The Department of Energy (DOE) has officially approved the transfer of the divested 45-percent shareholdings of American firm Chevron Corporation in the multi-billion Malampaya gas field project to UC38 LLC, a subsidiary of Udenna Corporation owned by businessman Dennis Uy.
In a formal correspondence to the Malampaya consortium, the DOE stipulated that “after thorough review and evaluation of the submitted document of SC (Service Contract) 38, the acquisition of participating interest of UC 38 LLC under SC 38 was found acceptable and is hereby approved.”
With the green-lighted transfer of Chevron’s equity in the gas field venture to the Uy-led firm, the energy department specified that UC 38 LLC is already the duly recognized interest-holder in the project; and stands as one of the major shareholders in SC 38.
The others with equity ownerships in the consortium are Shell Philippines Exploration B.V. (SPEX) with 45-percent stake and also the field operator; and state-run Philippine National Oil Company-Exploration Corporation which holds the minority share of 10-percent.
SC 38 is the license that binds the commercial development and the contractual arrangements that the Malampaya consortium has with the Philippine government in the operations of the gas field as well as the royalty sharing covenant that the parties-in-interest had agreed upon in the venture. Malampaya’s SC 38 will expire in 2024.
In the finalization of Chevron’s stake sale to Udenna, the DOE stated: “it should be understood that the transfer of participating interest will not in any way modify, alter or diminish the rights, obligations and commitments under SC 38.”
The department reckoned that the decreed ownership change of unloaded interest in the Malampaya project is in keeping with the prescription of its Department Circular No. DC 2007-04-003, which sets the guidelines and procedures for “the transfer of rights and obligations in petroleum service contracts”, as underpinned by Presidential Decree No. 87 or the Philippine Oil and Gas Law.
It has to be recalled that in a Congressional investigation November last year, the DOE told the Senate Committee on Energy that the sale transaction was still “incomplete” and that the document signed by parties then remained to be a “voidable contract.”
On those legislative proceedings, the DOE revealed that the financial and legal units of the agency were still evaluating the document-submissions of Udenna; and there were still assertions then that the divestment could still be declared a failure if the government would find any lapses in the process of firming up the transaction.
But in the final evaluation of the DOE, it established that all requirements and documentary-submissions have been complied with by Udenna; hence, the transfer of the shares had been subsequently authorized.
As previously disclosed by the DOE, the Udenna group paid US$565 million on its acquisition of the Chevron shares. The sale was finalized in March last year.
The Uy-controlled firm also apprised Congress previously that the funds it funneled into the acquisition came mainly from loans with ING Bank and the Australia New Zealand (ANZ) Banking Group.