Udenna is buyer of Shell’s 45% stake in Malampaya

By Myrna M. Velasco – May 20, 2021, 5:33 PM
from Manila Bulletin

Davao businessman Dennis Uy’s Udenna has been chosen as the buyer of the 45-percent stake of Shell Philippines Exploration B.V. (SPEX) in Malampaya, giving him ultimate majority control in the country’s commercial gas field.

In an announcement made by SPEX’s parent firm Royal Dutch Shell plc, it stated that its corporate vehicle Shell Petroleum N.V. signed an agreement with Uy’s Malampaya Energy XP Pte. Ltd., a subsidiary of Udenna Corporation for the purchase of the shares of Shell in the project.

The buyer of the 45-percent shareholdings of Shell in Service Contract (SC) 38 will also assume the operatorship of the gas field, because that has been the function of SPEX in the multi-billion gas field project; entailing then that Udenna will already be the operator of Malampaya.

Wael Sawan, Shell’s Upstream Director, noted that the stake sale announcement “is consistent with Shell’s efforts to shift our upstream portfolio” to other focuses of business. No transaction value had been revealed yet on the divested Shell equity in the Malampaya project.

Uy, for his part, noted that in the acquisition of Shell’s stake, the company will also be absorbing the employees who worked at Malampaya under the outgoing operator.

“We are tremendously proud of Malampaya Energy for acquiring one of Shell’s most successful natural gas assets in Asia, which of course includes the world-class SPEX team currently operating Malampaya,” the Davao-based businessman said.

Belinda Racela, top executive of Malampaya Energy said, “the ongoing safety and reliability of Malampaya is our top priority and will be delivered by the same experienced team of upstream professionals from SPEX working with consistent practices,” with her adding that “they will be strongly supported by our newly established upstream decision review board of leaders.”

Shell is already the second multinational giant to exit from the Malampaya venture – the first one was American firm Chevron Corporation, which unloaded its 45-percent stake in the project to UC38 LLC , also of Udenna Corporation of businessman Dennis Uy for a transaction worth US$565 million that was finalized in March 2020.

The consortium-members of the Malampaya venture had batted for an extension of the project’s service contract, but that is still undergoing evaluation and has yet to secure the approval of the Philippine government, including the Department of Energy (DOE) and then the Office of the President.

With the departure of SPEX, the new Malampaya consortium-members will now just comprise of Udenna; and minority equity holder state-run Philippine National Oil Company-Exploration Corporation.

The latest pronouncement of the DOE had been that: the license extension application is still going through the evaluation of its technical working group (TWG) – and that included teams from its financial, technical and legal services bureaus.

If the gas field’s license extension will be granted, it has been initially assessed that Malampaya’s production life cycle may still be stretched until 2027, although with lower production capacity.  But without extension, the field’s operation shall cease at its contract’s expiration in 2024.

Studies previously indicated that prospects at Malampaya East had been estimated at 140 billion cubic feet; and that had been one of the areas targeted for further development if the project’s license would be extended.

Since the kick-off of the gas field’s commercial operations in 2001, it has been stated by DOE and PNOC-EC officials that the project already generated US$12 billion in revenues for the Philippine government – including royalty share from extracted gas volumes as well as taxes paid to the State.

With the changeover in ownership, the remaining concerns yet to be addressed in the Malampaya project is a pending case in the Supreme Court that shall lay down a final ruling on an arbitration award to the SC 38 consortium on a tax case that it won against the Commission on Audit.

The arbitration case was decided in 2019 by the International Chamber of Commerce (ICC) in Singapore — and the decision then was a partial award of P146.8 billion in favor of the Malampaya consortium. But for that arbitral ruling to be enforced, it has to be affirmed by a court in the Philippines.