The Senate Committee on Energy is requiring the Department of Energy (DOE) to legally justify the approval it bestowed on the transfer of the unloaded 45-percent shareholdings of Chevron Corporation in the Malampaya gas field venture to buyer Udenna Corporation.
In a statement to the media, Senator Sherwin T. Gatchalian, who is the chairman of the energy committee in the upper chamber, stipulated that there is a “need for an explanation from the DOE’s end on how they could justify their approval of the transaction.”
Tricky legal and technical concerns are being raised, according to the lawmaker, because “this involves not just an ordinary asset. It demands a lot of experience, technology and global connections.”
The DOE has rendered its approval on the transfer of the Chevron shares to Udenna subsidiary UC 38 LLC, in a letter-correspondence to the Malampaya consortium that was issued by the office of Energy Secretary Alfonso G. Cusi on March 26 this year.
The Senate energy committee insisted that “technical know-how is required and this is because we’re looking at the larger picture, which is the energy security of the country.”
On its own, Udenna does not have any established track record or experience in the upstream oil and gas sector – although company chairman Dennis A. uy indicated that they absorbed the technical team from Chevron to satisfy the operational facet of their business entry into the Malampaya venture.
Gatchalian noted that in the changeover of ownership and responsibilities in the Chevron-Udenna deal, “the consumers are the primordial concern,” with him adding that “we want to make sure that the consumers will receive 24/7 electricity at a least-cost manner.”
The Senate energy committee chairman similarly reminded the DOE that “we have laws and regulations that govern all of these transactions; and those laws are meant to create a stable environment in the power sector.”
The solon further stressed that despite the presence of a DOE policy requiring prior government approval in the divestment of interests in upstream petroleum project, such State go-signal was only sought belatedly by Udenna and Chevron around October last year — or eight months after the parties-in-interest had already finalized the sale and purchase agreement (SPA) on March 11, 2020 and corresponding payment was already remitted by Udenna to the equity-seller.
Gatchalian said ‘the advance approval policy’ is also enshrined in the joint operating agreement (MOA) of the Malampaya consortium, which prescribes that “for the sale of shares to be finalized, the party or the transferer has to ensure that they get all prior permits or approvals from the government.”
He pointed out that in the case of the Chevron-Udenna deal on Malampaya, “it was only on October 28 last year that the DOE has been officially provided with the document on the Malampaya shares’ divestment.”
In an investigation November last year, the Senate energy committee thus required the DOE to submit “legal basis in reviewing the transaction – whether there is a need for another issuance to clarify if these kinds of transactions would need executive approval or not.”
The Congressional body also sought recommendations or inputs from the energy department if there are warranted amendments that have to be incorporated in Presidential Decree 87 or the Philippine Oil and Gas Law to prevent confusion or chaos on such kind of transactions in the future.