Competition watchdog Philippine Competition Commission (PCC) on Monday said the green light it gave to the UC Malampaya Philippines-Chevron Malampaya deal concerns only the competition aspect of the transaction.
The deal was approved by the Department of Energy (DOE) in April this year, after evaluating the technical, financial, and legal capability of UC Malampaya. After the deal was finalized, Chevron Malampaya was renamed UC38 LLC.
In so far as the transaction between Malampaya Energy, another subsidiary of Dennis Uy-led Udenna Corp. (UC), and Malampaya operator Shell Philippines Exploration B.V. (SPEX), PCC “defers the other aspects of a firm’s viability for operations to the sector regulators”.
“In the first transaction by Udenna acquiring minority company interest from Chevron Malampaya in 2020, PCC found no competition issue then because Udenna was not engaged in the natural gas business.
In Udenna’s transaction to take over controlling stake in Malampaya from Shell this year, this was not notified to PCC due to the increase in notification threshold to P50 billion under the Bayanihan 2,” PCC Chairman Arsenio Balicasan said in a statement. PCC reiterated the importance of merger reviews to safeguard the market from possible anti-competitive deals. “However, it defers to sector regulators the other aspects of accrediting or approving the transaction for standards outside of competition.”
The DOE has yet to approve the transaction involving SPEX’s sale of a 45-percent operating interest in the Malampaya gas project to Malampaya Energy. Pending review of this deal, the Davao businessman has a 90-percent operating interest in the Malampaya Service Contract No. 38.
Senate Energy Committee Chairman Senator Sherwin Gatchalian has branded the Chevron-Udenna deal as “defective and invalid.”
“There is enough evidence that the decision rendered by the Department of Energy to approve the sale of Chevron Malampaya’s 45 percent stake in the Malampaya gas project to the Udenna Group of Dennis Uy is defective and invalid,” Gatchalian said.
The approval is invalid because, according to Gatchalian, there is are a lot of “inconsistencies.”
“We got more confused by the DOE’s own admission that there is indeed confusion,” Gatchalian, who presided the committee hearings, said last week.
Gatchalian sought the clarification after learning from DOE Secretary Alfonso G. Cusi that no prior approval by the government was needed in Chevron’s transfer of its stake to Udenna’s UC Malampaya Philippines Pte Ltd. and that it was based on an evaluation using the “farm-in process” that, the senator noted, only made DOE’s explanation all the more confusing.
“Nowhere in the documents that the DOE submitted can you find the argument of using the farm-in [rule],” Gatchalian said, noting that “from day one, we were made to understand this should be approved by the government and the process will follow PD 87 and DC 2007.”
He was referring to DOE’s Department Circular 2007-04-003 prescribing the guidelines and procedures for the transfer of rights and obligations in petroleum service contracts under Presidential Decree 87.
Gatchalian recalled that the DOE earlier said, “The government should not review and approve it, but the DOE is now saying it approved the transaction but used a different method.” He added, “when I reviewed the documents, there is no such disclaimer that the DOE used a different method. So, all along, in our minds the transaction went through the normal process of DC 2007.”