CAPITAL: Manila

MONETARY UNIT: Peso

REFINING CAPACITY: 389,000 b/cd

OIL PRODUCTION: 800 b/d

OIL RESERVES: 228 million bbl

GAS RESERVES: 2.85 tcf

Shell Philippines Exploration BV and Occidental Philippines Inc. planned a large gas field development in the Philippines linked to power generation plants.

The companies` Malampaya and Camago gas finds, which have combined estimated reserves of about 4 tcf of gas, could supply 3,000 MW of generating capacity, and more gas reserves were likely nearby.

Malampaya and nearby Camago were found in 1,000 m of water off Palawan Island in 1989. They would be developed with subsea production centers tied back to a processing platform in shallower water.

From the platform, a 510-km pipeline would take gas to shore to feed power stations near Batangas, south of Manila. The field development and power plant project was expected to cost $4.5 billion: $2 billion for the gas field development and $2.5 billion for power plants.

Shell and Oxy signed supply pacts with First Gas Power Corp., National Power Corp., Manila Electric Co., and independent power producer Kepco Philippines.

BG plc, a partner in the First Gas Power joint venture, said the Shell-Oxy development would provide first gas in 2002. Total gas output was expected to reach 500 MMcfd, along with 25,000 b/d of condensate.

Initially, power plants with combined capacity of 2,700 MW were planned: a 1,200 MW unit at Ilijan by Kepco; a 1,000 MW plant at Santa Rita by First Gas Power; and a 500 MW unit in the Calabarzon region, also by First Gas Power.

First Gas Power`s Santa Rita plant was due in operation in 1999 to supply customers in the Manila area. The venture had signed contracts with Enron Corp. for supply of condensate to fuel the plant until the Malampaya-Camago came on stream.

Decontrol law

Philippines President Fidel Ramos signed a law deregulating the oil industry, replacing a law the Supreme Court struck in 1997.

The measure set a 5-month transition to the free market and a standard 3% import tariff on both crude and products.

Ramos said the law would help 32 firms that wanted to compete with the Philippines` three large refiner-marketers. It also allowed him to spend $72.5 million to subsidize petroleum product prices during the transition, if necessary.

The Supreme Court ruled that the original law was unconstitutional because it favored the existing refiners-Petron Corp., Pilipinas Shell Petroleum Corp., and Caltex (Philippines) Inc.

It said the law put competitors at a disadvantage with a 4 percentage point tariff differential on imports of crude and refined products, a requirement for a 40-day inventory, and a provision that prevented them from selling at a loss to gain market share.

After the court`s final ruling, President Fidel Ramos called a special session of Congress to revise the oil decontrol bill.

Deregulation of the industry brought competition quickly.

Coastal Corp. planned to use the 2.4 million-bbl Subic Bay oil storage center to become a major player in the Philippines market.

It owned the complex equally with Petroleum Authority of Thailand (PTT).

Coastal said its gasoline market share went from zero to 5% in 1998.

PTT said it would spend $240 million over 5 years to build about 140 service stations. It also planned to invest $140 million in five new petroleum companies, four with Coastal as a partner.

Plans for a $500 million naphtha cracker in the Philippines were postponed after the government and private investors were unable to agree on proposed tariffs.

A group of local and foreign investors, including Japan`s Sumitomo Corp. and Mitsubishi Corp. and led by the Chemical Industries of the Philippines, asked that polypropylene and polyethylene tariffs be increased to 20% from 10%.

President Ramos twice refused to increase tariffs, citing a need to further deregulate the country`s petrochemical industry.