The Department of Energy is confident that by end of this year, the review of the purchase of Malampaya shares to Razon-led Prime Infrastructure Capital Inc.’s (Prime Infra) will be finished and that the review will make sure it would beneficial for the country and the people.
Energy Secretary Raphael P.M. Lotilla said that special technical and financial review committees have been formed and consultants have been tapped to review the proposed sale of the share of Shell Philippines Exploration B.V. to the Razon-led Prime Infrastructure Capital Inc.’s (Prime Infra) and the review is on track.
He told a press briefing :
“We want to assure the public that the DoE will exercise the utmost care and diligence in carrying out its mandate involving the country’s upstream oil and gas sector in general, including the country’s biggest gas-to-power initiative to date.”
Lotilla said the special technical and financial review committee will be chaired by Rufino B. Bomasang, with Francisco G. Delfin, Jr. and Froilan A. Tampinco as members, while Edgar Benedict C. Cutiongco will serve as a consultant, Business World reported.
Bomasang previously served as president of PNOC Exploration Corp. (PNOC EC), while Delfin was a DoE undersecretary and the current vice-president of PetroEnergy Resources Corp. Tampinco was president of the National Power Corp., while Mr. Cutiongco had a stint at PNOC EC.
The financial review committee will be chaired by Roberto G. Manabat, while J. Carlitos G. Cruz and Gabriel R. Singson, Jr. will serve as its members and Ephyro Luis B. Amatong as a consultant. Luis Ma. G. Uranza will act as a consultant for the legal aspect of the sale.
Service Contract 38, which covers the Malampaya project located northwest of Palawan Island, West Philippine Sea, is operated by SPEx, which also holds a 45 percent interest in it. State-led PNOC EC has a 10 percent stake.
A unit of Udenna Corp., chaired by Dennis A. Uy, previously acquired the 45 percent in the deep-water project held by Chevron Malampaya LLC. The deal, forged in October 2019, was approved by the DoE in March 2021.
Another Udenna unit has a pending deal to acquire the 45 percent stake of SPEx in an agreement forged in May 2021. The acquisition awaits the approval of the DoE, which in turn is waiting for the consent of PNOC EC.
In June, businessman Enrique K. Razon, Jr. said that his group was poised to take a controlling stake in the project.
In July, Razon’s Prime Exploration Pte. Ltd., a subsidiary of Prime Infrastructure Capital, Inc. (Prime Infra), announced that it had signed a share purchase agreement acquiring MEXP Holding Pte. Ltd. from a subsidiary of Udenna. MEXP previously signed an agreement with Shell Petroleum N. V. to acquire SPEx.
Lotilla reiterated that the review of Prime Infra’s acquisition is on track. He said on Aug. 25 that the decision on the Malampaya stake sale will be made before the year ends.
Last week, the DoE established a legal advisory panel to guide the department on legal issues, including the Malampaya deal, as well as accelerating and expanding the development of indigenous energy resources in the country.
The legal advisory panel includes retired chief justices Renato S. Puno, and Artemio V. Panganiban.
The Malampaya gas field, which delivers around 20 percent of the country’s electricity requirements, is operated through Service Contract No. 38 (SC 38) granted to the consortium of SPEX (Shell Philippines Exploration B.V.), Chevron Malampaya (now UC38LLC), and state firm PNOC-EC.
Lotilla acknowledged that the ongoing review is crucial to the country’s energy security as the “present Malampaya-Camago field is a finite one,” and that “the resolution of legal, technical and financial issues” on the sale of Malampaya operator Shell Philippines Exploration’s (SPEX) interest to Prime Infra is “important for the energy security of the country.”
The Malampaya project is one of the country’s most important power assets and is the only local producer of indigenous natural gas. It began operations in 2001, with the consortium’s license for the project set to expire in 2024, according to Business Mirror.
Operating since 2001, the Malampaya gas field supplies fuel to around 40 percent of gas-fired plants in Luzon, generating around 3,457 megawatts (MW) for the Luzon grid.
It may be recalled that SPEX sold its 45-percent stake to Malampaya Energy XP Pte Ltd. (MEXP), a company previously owned by Udenna Corporation of Davao businessman Dennis Uy. PNOC-EC did not give its consent to this deal. Later on, MEXP and Prime Exploration Pte. Ltd., a subsidiary of Prime Infra, signed a share purchase agreement.
Prime Infra’s undertaking
Prime Infra earlier vowed to accelerate investments in the Malampaya gas field to improve the output of existing wells and, if possible, develop new wells in the area once license extension is secured from the government.
Prime Infra’s investment in the expansion of Malampaya operations will also be critical to providing the necessary infrastructure to support the development of natural gas in the area, one of the key points defined in the administration’s energy agenda.
Lotilla said last week the review on the Malampaya deals would be finished and resolved within the year, with PNOC-EC likely to give the green light on Prime Infra’s investment deal. “The schedules are quite tight … Even if we stretch a bit, I don’t think they would have to go beyond this year,” the DOE chief had said.
Explaining the process, Lotilla said PNOC-EC, with its 10-percent stake in the Malampaya project, “will give consent first.”
“The PNOC Exploration Corp. is considering the matter of giving its consent to the sale of Shell’s interest, and as far as the Department of Energy is concerned, we would have to review the sale and the terms and conditions under which it is going to be made,” Lotilla said.
“But I can assure you that we will try to adhere to the timelines that are in the department circular that I issued in 2007 on the renewal and approval of transfers and interest in the service contract. I realize that the deadlines there are tight, but as much as possible, we would like to address these issues within the framework of that department circular,” he added.
“The main objective is to ensure that the Philippine government and the Filipino people will be able to take full advantage of this resource and that within the framework of Presidential Decree 87, we look forward not only to the extraction of the existing resource but that we also look to the full development of the other oil and gas resources of the country,” he said.
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