Solon raises red flag over Chevron-Udenna deal


Senator Sherwin Gatchalian raised the red flag Sunday over the “defective and invalid” Chevron-Udenna deal involving the Malampaya gas project.

“There is enough evidence that the decision rendered by the Department of Energy (DOE) 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, chairman of the Senate Energy Committee warned.

In a statement over the weekend, Gatchalian said: “My opinion of this is that it is a defective approval, therefore, the approval is invalid because clearly there is a lot of inconsistencies and any major transaction like this should not lead to confusion.”

The lawmaker lamented that “instead of us appreciating it, we got more confused by the DOE’s own admission that there is indeed confusion,” indicating the scrutiny into Udenna’s buy-out of Chevron in Malampaya just cropped up during the Senate panel’s hearing on the DOE’s proposed 2022 budget.

Gatchalian sought the clarification after learning from Energy Secretary Alfonso Cusi that no prior approval by the government was needed in the 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, however, added that “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.”

The senator then sought clarification from Cusi during the budget hearing as he dug up the statements given by DOE officials earlier to the Senate Energy Committee hearing in November 2020 affirming that the transaction between Udenna and Chevron requires prior approval of the DOE as stated under Section 11 of PD 87. Moreover, he recalled that the positions aired by the DOE through then Assistant Secretary Leonido Pulido and subsequent submissions by the department to the Senate stating that “the transfer of interest in the Malampaya gas field project must be approved by the department before it becomes binding and effective.”

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