As it will be handing over the Malampaya gas field venture to a non-technical buyer, Shell Philippines Exploration B. V. (SPEX) indicated that it will be providing a “six-month transition operation” on the facility as part of the handover process to new owner Malampaya Energy XP Pte. Ltd. (MEXP), which is a subsidiary of the Udenna Group.
SPEX Managing Director and General Manager Don Paulino stated that Shell’s deal team in Singapore and buyer MEXP are due to discuss on possible technical services agreement that shall be firmed up -- so SPEX can still temporarily operate the gas production facility while the Udenna company learns and takes a deeper grip on how it will eventually run the asset.
“So the deal team and MEXP do recognize that in this part of the transition, maybe not everything will be properly resourced, so there needs to be some level of support coming out from Royal Dutch Shell in this case. And that support will come in the form of technical services agreement - and the period of that normally, by experience, is a maximum of six (6) months,” the SPEX managing director emphasized.
Paulino qualified that a six-month transition in operations is what SPEX ought to extend, “so Shell would not normally go beyond that. And that is to enable the new owner to do what they need to do.” The transition period is seen kicking off between November to December this year.
The SPEX executive stressed “this is not the first time that Shell is handing over to a smaller organization,” with him emphasizing that the overall experience of Shell in such business dealings had been generally positive.
In the divestment of SPEX’s 45-percent operating stake in the Malampaya gas field project, Paulino noted that part of the evaluation carried out by their deal team in Singapore was: assessment on the technical capacity of the buyer to takeover the operations of the gas field.
He specified that in the bid of MEXP, it submitted a three-tiered transition plan on how it can acquire and re-calibrate the skill set of its organization on continuing the operation of the gas facility.
The short-term plan, he said, is for MEXP to utilize the existing skills and technical competence of SPEX personnel that it will be absorbing when it comes to the day-to-day operations in the facility; then the other plan is to outsource some components of its operation via contracting of technical pool of people and consultants that are well experienced in upstream exploration, development and operations – including the drilling part; and the longer term plan will be to fully equip the company’s technical expertise by recruiting highly experienced talents in its organization.
“Shell has looked into a number of things technically with respect to the award to Udenna. So the first one that Shell had looked into is the commitment of Malampaya Energy XP to get all the people, which means on a day-to-day basis, the day-to-day operations can be sustained and can be continued,” Paulino narrated.
He expounded that the second strategy in MEXP’s transition plan is “to bring in additional expertise. The way they are doing that is they’re doing in a variety of ways – one of it is contracting it up.”
Paulino further said “the other part that they’re also looking at is related to the subsea or exploration part in the drilling,” and in his view, that is another sphere that MEXP will be procuring via contracts or consultancy arrangements.
The third anchor of the transition plan, he reiterated, is “bringing in some of the upstream experience, because it’s good to have that overall broad commercial understanding of the business; and it’s also important that you get an understanding of what is really like to run an upstream company,” and that can be underpinned by tapping people with wide experience and deep expertise in the oil and gas business.