many novel solutions were adopted with
respect to rig equipment and modifications, deep water
carbonate gas reservoir drilling procedures with total losses,
management of hydrates, subsea Xmas trees, well completions
and well test clean-up programmes.

OTC 14038

MALAMPAYA DEEP WATER GAS TO POWER PROJECT - AN OVERVIEWPOWERING THE PHILIPPINES INTO THE NEW MILLENNIUM

The casing design revolved around a requirement for 7


inch mono-bore completions, to drill 8 inch hole through the
reservoir and to complete with a 7 inch liner. This would
allow both high production rates and left the option open to
deepen any of the wells if required. The production casing was
set above top reservoir to avoid drilling with large hole size
into the loss prone reservoir.
Corrosion Resistant Alloys (CRA) were selected for all
flow wetted areas including the liner, tubing, accessories
and a section of 9 5/8 inch casing between the liner top and the
production packer. A tapered production casing string was
required to accommodate the large bore TRSSSV.
The perforation philosophy was based on the use of the
latest deep penetrating charges with the largest gun size to
ensure the maximum inflow performance from the interval
available for perforation. This approach facilitated a single
perforation run, to minimize hydrate risks associated with well
interventions in this deep water environment.
Deep set permanent gauges were justified for field wide
monitoring to confirm connected gas reserves. The production
casing was set above top reservoir to avoid drilling with large
hole size into the loss prone reservoir.
The reservoir development of the deep water Malampaya
gas field has been a success, as the subsurface objectives have
been met and well deliverability targets exceeded. The wells
have been flowed clean to rates of up to 120 MMscf/day and
have demonstrated initial potential in excess of 250
MMscf/day. With permanent down hole gauges installed in
each well, field wide monitoring has commenced with very
favourable indications of good lateral connectivity. The down
hole gauges will provide key data required for ongoing
production surveillance and planning Phase 2 development,
currently envisaged in 2009. In addition, the reservoir model
based on the five appraisal wells, 3D seismic acquired in 1991
and the extensive Integrated Petroleum Engineering Study
carried out in 1994/ 95, proved to be a very robust tool for
planning the surface development.
Subsea Engineering
The Malampaya Subsea System (Fig. 4) is unique in that it
is located in a remote deep-water environment and is the sole
gas supply to power generation stations located 500 km away
on Luzon Island. Many challenges had to be overcome to
realise this latest advance in the development of deep-water
subsea production capability i.e.

High reliability and system availability requirements;


Difficult flow assurance requirements including
hydrate prevention and management of liquid hold-up
in flowlines;

High production rate, high H2S and CO2 content of


produced fluids requiring CRA materials;
Installation in an area devoid of customary E&P
support infrastructure.

The subsea system design focused on achieving the highest


levels of overall system availability. This was achieved by a
combination of using existing field proven technology,
simplifying the design where possible, providing suitable
levels of redundancy, proper material selection, applying the
highest levels of quality assurance, equipment testing and
verification. Confidence in the attainment of the required
availability was gained through detailed availability analysis
and modeling. In addition, emphasis was placed on ensuring
that the experience and lessons learnt from other global subsea
systems have been incorporated into the design of the
Malampaya subsea system.
The wet gas subsea tieback of Malampaya required the use
of the latest modeling and flow assurance strategies. With
seabed temperatures as low as 5 C, hydrates could easily
form in the individual well flowlines and in the 16 inch hulk
flowlines. Hydrate formation is inhibited by injecting
methanol in the individual well flowlines and in the common
subsea manifold. In the event of a hydrate blockage, the dual
flowline configuration will allow for round trip pigging to
clear the lines and provide the flexibility to produce through
one line whilst blowing down the pressure in the blocked line
to melt any hydrate plugs.
The 820 metre water depth at the location of the
Malampaya manifold and the remoteness of the location from
other oil-field infrastructure and resources presented unique
challenges during the installation phase for the subsea system.
Emphasis was placed on careful planning of installation tasks
and preparation of contingency plans and procedures.
In addition, a full integration test of the subsea system was
undertaken on land prior to installation of the system offshore.
This test was used to verify that the system operated correctly
and to train and familiarise personnel who would be involved
in the installation and operation of the system.
Production Platform
The Malampaya platform Topsides were fabricated in
Singapore and weigh over 13,000 tonnes when in operation.
To maximise onshore completion and minimise offshore
hook-up in the remote platform location, the Topsides were
designed as a single integrated deck with a dry weight of
11,500 tonne. Mobilisation costs of suitable heavy lift vessels
from either the Gulf of Mexico or the North Sea would have
been prohibitively expensive and the Project Team therefore
opted to adapt the float-over installation technique for what
was to be the largest Topsides ever to be installed in the South
East Asian waters. A critical activity for the success of the

D. GREER

float-over operation was the raising of the Topsides some 20


metres above grade in the fabrication yard prior to load-out
onto the transportation barge. The Topsides sailed away on
schedule on the 1st of March 2001 after a 22-month
fabrication programme.
The Topsides facilities (measuring 40m x 92m in plan)
were then set on their concrete base as a complete integrated
deck in the South China Sea, on 17th March 2001 with a loss
of only 2 days for weather downtime during the whole
operation (Fig. 5).
The supporting base, the Malampaya Concrete Gravity
Structure, which was built in Subic Bay, had already been
installed three months ahead of schedule on 2nd June 2000.
The CGS/dry-cell storage substructure concept was selected
for its constructability in a remote location using local
resources and as an economic way of providing the necessary
condensate storage without impacting the pristine marine
environment of Palawan. In addition to these challenges, the
CGS had to be designed to withstand extreme loading
generated by seismic events and typhoons. The calcified coral
seabed at the platform site had to be levelled to provide a
suitable foundation for the CGS. This was achieved by
controlled dumping of gravel over the entire base area of the
CGS: another industry-first.
The platform operating philosophy is to have minimum
personnel working offshore. This strategy will reduce the risks
associated with personnel traveling to and from the offshore
platform as well as minimise operating costs. To complement
this strategy, the platform processes will be controlled
automatically with surveillance provided from a manned
onshore control room. This in itself is not new, however, the
vast amount of electronic data that will be transferred from the
platform to the onshore control room will be transferred via
satellite, requiring high integrity systems and the latest
telecommunications technology. The platform control system
relies on field bus technology, which has led to a substantial
reduction in the amount of platform cabling required via the
use of high speed fibre data lines.
Handling the liquid which accumulates in the long bulk
flowlines (a mixture of condensate, water and methanol) at
low flow rates was a major consideration in the design of the
platform, especially when ramping-up gas production
following a period of low production. The traditional solutions
of a slug catcher and/or providing significant margins in the
sizing of the liquid handling vessels was discarded in favour
of state-of-the-art dynamic process modeling of the likely 3phase fluid behaviour in the flowlines to provide the basis for
optimising the platforms inlet process control system. The
application of advanced process control solutions to high
integrity, fast response inlet control valves meets most of the
required operating envelope supplemented by an operating
procedure for periodically sweeping the liquid out of the

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flowlines in the event of prolonged periods of very low


offtake. This solution has eliminated the need for surge
protection whilst maintaining the reliability of supply to the
gas Buyers. Thus a major reduction in facilities weight was
achieved, with a resultant reduction in the cost of the topsides.
A state of the art dynamic model of the complete production
system from wells to Buyers was developed to aid control of
operations during these transient conditions.
Availability of gas supply is crucial to the project. A
detailed availability model of the Malampaya production
system from reservoir to delivery was instrumental in
analysing the weak points in the chain and arriving at the best
sparing philosophy for achieving high availability. The
availability requirements were translated into the procurement
packages of all the major items of equipment. The most
important of these related to the onshore gas plant, as any
shutdowns in these facilities could have an immediate impact
on supply to Buyers. The offshore facilities, unlike those
onshore, have the benefit of the long gas export pipeline being
operated at high pressure which can then be de-pressurised to
compensate for any short duration disruption in the
topsides process.
Digital automation systems and Foundation Fieldbus were
used to support the Malampaya project goal of high
availability, precise control, and predictive maintenance on
minimum intervention. Given the national importance of
Malampaya, the facilities must be able to produce gas virtually
all year round, without interruption of supply. Consequently,
the Process Automation System (PAS) target availability was
set at 99.98%. In order to achieve the high availability and to
support the minimum-manning concept, the time between
planned major maintenance shutdowns is set at five years.
These stringent requirements motivated the use of Foundation
Fieldbus (FF) as the technology for the Process Automation
System both offshore and onshore, since FF technology offers
better measurement, more robust process control and remote
diagnostics for field devices. The project requirements
stretched the envelope of existing host system functionality
and an extensive development programme was jointly agreed
with the system vendor in order to meet the project
requirements. The resultant system comprises of around 1500
FF devices, which is one of the most extensive uses of FF in
the Oil and Gas industry. The extensive use of Foundation
Fieldbus and emphasis on high system availability has
enhanced the capability of available technology and
supporting software particularly in the area of the Asset
Management applications to enable extensive predictive
maintenance and remote diagnostics.
Flowlines and Pipelines
The field flowline and gas export pipeline route selection,
design and installation are at the forefront of deep water
pipeline technology. The pipelines traverse structurally
complex terrain with varied seabed characteristics and sea

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MALAMPAYA DEEP WATER GAS TO POWER PROJECT - AN OVERVIEWPOWERING THE PHILIPPINES INTO THE NEW MILLENNIUM

bottom relief. Fig. 6 illustrates a compressed cross-section of


the route illustrating the varied relief, from the subsea
manifold to the pipeline-landing site at Batangas.
The Philippine archipelago is recognised as being one of
the most seismically active areas in the world. The gas export
pipeline crosses active faults, an extensive system of
submarine channels and areas susceptible to mass gravity
flows and other soil instabilities. In addition, the pipeline
route was selected to avoid environmentally sensitive areas
such as coral reefs and pearl farms.
The pipeline route was surveyed in several extensive
offshore campaigns to gather geophysical, geotechnical,
environmental and metocean design data. Advanced satellite
technology and computer visualisation tools allowed the
Project Team to make rapid and informed routing selections
and decisions. An environmental consultant was involved at
an early stage to ensure all potential environmental concerns
were identified, eliminated or mitigated. The latest generation
of dynamically positioned lay-barges was employed for the
pipeline installation to place the pipe precisely along the
seabed route whilst minimising any disturbance to the seabed.
A specialist group, working as part of the pipelines design
team, systematically addressed seismic hazards within a limit
state design framework. A seismic hazard analysis was
commissioned to provide seismic design criteria such as fault
locations, displacements and ground movements.
A separate mass gravity flow study investigated potential
pipeline loading as a consequence of submarine gravity slides.
Finite element models of soil behaviour and pipeline response
were developed to validate the design.
Onshore Gas Plant
Geochemical studies and zonal mapping of the H2S in the
Malampaya reservoir determined that concentrations could
vary across the field between zero and a maximum of 1,000
ppm for an individual well but the produced gas to the
platform is not expected to exceed 500 ppm. The smooth,
continuous, operation of the onshore gas plant over a wide
range of flow rates and variable H2S concentrations meant that
the process design had to be determined as much by
operational and availability criteria as capital cost. The plant
configuration and sparing philosophy should provide the
required high on-stream availability. The challenge in detailed
design, procurement and construction was to realise this high
availability target through the quality of the engineering
design and by continuing to strive for low-intervention design
and turnarounds.
In order to provide a facility that is designed for long-term
availability and high reliability, it was critical that the
Contractors involved in the work shared this goal. Incentive

performance-based contracting strategies were therefore used


and co-operative alliancing promoted to realise these goals.
The Onshore Gas Plant (OGP) (Fig.7) is designed to
remove up to 1000 ppm H2S from the gas, using an amine
process and deliver specification gas (less than 20 ppm H2S)
to the customers. The facility also includes fiscal metering for
the three customers, a sulphur recovery unit and various
utilities. The plant has two process trains with common inlet
and outlet facilities. To prevent formation of hydrates,
substantial volumes of methanol are continuously injected
offshore, some of which reach the OGP and are removed in
the processing of the gas. The onshore control room is the
main control point for both onshore and offshore facilities.
The control system for both onshore and offshore activities is
integrated and is based on the Foundation Fieldbus open
architecture technology. The plant is located next to the
existing Shell refinery and some utilities are shared.
The Malampaya OGP is the revenue valve between the
upstream development and the gas Buyers. The three power
plants feed up to 30% of the electricity demand on Luzon
(including metro Manila) and continuity in operation of the
OGP is essential to maintain power supplies. From the plant
there are two approx. 10-km long pipelines to the power
plants. Due to the short delivery lines, there is no buffer
between the plant and the power stations. Thus very high
availability and reliability of the plant, from initial production
and throughout its life, is an essential success factor for the
whole Malampaya development.
The OGP design and execution schedule was from the
outset extremely tight, mainly due to uncertainties during the
definition stage on the exact requirements for H2S removal.
Consequently, the main EPC contract was awarded with a
target price mechanism only in April 1999, and ahead of final
design optimisation studies. The contract scope also included
commissioning, start up and initial operation, as well as
preparation of complete operations and maintenance
documentation and operator training. Following further FrontEnd Engineering Design (FEED) work through Q2/Q3 1999,
the project moved into detailed design in Q4 1999. Initial gas
delivery was planned for 1st October 2001 in preparation for
long-term gas supply to commence 1st January 2002.
The project was delivered in a record time of 22 months
from the start of detail design to the first gas delivery. Start-up
of the plant was achieved in only 7 days from the opening of
the gas inlet valves to commencement of reliable delivery of
specification gas to the customers. The plant was delivered
within budget and some $50 million lower than the estimate at
end of the FEED phase. The project achieved 11.3 million
man-hours without a single LTI, whilst utilising workers
mainly from the surrounding communities. The construction
site was certified to ISO 14001 at the start of the site
construction and the certification was retained and updated
prior to commissioning and initial operation.

D. GREER

This achievement was made possible through strict and


focused project management, tight management of the
significant overlap between detailed design, procurement and
construction, strict application of change management,
excellent co-operation between SPEX and the EPC contractor
and subcontractors, the application of Value Engineering and
Flawless Start Up Principles.
ENVIRONMENTAL COMPLIANCE
The gas export pipeline route passes through an
environmentally fragile region that includes coral reefs as well
as commercial fishing grounds, pearl farms, tourist areas, sites
of archaeological interest and ancestral domains. Obtaining
project approvals within such areas called for a highly
responsible approach and SPEX committed itself from the
very start of the project to minimise environmental and social
impact and involve key stakeholders in addressing issues
of concern.
SPEX commissioned detailed, independent, environmental
baseline studies to assess potential impacts and recommend
measures for their mitigation. These included the use of stateof-the-art underwater survey techniques to map and assess
coral cover and bio-diversity. An inventory of fauna living in
the corals was made, as well as marine surveys of the
mangroves and sea grasses. In addition, detailed socioeconomic and cultural studies of the area were conducted.
Key stakeholders were consulted at regular intervals. Initially,
scoping workshops were held to introduce the project and
identify issues and concerns. Following the environmental
assessment, validation workshops were held to share the
results of the studies and to explain and discuss the mitigation
measures on the identified impacts. Participants included
local governmental agencies, NGOs and representatives of
indigenous communities.
To encourage wide participation in the consultation process
with the key stakeholders and raise awareness, booklets,
posters and video, were used in addition to public hearings and
workshops. The work of the SPEX team was helped by the
well-established and highly respected Pilipinas Shell
Foundation, Inc. which has been working with local
communities since 1982. Communities were assured that the
Foundation would receive funds from the project to enlarge
the scope of its continuing activities, which include training
farmers and young people and all promises made in this regard
have been delivered.
SUSTAINABLE DEVELOPMENT
In addition to complying with the law and fulfilling all
obligations and conditions associated with approved
Environmental Compliance Certificates, SPEX remained
committed to promoting Sustainable Development throughout
all project activities.

OTC 14038

Within the Philippines, project activities covered four


provinces viz. Palawan, Mindoro Oriental, Batangas and Subic
Bay. Every effort was made in each of these areas to minimise
the impact of construction activities on local communities.
Prior to project implementation, social and environmental
impacts were identified as part of the Environmental Impact
Assessment(EIA) process and mitigating measures
implemented to prevent or minimise the effects on local
communities. Aside from establishing measures to avoid and
mitigate any negative social and environmental impacts during
project implementation, compensation was provided to those
members of the communities directly impacted. In addition, a
social management process involving the provision of social
investment programmes to surrounding communities was
undertaken to provide additional support over and above that
provided by Government as a means of addressing their
social needs.
Social management efforts implemented by SPEX also helped
explain the project to local communities and enabled further
dialogue and co-operation. Concern and resistance from local
communities to the Malampaya project reduced and enabled
greater dialogue and co-operation.
After a series of
consultations, people in the locality were able to understand
the economic importance of the project, not only to their
locality, but the whole country. The improved social climate
that developed out of SPEXs communications programme, as
well as the support provided to communities in their efforts to
improve their socio-economic and environmental conditions,
was a key element in enabling the project to be completed
on time.
SPEXs policy from the outset of the project was to support
sustainable development programmes as a form of social
investment to catalyse improvement of socio-economic
conditions in communities affected by the project. This not
only brought benefits to local communities, but also helped
the Company avoid delays in the implementation of the
project. Sustainable development projects established open
communication, co-operation, trust and confidence of local
communities in SPEX. The success of SPEXs social
management programmes can be attributed to the following
key factors a) establishment of a wide portfolio of
projects; b) rapid response to critical issues and problems
before they could escalate; c) continued dialogue and
communication with local governments and local
organisations affected by the project operations; d) active
participation by senior management in the Sustainable
Development programme to promote the concepts, and
facilitate timely evaluation and approval of project proposals;
e) strong support for the Malampaya project provided by the
local government executives (Governors of Subic, Mindoro,
Palawan and Batangas) helped to influence a positive
reception by local people.

OTC 14038

MALAMPAYA DEEP WATER GAS TO POWER PROJECT - AN OVERVIEWPOWERING THE PHILIPPINES INTO THE NEW MILLENNIUM

MALAMPAYA: A KEY LINK IN ANY FUTURE TRANSASEAN GRID


Linking the Philippines to the proposed Trans-ASEAN Gas
Pipeline (TAGP) may not be as far-fetched as currently
projected by some. The Malampaya field facilities are
strategically located to serve as a link to the TAGP. They are
very close to Sabah in Malaysia, with estimated reserves of 6 8 Tscf, which have currently no immediate market.
Additional gas demand prospects in the Philippines beyond
the Malampaya Deep Water Gas to Power project appear to be
positive, as alternatives for energy diversification and
increasing self-reliance remain limited.
Moreover, the
inherent instability of crude oil prices enhance the economics
of gas substitution. Governments must exert every effort to
sustain or even enhance such interests by providing a more
favourable environment that will encourage further gas
exploration, reduce regulatory risks for long-term investments
and enhance the competitiveness of gas compared to other
fuels. The recent ASEAN Council on Petroleum (ASCOPE)
forum on Trans-ASEAN Gas Pipelines provided a venue for
discussion among all the relevant regional players and
highlighted the opportunities for gas trading, both by pipeline
and LNG.
As ASEANs gas industry continues to evolve, and
developments such as Malampaya provide a foundation for
possible links with ASEAN neighbours, some lessons may be
drawn from the European experience which may have some
relevance for the ASEAN gas industry. Despite the diversity
of the EU member states, European gas companies have been
able to develop a large gas market, characterised by a high
level of security of supply. An integrated European gas grid
has developed by a step-by-step "bottom-up" approach, with
each stage corresponding to new sources of supply and
development of new markets. At each stage, Governments
have set the framework to ensure that the necessary
infrastructure would be developed on a commercially and
financially robust basis.
If creation of the Trans-ASEAN grid follows this approach,
then the timing of each link will depend on decisions made by
the large number of players involved and, as such, the rate of
development is difficult to predict. For the longer term,
however, it is clear that the Malampaya facilities will open the
gateway to implementing and integrating the Philippine leg of
any future Trans-ASEAN pipeline.
TRANSFORMING THE VISION INTO REALITY
This landmark deep water project was recently completed on
schedule and under budget. It represents the largest industrial
undertaking in Philippines history with a combined investment
of $US 4.5 billion ($US 2 billion in the upstream sector).
Over the life of the project, it is estimated that the Philippines

Government will receive some $US 10 billion in revenue


whilst saving a similar amount in foreign exchange
transactions. Malampaya marks the birth of the Philippines
gas industry, paving the way for cleaner and more efficient
power generation in the new millennium.
The Malampaya Project is a live example of climate-friendly
technology transfer. The gas supplied from Malampaya will
mainly replace oil-fired power generation, with oils share in
power generation reducing from 47% to 9% based on DoE
forecasts. This will significantly reduce greenhouse gas
emissions in the Philippines mainly because the lower carbon
intensity of gas compared to oil.
The project was executed in a trailblazing style, with good cooperation between Government and private enterprise and a
determined focus by the downstream and upstream sectors to
surmount all challenges. The globally distributed SPEX
Project Team with its can do, must do, will do spirit
remained committed to Sustainable Development and
environmental compliance as well as delivering a fit for life
development to power the Philippines into the next
Millennium with Malampaya natural gas. A springboard for
future growth in the Philippines gas market has therefore been
established thus providing infrastructure to serve as a link in
any future Trans-ASEAN grid.
Arguably, the most notable milestone in the history of
Malampaya was the availability of Malampaya Gas to Gas
Buyers on October 1st 2001. Many people offered much toil
and sweat to help in the attainment of this milestone and had
to endure many, many long months of struggle and challenge.
Throughout this period, they demonstrated not only
tremendous passion but a sustained capability to work
professionally, safely, effectively and responsibly against very
tight deadlines and to cope with many additional burdens.
They also showed the flexibility to cope with the unexpected
and unprecedented. To develop and form the global
Malampaya Project Team from its early beginnings in early
1998 to execute such a challenging deep water project of this
scale and complexity, so rapidly, was a very serious
undertaking. After all, the team was tasked with embarking
upon one of the greatest industrial undertakings in the history
of the Philippines. In the furtherance of this object of national
interest, many E&P contractors played a very, very important
role. Thanks to their efforts, SPEX went on to meet the allimportant date of first commercial Gas Sales on January
1st 2002.
The Malampaya Project rapidly advanced from a near
standing start after the Declaration of Commerciality on 14th
May 1998 to its current state of completion. All hardware,
infrastructure, staff resources and systems are now in place
and the power plants have been commissioned. A large
number of substantial gains have been achieved on the
technical, operational, contracting, organisational, human

10

D. GREER

resources and reputation-management fronts which are


considered to be of great value to other major projects being
planned or implemented in developing countries. At the same
time, the structures, procedures and shared staff values
necessary to successfully complete a major deep water project
safely, on time and within budget in an environment with very
limited E&P history or infrastructure have been successfully
implemented. The principal project tenets of HSES, Cost,
Schedule, Availability, Innovation and Sustainable
Development and the relentless focus by all parties on these
themes, which underpin the project logo, the Malampaya
Flame (Fig. 8), served the Project Team very well.
For staff involved in project development activities, the
Malampaya story has just ended. In reality, for the vast
majority of SPEX staff and SPEXs customers however, the
Malampaya story is just about to begin. Like a ship that passes
over the horizon, whilst it may no longer be visible, the efforts
of all its crew will never be forgotten. Similarly, the lessons
gained from this particular project should not be forgotten too
readily as they will hopefully be of great value to future deepwater projects in remote locations and to the E&P industry
at large.

OTC 14038

MALAMPAYA DEEP WATER GAS TO POWER PROJECT - AN OVERVIEWPOWERING THE PHILIPPINES INTO THE NEW MILLENNIUM

OTC 14038

Fig. 1: Location Map of the Malampaya Field

28 km

Fig. 2: The Malampaya Field

504 km
U p strea m
Catenary Anchored
Leg Mooring (CALM)
buoy for tanker
loading of condensate

Gas dehydration
Gas dewpointing
Condensate stabilisation
Export compression

D ow nstream
Sulphur Recovery
H2S removal
Metering
Supply base

Onshore Gas
Plant

-0m

Power
Stations

Alternative
Fuel

24" Dry gas


pipeline

- 43 m
3rd flowline
(2021)

Subsea
manifold

Condensate
storage

Condensate
export

2 x 16 CRA wet gas

- 820 m
5 Development wells
4 Additional developm ent wells (2009)

Fig. 3: Project Schematic Illustration


Fig. 4: Subsea Facilities

11

12

D. GREER

OTC 14038

0
100

CGS
Location

South of Mindoro

Batangas
100

Water depth (m)

200
300
400
500

Manila
Trench

600
700

100

200

300

400

KP position (km)

Figure 5: Malampaya Production Platform

Figure 6: Gas Export Pipeline Route Profile

Figure 8: The Malampaya Flame


Figure 7: Malampaya Onshore Gas Plant
The Malampaya logo is inspired by Shell Philippines
trail-blazing vision of the Malampaya Deep Water
Gas to Power Project. It portrays the essence of this
landmark Philippine energy project and depicts a
natural gas flame from the deep blue waters of
Palawan intertwining with the sun, stars and colours
of the Philippine national flag. The logo symbolizes
the commitment of the Philippine Government and
Project Stakeholders to secure for the first time in
the Philippine history an indigenous, clean, and
dependable source of power for the nation at the
dawn of the new Millennium.

500