The acquisition of another 45-percent interest in the Malampaya gas-to-power project in northwest Palawan by Dennis Uy’s Udenna Corp. will need government approval, Energy Secretary Alfonso Cusi said over the weekend.
Malampaya Energy XP Pte. Ltd., a unit of Udenna, disclosed last week it was buying the 45-percent stake of Shell Philippines Exploration B.V. in the $4.5-billion Malampaya project for up to $460 million.
“Yes, it needs approval. We have to determine its technical, financial and operational compliance to standards required to assure energy security of the country,” Cusi said when asked for comment on the transaction between Udenna and Spex.
Spex is the operator of Malampaya project covered by Service Contract No. 38.
He said the DOE would review the technical and financial capability of Malampaya Energy, which would become the operator with 90-percent stake in SC 38.
Energy Assistant Secretary Leonido Pulido III said DOE could reject the transfer of operatorship if Malampaya Energy would be found to have insufficient financial or technical capability to fund the work commitments of SC 38.
Pulido said the signing of agreement between Malampaya Energy and Spex was “purely private business transaction,” and the DOE had no part in the agreement nor in the selection process.
He said the sales agreement needed the approval of the SC 38 Consortium members prior to submission to the DOE for the processing of approval of transfer of participating interest and operatorship.
“The DOE’s only task is to evaluate and determine the legal and financial capability of Malampaya Energy with the acquisition of 45-percent PI [participating interest] from Spex and technical capability to be the operator for SC 38,” he said.
Shell Petroleum N.V. announced Thursday it signed an agreement with Malampaya Energy to sell its 100-percent shareholding in Spex, which holds a 45-percent operating interest in SC 38, which includes the producing Malampaya gas field for up to $460 million.
Shell said in a statement the base consideration for the sale is $380 million, with additional payments of up to $80 million between 2022 and 2024, depending on asset performance and commodity prices. Subject to partner and regulatory consent, the transaction is targeted to be completed by the end of 2021. The transaction has an effective date of Jan. 1, 2021.
Aside from Spex, the other partners in SC 38 are UC38 LLC, a subsidiary of Udenna (45 percent) and state-owned PNOC Exploration Corp. (10 percent). This means that Udenna of businessman Dennis Uy now has 90-percent interest in SC 38.
Udenna earlier acquired the 45-percent interest from Chevron Malampaya LLC for about $565 million, which was completed in March 2020. The DOE also reviewed that transaction and gave its approval in April this year.
Meanwhile, Senator Sherwin Gatchalian said he would compel the DOE to divulge its plans and programs on Malampaya in light of the divestment of Spex and the nearing expiration of SC No. 38 to ensure the future of its operations and the continuous supply of energy in the country.
“Given the significant role that the Malampaya project plays in the Philippines’ energy security, it is imperative that the DOE apprise the Filipino public on Malampaya’s operations”•the remaining natural gas reserves and the government’s plans for continuous energy supply, likewise on the pending request for the extension of SC No. 38,” Gatchalian said in filing Resolution No. 724.
Gatchalian’s committee on energy will conduct an inquiry into the status of the sale of the stake of Spex and the basis for the DOE’s decision if it approves the sale. The senator also wants to know the DOE’s direction in the face of the impending expiration of Malampaya’s service contract less than three years from now.
“It is critical for the DOE to ensure that whoever gets hold of Shell’s interest should have, not just similar experience or capacity, but more so the technical, financial and legal capability to operate the Malampaya project or to be a service contractor,” Gatchalian said.
He said it was incumbent on the DOE to ensure that the transfer of interests of the members of the consortium should go through a comprehensive review and evaluation pursuant to the requirement under Presidential Decree No. 87.