By Myrna M. Velasco
The Department of Energy (DOE) has formally declined the offer of Pangilinan-led PXP Energy Corporation to acquire the 45 percent stake of American energy giant Chevron in the multi-billion Malampaya deep water gas-to-power project.
Energy Assistant Secretary Leonido J. Pulido III said the department had not accepted the proposal of the Pangilinan group because it is not in keeping with the terms and policies on securing a petroleum service contract with the government.
“What they did is submit a proposal for an area with existing service contract. So we have to deny it,” the energy official stressed. The Malampaya project is under Service Contract (SC) 38 which is majority owned by Shell Philippines Exploration B.V. (also the field operator); and Chevron at 45 percent equity each; then Philippine National Oil Company-Exploration Corporation (PNOC-EC) as minority shareholder with 10 percent stake.
PXP Energy had dangled an alternative offer to acquire the 45 percent shareholdings of Chevron Malampaya LLC in the country’s only commercial gas field project – channeling its tender direct to the DOE.
That essentially attempted to match the offer of Udenna Group of Dennis Uy in the American firm’s stake in the Malampaya venture – which was reportedly set at a “premium” offer.
Pulido noted that PXP Energy had already been advised that “we cannot accept their proposal” – with him emphasizing that there are only two ways for any party to corner a petroleum service contract – one is to nominate a service area that is not yet covered by a contract; or join the bidding for the pre-determined petroleum blocks as offered by the DOE.
The Pangilinan group had not just offered to buy the Chevron stake, but it also propounded to convert the Malampaya field into an eventual liquefied natural gas (LNG) hub at the lapse of the project’s service contract in 2024.
In the Udenna-Chevron merger and acquisition (M&A) transaction, it was hinted that businessman Dennis Uy has been seeking partnership with state-run Philippine National Oil Company (PNOC) for the deal. That has been confirmed by government sources, although the details of the negotiations are still being kept under wraps.
On the ‘right of first refusal’ that can be invoked by the existing Malampaya partners under their joint operating agreement (JOA), it was gathered that field operator Shell Philippines Exploration B.V. (SPEX) may no longer exercise it.
When asked on the matter, Energy Secretary Alfonso G. Cusi said the department has yet to be informed on the outcome of the discussion of the concerned parties “because that’s a private transaction”, but he indicated that the ‘right of first refusal option’ may no longer be consummated.
While a sale and purchase agreement (SPA) had already been signed between Udenna and Chevron, it was noted that closing of the transaction – primarily the payment – has yet to be sorted out and completed.
The deal will also need to go through the approval process of the Philippine Competition Commission (PCC), as had also been sounded off earlier by the Uy-led firm.