DOE didn't take part in Shell-Udenna Malampaya deal; transaction up for review —Cusi

The government did not intervene in the multi-million dollar deal between Shell Petroleum N.V. and Malampaya Energy XP Pte. Ltd., a subsidiary of Dennis Uy’s Udenna Corp., for the sale of a controlling stake in the Malampaya gas-to-power facility, Energy Secretary Alfonso Cusi said Tuesday.

On Thursday, Dutch petroleum giant Shell disclosed that it signed a share purchase agreement with Uy’s Malampaya Energy for the sale of its 100% shareholding in Shell Philippines Exploration B.V. (SPEX), which holds a 45% operating interest in Service Contract 38 or the Malampaya gas field. 

The base consideration for the sale is $380 million, with additional payments of up to $80 million between 2022 to 2024 contingent on asset performance and commodity prices.

“At this point, any agreement between Udenna Corporation subsidiary Malampaya Energy XP Pte Ltd and Shell Philippines Exploration B.V. (SPEX) on the acquisition of SPEX's 45% participating interest in Petroleum Service Contract No. 38 (SC38) is a private business transaction between the parties,” Cusi said in a statement.

“In other words, the Department of Energy (DOE) did not take part in the decision of SPEX to sell, the bidding or negotiations that ensued, and its outcome.”

With the sale of Shell’s Malampaya stake to Malampaya Energy, Uy’s company will now hold 90% control of the gas field in offshore Palawan.

Uy's company has already bought out Chevron Philippines’ share in the Malampaya Consortium last year, which had 45% participating interest in SC 38. 

Before Uy's planned takeover, the Malampaya Consortium was composed of SPEX, Chevron, and the Philippine National Oil Company-Exploration Corporation, which still holds 10% interest in the gas field.

“The transfer of participating interest in SC38 Malampaya Consortium is governed by the terms of the Joint Operating Agreement (JOA) entered into by the members. Under the JOA, all parties must first consent to a sale of any or all participating interest,” Cusi said.

The Shell-Uy transaction, which is subject to partner and regulatory approval, is targeted to be completed by the end of 2021.

Review

Cusi noted that once the transaction has been completed at the consortium level, it will still be submitted to the DOE for its review and approval in accordance with Presidential Decree No. 87, otherwise known as the Oil Exploration and Development Act of 1972 (PD87).

“For its part, the DOE will, accordingly and judiciously, evaluate the legal, financial, and technical aspects of the transaction, and its impact on the obligations of the consortium to the Philippine government according to the terms of SC38 and PD87,” Cusi said.

In a separate statement, Senator Sherwin Gatchalian urged the DOE to divulge its plans and programs on Malampaya in light of the divestment of Shell and the nearing expiration of the Malampaya deep water gas-to-power project to ensure the future of its operations and the continuous supply of energy in the country.

“Given the significant role that the Malampaya project plays in the Philippines’ energy security, it is imperative that the DOE apprise the Filipino public on Malampaya’s operations — the remaining natural gas reserves and the government’s plans for continuous energy  supply, likewise on the pending request for the extension of SC No. 38,”  he said in filing Resolution No. 724.

Gatchalian said the Senate Committee on Energy, which he chairs, will conduct an inquiry into the status of the sale of the stake of SPEX and the basis for the DOE’s decision if it approves the sale.

The senator also wants to know the DOE’s direction amid the impending expiration of Malampaya’s service contract less than three years from now.

“It is critical for the DOE to ensure that whoever gets hold of Shell’s interest should have, not just similar experience or capacity, but more so the technical, financial and legal capability to operate the Malampaya project or to be a service contractor,” Gatchalian said.

The Malampaya gas-to-power facility fuels three gas-fired power plants with a total generating capacity of 2,700 megawatts (MW), providing up to 30% of the power generation needs of Luzon.

Connected to onshore gas plants in Batangas, the Malampaya offshore facility in northern Palawan was inaugurated in 2001.

The project has provided a crucial source of income for the government with a total net national government share amounting to 261,681,610,752.59 since it began commercial operations in 2002 until 2019, according to Gatchalian. --KBK, GMA News