Gov’t starts studying Malampaya buyout proposal – Cusi

By Myrna M. Velasco – September 29, 2020, 10:29 AM
from Manila Bulletin

As the government is keen on evaluating the joint venture deal proposed by Davao businessman Dennis A. Uy, Energy Secretary Alfonso G. Cusi indicated that they will start studying the ‘buyout proposal’ for the 45-percent majority interest of Shell Philippines Exploration B.V. (SPEX) in the Malampaya gas field venture.

“We appreciate the invitation and we will evaluate it. PNOC-EC (Philippine National Oil Company-Exploration Corporation) is currently doing technical and financial evaluation,” the energy chief said.

This week, Uy’s Udenna Corporation had sought the imprimatur of state-run PNOC-EC to become its partner in acquiring the Shell shareholdings being sold off in the gas field project.

Rozzano D. Briguez, president and CEO of PNOC-EC, indicated “we have our own ongoing study on all the possible implications of Shell’s divestment.” The company said it will make the outcome of that study in due time.

When Udenna acquired the 45-percent stake of American firm Chevron Corporation in the Service Contract (SC) 38 of Malampaya, it was PNOC-EC that sounded off interest then to coalesce with Uy’s firm.

This time, it is the Davao-based businessman who advanced an offer for his company to forge a tie-up with government for the Malampaya shares’ acquisition and to subsequently gain control of the gas field’s operations.

Shell’s stake divestment is seen to have far-reaching implications because it holds operatorship in the gas field.

Nevertheless, Udenna opined that in its targeted business pact with the government, they can lean on the acquired technical expertise of current Shell personnel for the continuous operation of the gas field.

Several other interested parties, like San Miguel Corporation, had manifested interest in the Malampaya asset, but Udenna and PNOC-EC as existing consortium-members have the upper hand in exercising their pre-emptive rights in the buyout deal.

The remaining life cycle of Malampaya’s existing service contract will be until 2024, so that will give the new consortium-members four more years to carry on with gas production and serve the fuel requirements of gas-fired power facilities in the country.

The first gas sale and purchase agreement (GSPA) of SC 38 will expire in 2022; and the biggest puzzle at this point is whether or not Malampaya’s license will be extended; or the power plant developers will already need to embrace imported liquefied natural gas (LNG) as alternative.

Power facilities had been the main users of the indigenous gas produced from Malampaya; while a measly percentage of it is being funneled to industrial customers.

The Philippines had long targeted to ramp up it indigenous oil and gas discovery, but the exit of major players – compounded by tricky geopolitical concerns – had not been propping up that goal.

The odds are manifestly not in the country’s favor as many investors worry about the diplomatic tension trouncing prospective petroleum exploration activities at the West Philippine Sea.