Energy Secretary Alfonso G. Cusi said his office will thoroughly review the capabilities of Udenna Corp. (UC) to take over the Malampaya gas-to-power project in northwest Palawan.
“On the financial, technical and legal review by the DOE [Department of Energy], we want to make sure that gas supply and energy security will not be compromised,” said Cusi in a text message over the weekend when asked for his comment.
Dennis Uy-led UC now controls 90 percent of the gas project after it announced last week that its unit, Malampaya Energy XP Pte. Ltd., signed a deal with Shell Petroleum N.V. to sell its 100-percent shareholding in Shell Philippines Exploration B.V. (SPEX).
Spex holds a 45-percent operating interest in Service Contract 38, which includes the Malampaya gas field.
Aside from SPEX, the other partners in SC38 are UC38 LLC, a subsidiary of Udenna (45 percent) and state-owned PNOC Exploration Corp. (10 percent).
The sale, which is still subject to regulatory approvals, is worth $380 million, with additional payments of up to $80 million between 2022 and 2024, depending on asset performance and commodity prices. The transaction is targeted to be completed by the end of 2021.
Cusi said the review will be conducted internally. “The DOE will do it,” he replied when asked if the agency will tap third-party consultants to conduct the review.
Energy Assistant Secretary Leonido Pulido III said in a text message last week the deal between Malampaya Energy and Shell Petroleum N.V is purely a private business transaction and that the DOE has no part in this agreement nor the selection process.
He said, however, that the parties need to formally inform the DOE and submit the necessary documents.
“This sales agreement will still need 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,” he said.
The DOE’s only task, he said, is to evaluate and determine the legal and financial capability of Malampaya Energy with the acquisition of 45 percent from SPEX and technical capability to be the operator for SC 38.
“The DOE can only deny the transfer if it concludes that Malampaya Energy has no sufficient financial capability to fund the work commitments of SC 38 with respect to the 45 percent [from SPEX] and/or deny the transfer of operatorship if Malampaya Energy has no technical capability,” said Pullido.
Shell made an assurance that the SPEX staff would continue their employment under the new ownership, providing continuity and contributing to ongoing operational reliability and safety. Malampaya and its staff made significant contributions to the Philippines and to the local community over the past two decades and are expected to continue playing an important role in providing energy for the Philippines.
Belinda Racela, a top executive of Malampaya Energy, said the ongoing safety and reliability of Malampaya is the group’s top priority and would be delivered by the same experienced team of upstream professionals from SPEX working with consistent practices.
“They will be strongly supported by our newly established Upstream Decision Review Board of industry leaders and the ex-Chevron and ex-Shell upstream specialists in our Malampaya Energy business, who are already actively involved in managing the Malampaya consortium,” Racela said.
“We are excited about the future growth opportunities at Malampaya. Our teams are accelerating exploration and production plans to extend the life of the Malampaya field and expand supplies of affordable, safe, low-carbon and indigenous energy for the nation.”
Malampaya delivers a fifth of the Philippines’s growing electricity requirements through the supply of natural gas to five power plants in Luzon. The asset has been operating safely and reliably since 2002 and has contributed over $10 billion in revenues to the Philippine government to date.