PNOC-EC withholds consent to sale of Malampaya stake

The Philippine National Oil Co.-Exploration Corp. (PNOC-EC), which holds a 10-percent stake in the Malampaya consortium, is not giving its consent to the $380-million deal between Malampaya operator Shell Philippines Exploration B.V. (SPEX) and Udenna Corp.’s Malampaya Energy XP Pte. Ltd.

“PNOC-EC is withholding its consent to the transaction,” said PNOC-EC President Rozzano Briguez during a public hearing on the Malampaya Deep Water Gas-To-Power Project conducted by the Senate Energy Committee held Wednesday.

He refused to say why and how PNOC-EC arrived at its decision. Briguez asked the committee that he be allowed to refrain from answering further questions since SPEX was informed about the decision only two days ago.

“Out of respect to the other parties, not to disclose reason behind our decision at the moment because our other partners, stockholders have to be informed first. We only informed one of them, SPEX. I’m reiterating that we have communicated two days ago that we are withholding our consent. Our letter did not contain the reasons.”

He said it is up to SPEX “how it will act after we withhold our consent.”

The consortium is composed of PNOC-EC (10 percent), SPEX (45 percent) and UC38 LLC (45 percent).

SPEX earlier sold its stake to Malampaya Energy for $380 million, with additional payments of up to $80 million between 2022 to 2024 contingent on asset performance and commodity prices.

PNOC-EC earlier waived its right to match the offer of Malampaya Energy.

The deal is valid if the parties secure the consent of PNOC-EC and if the Department of Energy (DOE) approves it.

Energy Secretary Alfonso G. Cusi, who was present during the hearing, was asked if his office would continue to evaluate the deal after PNOC-EC withheld its consent.

“What is the purpose of continuing the evaluation if there is no consummation, if there is no consent by the parties?” the energy chief commented.

The target date for the deal to become effective was set later this year.

SPEX, according to its managing counsel Atty. Kiril Caral, confirmed during the hearing that it received a letter from PNOC-EC about its decision to not consent to the transaction. He also confirmed that the state firm did not explain its reasons.

“We’re very disappointed [with the] decision of PNOC. However, we will continue to engage with them to find out if there is anything we can do to address the concerns that might have led them to this decision,” said Caral during the hearing.

He added that SPEX is “very much interested to understand” what led PNOC-EC to withhold its consent to the deal. Understanding PNOC-EC’s decision is the first step moving forward, Caral said, but without its consent, “we will not be able to pursue the sale at the moment.”

Committee chairman Senator Sherwin T. Gatchalian lauded the decision of PNOC-EC, saying this will protect the interest of the Filipino people. “I laud and welcome the decision of PNOC for putting the interest of the Filipino people first. Definitely, that decision will not be put to waste because we recognized that decision was made to protect our country.”

The Malampaya gas field delivers a fifth of the Philippines’ growing electricity requirements through the supply of natural gas to five power plants in Luzon.

The gas project has also been providing a crucial source of income for the government with a total net national government share amounting to P261,681,610,752.59 since it began commercial operations in 2002.