Scrutiny of Malampaya deal pushed

By Lenie Lectura – October 5, 2020
from Business Mirror

THE Senate Committee on Energy will be looking into the Malampaya transaction involving the sale of the gas field operator’s 45-percent stake possibly to existing consortium members or to new parties.

While the impending transaction involves private companies, committee chair Sherwin Gatchalian said government must be involved in dealings that affect the country’s energy security.

The Malampaya gas field delivers about 20 percent of the country’s electricity requirements for nearly two decades. It is expected to run dry by 2024.

“We will file a resolution to inquire about the Malampaya transaction. We want to know the future of Malampaya and we want to know the transactions happening in relation to energy security,” said Gatchalian in an interview.

Gatchalian recently filed Senate Bill 1819 for the country to provide a national energy policy and framework for the development and regulation of the Philippine midstream natural gas industry.

“The proposed Midstream Natural Gas Industry Development Act will encourage private capital and foster an open and fair competitive market while at the same time ensure safe, reliable and environmentally responsible operation of LNG [liquefied natural gas] terminals,” the senator said.

The Department of Energy (DOE) awarded the (Malampaya) Service Contract 38 to a consortium led by Shell Philippines Exploration BV (SPEx), which earlier announced plans to divest itself of its 45-percent interest as part of its portfolio rationalization efforts.

Other consortium members include Dennis Uy-led Udenna Corp. (UC), with 45-percent interest, and Philippine National Oil Company-Exploration Corp.  (PNOC-EC), 10 percent.

UC, which bought its shares from Chevron Malampaya Llc. last year, said it would invoke its pre-emptive and consent rights over the stake sale.

Udenna Group spokesperson Raymond Zorrilla said only UC and PNOC-EC are “the most suitable party” to assume Shell’s interest. UC is asking PNOC-EC to join in its pursuit to take over the gas field.

The original SC 38 consortium—SPEX, Chevron and PNOC-EC—is supplying gas to 5 power plants since the gas field was commissioned in 2001.

“I would rather have consortium members who have experience in exploration. We have been told that this is a private transaction but we are looking at a bigger picture here because it involves national energy security. In PD [Presidential Decree] 87, the energy security aspect should be looked into,” said Gatchalian.

Consumer advocate Laban Konsyumer, Inc. (LKI) agrees.

“Government needs a partner with institutional expertise in the project, not only money,” commented LKI President Victor Dimagiba.

Energy Secretary Alfonso G. Cusi assured that a change in the consortium members would not affect the country’s gas supply. “In case it’s sold, it won’t affect our gas supply for the power plants drawing from it,” the energy chief said.

While the upstream development arm of the Royal Shell Group has yet to name prospective buyers, SPEx said it would not sell until it finds the most qualified buyer.

“Our priority is to make sure we have a safe and reliable operations.  We are committed to continue with the operations until a suitable, financially and technically competent buyer is found,” the company said.