DOE wants higher gov't share in Malampaya revenues

The Department of Energy (DOE) wants to corner more revenues in favor of the government from the operations of the Malampaya gas field as it now looks into the possible license extension of the natural gas-to-power facility’s service contract beyond 2024.

The Malampaya Consortium’s Service Contract 38 began commercial operations in 2001 and will end in 2024.

Davao-based tycoon Dennis Uy’s conglomerate Udenna Corp. is set to hold 90% control of the SC 38 after it acquired Chevron’s 45% participating interest in consortium and is expected to finalize its deal with Dutch petroleum giant Shell for another 45% operating interest in the Malampaya gas field.

Prior to Uy's planned takeover, the Malampaya Consortium was composed of Shell Philippines Exploration B.V. (SPEx), Chevron, and the Philippine National Oil Company-Exploration Corporation, which still holds 10% interest in SC 38.

At a virtual press briefing on Wednesday, Energy Assistant Secretary Gerardo Erguiza Jr. said negotiations between SC 38 operator SPEx, which will soon be acquired by Udenna unit Malampaya Energy XP Pte. Ltd., for the extension of Malampaya gas field service contract is ongoing.

Erguiza said there are eight parameters that are being discussed with the consortium members in regard to the license extension of SC 38 that they must comply with.

“Six of these [eight] items already have been [complied] upon,” he said.

The Energy official said the eight items that the consortium must comply before the DOE approves the license extension are assessment of the remaining gas reserves in Malampaya gas field, the members’ development work program, the decommissioning and restoration plan, asset disposal, gas pricing, social development/responsibility fund, banked gas, and government sharing.

“The DOE will not just approve it, we will follow a framework,” Erguiza said.

The DOE official said two items are still being negotiated, one is the banked gas, which the government stocks for future use, and the government's share in the revenues from the Malampaya operations.

“At present, the government sharing is 60:40 [in favor of the government]. The DOE’s position is 80:20 and the alternative position is 70:30. But the DOE now wants 80:20 [sharing] so that the share of the government will be bigger,” Erguiza said.

Section 7.3 (b) and 7.4 of SC 38 provide that the DOE shall be entitled to receive 60% of net proceeds from Malampaya, while the contractor will keep 40% of the net proceeds from petroleum operations.

Earlier, the DOE said in a House budget hearing that the total government collection from the Malampaya project reached P332,061,684,842.47 from January 2002 to June 30, 2021.

Udenna-Shell deal

On the pending review of the Udenna-Shell deal for the 45% operating interest in SC 38, Erguiza said “this could go independently” from the discussions on the Malampaya service contract extension.

“At the rate we are going right now, we are going to decide on the transaction first, most likely… The extension can proceed independently but we see we have to address the concerns being raised right now,” he said.

Uy's planned takeover of the Malampaya facility is the subject of the graft complaint filed before the Office of the Ombudsman against Energy Secretary Alfonso Cusi, Uy, and officials of Chevron Philippines and Shell Philippines Exploration B.V.

“If the sale of shares is approved, theoretically speaking, SPEx is still the entity [in the consortium] but the owner of the shares is Malampaya Energy,” Erguiza said.

He added that the DOE does not see any reason to rescind Udenna’s planned takeover of the Malampaya project.

“Procedure-wise, if there are calls to rescind, they have to file necessary action, and they will respond to it accordingly,” he said.

The DOE official reiterated that the transaction is beyond the agency’ purview since it is between two companies.

However, the Energy department still opted to review the deals considering the country’s energy security will be at risk.

Energy Secretary Alfonso Cusi earlier said that the transaction is beyond the agency’s purview.

Udenna Corp. has refuted claims that the government will be financially disadvantaged after it acquired controlling stakes in Malampaya.

The Malampaya gas-to-power facility fuels three gas-fired power plants with a total generating capacity of 2,700 megawatts (MW), providing up to 30% of the power generation needs of Luzon.

Connected to onshore gas plants in Batangas, the Malampaya offshore facility in northern Palawan was inaugurated in 2001. —LBG, GMA News