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Transparency sought in Malampaya stake sale

The Energy department should be transparent in its review of the sale by Shell Philippines Exploration B.V. (SPEx) of its entire stake in the Malampaya deepwater gas-to-power project to a subsidiary of Dennis A. Uy’s Udenna Corp., a lawmaker said.

Senator Sherwin T. Gatchalian said in a statement on Friday that the sale of SPEx’s stake to Udenna unit Malampaya Energy XP Pte. Ltd. should be made clear to the public.

In May, SPEx announced that it had signed an agreement for the sale of 100% of its shareholdings in the project to Malampaya Energy XP. The deal comes after SPEx said in September last year that it was selling the stake.

“This is no ordinary asset. What are the sets of criteria that they will use in evaluating this transaction? It has to be very clear to the public,” said Mr. Gatchalian, who heads the Senate’s energy committee.

SPEx holds 45% interest in Service Contract (SC) 38, which covers the Malampaya gas field. The base consideration of the SPEx sale is $380 million, with additional payments of up to $80 million from 2022 to 2024 depending on asset performance and commodity prices.

The other firms with interest in SC 38 are UC38 LLC, another Udenna subsidiary, owning 45%; and Philippine National Oil Co.-Exploration Corp. with 10%. UC38 acquired its stake in March last year from Chevron Malampaya LLC.

Energy Secretary Alfonso G. Cusi said in a recent television interview that his department was still evaluating the transaction and that no decision had been finalized.

Mr. Cusi also said that the deal is a private business transaction but must first meet government requirements before receiving the stamp of approval from the Department of Energy (DoE).

“That one has been submitted to us, and we are evaluating the financial, technical

capability of the transaction. It’s in process actually right now, so we have no decision on that [yet],” Mr. Cusi said.

Mr. Gatchalian said that the government should examine the transaction, adding that the DoE should certify that it is legal and “that the new operator is financially and technically competent and has the capability of running Malampaya and supplying electricity to our homes.”

SPEx is the operator of the offshore Palawan project under SC 38, which will expire in 2024. The gas field’s reserves is said to last beyond that year.

“Whoever steps in to take the place of Shell will supply gas to our homes. Malampaya gas project powers about one in every five homes in Luzon. It’s important that we keep our lights on, that we have a constant supply of gas and in order to do that, we need to have very competent and financially strong operators,” Mr. Gatchalian said.

The lawmaker made a similar call in May after SPEx announced its agreement with the group of Davao City businessman Mr. Uy.

Mr. Gatchalian previously described the Malampaya project as the Philippines’ most significant oil and gas upstream development, which supplied 19.16% of the country’s electricity requirement for 2020.

He also said the project had contributed around P261.68 billion to the national government since the start of its commercial operation in 2002 until 2019.

BusinessWorld sought the comment of the DoE regarding Mr. Gatchalian’s statement but it has not issued a response as of deadline time. — Revin Mikhael D. Ochave

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