PNOC dangles initial offer for Shell’s stake in Malampaya

Published September 24, 2020, 12:40 PM

by Myrna M. Velasco

State-run Philippine National Oil Company (PNOC) has initially sounded off interest in the 45-percent shareholdings of Shell Philippines Exploration B.V. (SPEX) in the multi-billion Malampaya gas field venture.

PNOC President and CEO President Reuben S. Lista indicated that there was an initial meeting between the state-run firm and the executives of Shell on Thursday (September 24), and the interest of the government on the asset had been conveyed to them.

As communicated to the government, the sale plan is a global decision of the Anglo-Dutch energy giant, and it will be the principals of Shell that will hold the key as to which investor will eventually be selected as the buyer.

At this stage, Lista said PNOC will have to undertake due diligence, with him stressing that “we will be remiss of our role as the national oil company if we do not do due diligence.”

The energy investment arm of San Miguel Corporation is also among the companies that would want “to check” on the Malampaya stake being unloaded, according to company president Ramon S. Ang.

In a statement to the media, SPEX Managing Director Don Paulino indicated that their key assurance to the government is a “smooth transition,” especially since SPEX is the operator of the gas field.

Despite the sale plan, the company said the Philippines “remains an important country for Shell after over a century of successful operations.”

Paulino added “Shell will continue to pursue opportunities where it can leverage its global expertise in line with its strategy.”

Malampaya was discovered in 1989 through the Camago field in Palawan – and the initial target was for oil discovery, but gas emerged as the flourishing resource following successive well drillings.

A joint venture of foreign firms Shell and Oxy in 1992 prompted discovery of gas at an adjacent area – and that led to eventual commercial development and then the birth of the gas industry in the Philippines.

The scale of gas discovery stimulated investments in gas-fired power projects to underpin the gas sale and purchase agreements (GSPAs) for Malampaya’s yield, and that also whipped up the installations of generating facilities which for years contributed more than 30-percent of Luzon grid’s electricity requirements.

On its long years of experience and vast expertise in the upstream sector, SPEX clinched the operatorship of the gas field; and Chevron came later on as a partner – taking the other majority shareholdings of 45-percent that was divested by Oxy.

The government through Philippine National Oil Company-Exploration Corporation (PNOC-EC) likewise cornered the strategic 10-percent minority share in Malampaya – and that had proven to be a viable revenue-generating proposition for the state-run company.

Across administrations, the government always opted to increase its share in the Malampaya project, but this is a pitch that has yet to be concretized.