Government begins to study Malampaya – Cusi purchase proposal

Given that the government is interested in evaluating the joint venture agreement proposed by Davao businessman Dennis A. Uy, Energy Secretary Alfonso G. Cusi indicated that they will begin to study the ‘purchase proposal’ for the majority stake of 45 percent. percent of Shell Philippines Exploration BV (SPEX) in the Malampaya gas field project.

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

This week, Uy’s Udenna Corporation had applied for the go-ahead from the state-owned PNOC-EC to become its partner in the acquisition of the Shell shares that were being sold in the gas field project.

Rozzano D. Briguez, president and CEO of PNOC-EC, said that “we have our own study underway on all the possible implications of the divestment of Shell.” The company said it will release the results of that study in due course.

When Udenna acquired the 45 percent stake in the US company Chevron Corporation in the Malampaya Service Contract (SC) 38, it was PNOC-EC that sparked interest in merging with Uy’s company.

This time, it is the Davao-based businessman who submitted an offer for his company to forge a link with the government to acquire the Malampaya shares and subsequently gain control of the gas field operations.

The divestment of Shell’s stake is seen to have far-reaching implications because it occupies the position of operator in the gas field.

However, Udenna opined that in their specific commercial pact with the government, they can draw on the technical expertise gained from current Shell personnel for the continued operation of the gas field.

Several other interested parties, such as the San Miguel Corporation, had expressed 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 purchase agreement.

The remaining life cycle of Malampaya’s existing service contract will run through 2024, giving the new consortium members four more years to continue gas production and meet the fuel requirements of gas-fired power installations in the country.

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

Electrical installations had been the main users of the indigenous gas produced in Malampaya; while a negligible percentage is channeled to industrial customers.

The Philippines had long aimed to increase its discovery of indigenous oil and gas, but the departure of major players, compounded by complicated geopolitical concerns, had not propped up that goal.

The odds are clearly not in the country’s favor, as many investors worry about diplomatic tension sweeping away potential oil exploration activities in the Western Philippine Sea.