THE vice chairman of the House Committee on Good Government and Public Accountability on Sunday called the proposals for the government to take over Malampaya a “$1-billion foolish idea,” as the government is already collecting 60 percent of the net proceeds from Malampaya’s petroleum business.
Surigao del Sur Rep. Johnny Pimentel made the statement amid calls for the government to match the $460 million offered by a private firm to acquire Shell Petroleum N.V.’s 45-percent operating stake in the offshore Malampaya gas field.
“A foolish idea that would easily force taxpayers to suffer another $1 billion [P50 billion] in public debt obligations,” said Pimentel, adding, “there’s no point in the government suddenly having to borrow and spend a lot of money to match any private party’s offer to buy Shell out.”
Several groups earlier urged lawmakers “to fully explore if the government could easily get financing” to take over Shell’s operating stake in the gas project.
“But the takeover cost is actually around $1 billion, because on top of paying $460 million to Shell, the government would have to borrow and spend another $500 million to $600 million to explore and develop additional production wells,” Pimentel pointed out.
Record deficit
“And the government simply cannot afford to incur additional debt obligations now, considering its worsening budget deficit,” Pimentel said.
The government reported an unprecedented P1.37-trillion budget deficit in 2020, due to aggressive spending to fight the Covid-19 pandemic and stimulate an economy battered by prolonged lockdowns, with growth plunging to three-decade lows..
The gap between government spending and income is expected to further widen this year, after the Bureau of the Treasury reported a P1.14-trillion budget deficit from January to September.
Pimentel warned that the government’s deficit-spending, while needed, “is bound to haunt businesses and the economy in the months ahead, if left unchecked.”
“Once the economy starts to recover, bank lending rates will climb fast as the government competes with the private sector in borrowing more money to repay the public debt,” Pimentel said.
No money to match
Pimentel explained that both the state-owned Philippine National Oil Co. (PNOC) and its subsidiary, PNOC Exploration Corp., do not have the $1 billion needed to buy Shell’s Malampaya stake and run the gas project.
“The reality is, all government-owned or -controlled corporations, including PNOC and PNOC EC, have been remitting up to 75 percent of their annual net income as cash dividends to the national treasury,” Pimentel said.
Citing Department of Finance records, Pimentel said that in 2020 alone, PNOC and PNOC EC had to remit a combined P7 billion in cash dividends to help fund the Bayanihan programs meant to fight the pandemic.
Pimentel also questioned the claim of some groups that the government would be “giving up billions of pesos” if it did not acquire Shell’s Malampaya stake.
“What billions of pesos are they talking about? If you give something up, that means you had it from the start. But the government never had Shell’s operating stake,” Pimentel said.
Pimentel said Shell obtained its operating stake in Malampaya way back in 1990, when the government awarded Shell Philippines Exploration B.V. (SPEX), the petroleum service contract to develop the gas field at a cost of $4.5 billion.
Shell recently agreed to sell its 100-percent stake in SPEX to Malampaya Energy XP Pte Ltd, a subsidiary of Udenna Corp.
The transaction is valued at $380 million, with extra payments to Shell of up to $80 million between 2022 to 2024, contingent on Malampaya’s output and commodity prices.
No money for Petron
Meanwhile, after San Miguel Corp. expressed its willingness to sell Petron back to the government, Assistant Majority Leader and Cebu Rep. Eduardo Gullas said the government neither has the money nor the operational flexibility to run an extremely costly oil and gas company.
Gullas made a separate statement after Petron President Ramon Ang said he is willing to sell anytime the oil company back to the government.
“Thanks, but no thanks. Business tycoon Ramon Ang can keep Petron Corp. as Congress would never bankroll a government takeover of the country’s only oil refiner,” he said.
“We in Congress won’t allow the government to buy Petron back for the same reason that we won’t allow the state-run Philippine National Oil Co. to acquire Shell B.V.’s 45 percent operating stake in the Malampaya gas project,”
Gullas said.
SMC’s Petron, which has an 18.6-percent share of the local petroleum market, reported a net loss of P11.4 billion in 2020, when the Covid-19 pandemic destroyed the demand for fuel products.
The oil refiner has since bounced back, reporting a net income of P5 billion from January to September this year. “As to Malampaya, it is enough that the government is benefitting financially from the gas project without assuming any financial risks,” Gullas said.
“Actually, on top of the government’s share, PNOC also gets a portion of the money that goes to the Malampaya contractors, because PNOC has a 10-percent stake in the service contract,” Gullas added.
Gullas said the only business that the State should go into now is the business of providing public transportation, particularly passenger and cargo railways.
“This is because sound transportation investments lower the costs of moving people and goods, improve productivity and foster long-term economic growth as well as jobs expansion,” Gullas said.