Philippine business groups seek deeper probe into Malampaya deal

Several of the country’s biggest business groups have flagged the transaction regarding the Malampaya deep water gas-to-power project, citing the buyer’s supposed lack of experience in gas operations.

In a joint statement, the business groups urged the Senate and concerned agencies to look deeper into why the government did not exercise its right of first refusal over Chevron and Shell’s shares in Malampaya.

“By failing to do so, the government have given up tens of billions of pesos at a time when the government needs money more than ever and more importantly has put the country’s energy and national security at risk,” the statement read.

The statement was signed by the Energy Lawyers Association of the Philippines, the Financial Executives Institute of the Philippines, Filipina CEO Circle, Integrity Initiative Inc., Investment Houses Association of the Philippines, the Makati Business Club, the Philippine Women’s Economic Network, and the Women’s Business Council Philippines.

This comes after Davao-based businessman Dennis Uy’s Malampaya Philippines Pte Ltd. in March completed the buyout of the Chevron Philippines stake in the offshore gas field in Palawan. It also acquired the entire stake of Dutch petroleum giant Shell Petroleum N.V. in May, and has since been renamed UC MPPL. 

According to GMA News Research, Uy was one of President Rodrigo Duterte's top contributors during the 2016 campaign with P30 million in contributions, while his wife, Cherylyn, gave P1 million.

In the statement, the business groups noted that government lawmakers need to explore why the government failed to award a license in 2019, which could be a breach of fiduciary duty.

“We urge the Senate and concerned agencies and groups to fully explore if the government could easily get financing for such a purchase, as was done by the private purchaser, given Malampaya’s stable and highly guaranteed revenue stream,” the groups said.

“We urge them to more fully explore the government’s reasoning for allowing the sale of a critical energy asset to a group with, at the time of the bid, no experience or track record in gas exploration or production,” they added.

Energy Secretary Alfonso Cusi last month denied that the buy-in of Uy’s business into the Malampaya consortium was a midnight deal, as he said the transaction is beyond the department’s purview. Cusi also serves as president of a faction of the ruling PDP-Laban party.

For its part, Uy’s business group Udenna Corp. said its takeover of Malampaya was above board, as there are no laws requiring approval of transfer of shares of companies that have interest in the asset.

“Any breakdown could severely harm the economy, the environment, and even lives. Given the acquirer’s lack of expertise and heavily-financed nature of the proposed purchases, it is highly likely that they will take on partners,” the business groups said.

“The government should scrutinize the buyer’s financial and technical capabilities and interests and should reserve, enforce, and exercise its right to block and invalidate transfers of shares and control that may be disadvantageous to the Filipino people,” the statement added.

Lawmakers have conducted several hearings on the matter, with Energy committee chairperson Senator Sherwin Gatchalian calling the deal “lutong makaw.”

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

Uy’s planned takeover of the Malampaya facility is the subject of the graft complaint filed before the Office of the Ombudsman against Cusi, the Davao-based businessman, former and current officials of state-run Philippine National Oil Co.-Exploration Corp. (PNOC-EC), as well as officials of Chevron Philippines and Shell Philippines Exploration B.V.  — VBL, GMA News