DOE reviews Chevron’s sale of Malampaya stake
Catherine Talavera (The Philippine Star) – November 12, 2020 – 12:00am
MANILA, Philippines — The Department of Energy (DOE) is reviewing the sale of Chevron Malampaya LLC’s stake in the Malampaya deep water-to-gas power project to a unit of Dennis Uy’s Udenna Group.
“The acquisition of the Chevron Malampaya shares is currently under evaluation by the DOE to determine the technical, financial and legal capacity of the transferee,” DOE Assistant Secretary Leonido Pulido III said in a Senate hearing Tuesday.
Undenna subsidiary UC Malampaya Philippines Pte. Ltd. (UCMPPL) in March said that it has completed the acquisition of Chevron’s 45 percent stake in the Malampaya project.
While the transaction was completed in March, Pulido said the DOE only received in October a letter from Malampaya operator Shell Philippines Exploration B.V. (SPEX) endorsing Chevron Malampaya’s request for the approval of the transfer of participating interest to UCMPPL, as well as the request for the change of Chevron’s name to UC38 LLC.
Under Department Circular 2007-04-003, it is the service contract holder that can endorse any such transfer and seek for the approval of the DOE.
The DC prescribes the guidelines and procedures for the transfer of rights and obligations in petroleum service contracts under Presidential Decree 87.
In August, the DOE wrote to SPEX enjoining the operator to submit a request for the transfer of Chevron’s 45 percent stake.
Pulido said that the petroleum industry is a very technical sector that requires a lot of expertise and experience.
“Malampaya is an offshore facility that’s worth a lot of money. It’s critical for the government to ensure that any potential transfer would be transferred to an entity that has a similar background, similar experience and similar capacity,” he said.
Meanwhile, Pulido emphasized that no violation was committed by Chevron and UCMPPL in proceeding with their transaction before being evaluated by the DOE, with the DOE approval not stated in sale purchase agreement between the two parties.
“There’s no violation because we understand the nature of the joint operating agreement within the parties. Before any sale would proceed, the joint operating agreement requires them to first get the consent of other members of the consortium and at the same time, to offer the other members of the consortium their right to match the offer,” Pulido said.
“And so in view of DOE, we would have to wait for all of those events to take place before an actual ‘sale’ can be considered and evaluated by the DOE,” he said.
In the event that the UCMPPL does not pass the DOE’s evaluation, Pulido said the DOE would not recognize the transfer of the 45 percent stake and would ask Chevron to look for another purchaser that has the appropriate technical, legal financial capability.
Operating since 2001, the Malampaya offshore platform and onshore gas plant are key installations to the nation’s energy security. Malampaya is the only local producer of indigenous natural gas, supplying up to 40 percent of Luzon’s electricity needs.
The Malampaya contract will expire in 2024.