DOE: Gatchalian 'lutong makaw' remark vs. approval of Malampaya shares 'misguided'

The Department of Energy (DOE) on Tuesday clapped back at Senator Sherwin Gatchalian’s remarks that the agency’s approval of the Udenna-Chevron deal on the sale of Malampaya Consortium shares was rigged.

On Monday, Gatchalian said, “After conducting three hearings and going through all the documents which all came from DOE, all I can say is the transaction and the approval were lutong makaw.”

“Lutong makaw” is a Filipino idiom which means a decision has been rigged or pre-arranged.

“This revelation of Senator Gatchalian is unprecedented, as the matter is still being heard by the Senate Committee on Energy. The Senator's statements are misguided, lacking in factual and legal basis,” the DOE said.

The Energy department went on to hit Gatchalian’s inquiries, which it claimed was causing “undue delay” on the Malampaya transactions.

“The inquiries of Senator Gatchalian are causing undue delay to the timeline of the consortium corporations, and this may eventually take its toll and put our energy security at risk,” the DOE said.

To recall, Uy’s Malampaya Philippines Pte. Ltd. last year completed the buyout of the 45% Chevron Philippines’ stake in the offshore gas field in Palawan. It has since been renamed UC MPPL or UC Malampaya.

Aside from Dennis Uy’s group, the Malampaya Consortium is 45% owned by Shell Philippines Exploration B.V. (SPEX), and 10% by state-owned Philippine National Oil Co. (PNOC).

Likewise, 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).

The DOE said the sale of SPEX’s shares in the Malampaya project is “pending for review.”

“The DOE stresses that while there is no law or any rules or regulations that squarely directs the agency to review the sale of shares of stocks between the corporations, the DOE conducted the review because the Malampaya Gas Field is a backbone of the country's power generation mix, revisiting the sale has become imperative to ensure that national interest is protected and energy security is not put at risk,” it said.

Nonetheless, the agency said it decided to apply the Department Circular 2007-004-0003 (DC), entitled “Prescribing the Guidelines and Procedures for the Transfer of Rights and Obligations in Petroleum Service Contracts under PD 87” in assessing the Malampaya transactions

“While the DOE applied the DC in its evaluation, the Department was confronted by the question - which corporation’s financial soundness and capability should be evaluated? UC Malampaya's, the buyer of shares, or Chevron Malampaya LLC?” it said.

“Since Chevron Malampaya LLC, even if its shares of stocks are now owned by another corporation, will remain as implementer/operator of Service Contract (SC) 38, the DOE took the liberty to evaluate it,” it added.

The Energy department noted that if the Chevron-Udenna deal was a “farm-in,” or transfer of rights and obligations agreement, the agency would have taken a different approach in evaluating that deal because SC 38’s implementing corporation will then be the buyer and transferee of the rights and obligations, which is UC Malampaya.

“Senator Gatchalian, who is obviously confused, holds on to this theoretical framework. He must, however, realize that it is the financial soundness and capability of the implementing corporation that should be evaluated because it is the one that is operating the project,” the DOE said.

The senator claimed that the DOE had violated Presidential Decree 87, the law which provides the rules for the discovery and production of indigenous petroleum, as well as its Department Circular 2007-004-0003.

Citing their analysis of the DOE documents, Gatchalian said the Energy officials have approved the technical and legal evaluation for UC Malampaya, a subsidiary of Udenna. However, the DOE has approved UC38 LLC for the financial capacity evaluation.

“We saw in their own evaluation that UC Malampaya is unqualified, has negative working capital. So you don’t customize an evaluation because [in] one of the criteria, they will fall short. They have to be consistent. So in other words, the problem here is they didn’t follow the law and they didn’t follow their own circular,” the senator explained.

The DOE, however, said that the PD 87 and its DC 2007-004-0003 were “are square pegs in a round hole when applied to the sale of shares of stocks.”

“It is high time that Congress introduce remedial legislation through amendments, or even revise the entire charter governing the upstream industry, PD 87, which has been existing and has remained untouched in almost 50 years,” it said.

“On one hand, the DOE is also currently working on issuing the appropriate rule,” it added.

Uy’s planned takeover of the Malampay facility is the subject of the graft complaint filed before the Office of the Ombudsman against Energy Secretary Alfonso Cusi, the Davao-based businessman, and officials of Chevron Philippines and Shell Philippines Exploration B.V. 

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

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. -NB, GMA News