LAWMAKERS urged the Department of Energy (DOE) to exercise “prudence, diligence and integrity” in approving the investment deals of the group of Davao businessman Dennis Uy with the Malampaya consortium.
“As a Filipino, we want an operator who is qualified, who is experienced and who can assure us of continuous flow of gas to our power plants,” Senate Energy Committee Chairman Sherwin Gatchalian said during Tuesday hearing.
He was referring to the SPEX (Shell Philippines Exploration B.V.)-Udenna Group transaction, which the senator said is “more complicated and more important” because SPEX will turn over the operation aspect of the Malampaya gas project to an entity whose technical and financial capabilities are being questioned. “If it falls in the hands of an unqualified operator then we are doomed,” added the senator.
The Malampaya consortium is currently composed of UC38 LLC, a subsidiary of Udenna Corp. (UC), 45 percent; state-owned PNOC Exploration Corp., 10 percent; SPEX, 45 percent.
However, a deal was sealed between SPEX and Malampaya Energy XP Pte. Ltd., which signed a deal with SPEX to sell its 45-percent operating interest in SC 38. The turnover to Malampaya Energy is expected to be concluded in December this year.
Gatchalian and Sen. Nancy Binay also wants the DOE to halt ongoing negotiations to extend Service Contract (SC) 38, which was awarded to the Malampaya consortium, until the SPEX-Malampaya Energy deal is cleared by the government.
According to DOE Director for Energy Resource Development Bureau Cesar Dela Fuente, the discussion with the Malampaya operator for the license extension of SC 38 started in November last year. “It started prior to the negotiation of transfer. Until now, SPEX is the entity asking for the extension and not Malampaya Energy,” said Dela Fuente.
“I don’t want to speculate but by hunch, because Udenna is coming in, and there is a conditional SPA that is why there” an ongoing negotiation. It was back in 2016 when SPEX first asked for [an] extension but nobody back then was giving them light of day, said Gatchalian.
Binay said ongoing discussions on SC 38 extension, which expires in 2024, should be deferred until the next administration. “This is to avoid a midnight deal perception.”
The DOE, for its part, maintained it has exercised its authority to protect the interest of the government and the Filipino people regarding the change in ownership of the members of the consortium operating the Malampaya field under SC 38.
DOE officials at the hearing said Chevron Malampaya LLC, which used to own 45 percent of the gas project before it sold this to UC38 LLC, initially said it was not necessary to review the transfer of the shares of its parent company Chevron Philippines Ltd. to UC Malampaya Philippines Pte. Ltd.
Dela Fuente said that when Chevron Malampaya requested for a change of name, the DOE insisted on a review of its deal with UC Malampaya. “When I referred this to my bosses, the imprimatur of Secretary [Alfonso] Cusi is that in case of doubt, to apply the department circular as the benchmark to ensure that the parties are legally, technically and financially qualified,” Dela Fuente added.
He was referring to DOE Department Circular 2007-04-003, which mandates that “the rights and obligations under a petroleum service contracted executed under PD 87, as amended, shall not be assigned or transferred without the prior approval of the DOE.”
Dela Fuente said the DOE insisted on the review despite the diverging opinion within the department on the applicability of the department circular to the Chevron deal with UC Malampaya.
Dela Fuente said he stands by the recommendations on the financial soundness and legality of the Chevron-Udenna deal.