Some of the country’s most influential business groups led by the Makati Business Club have strongly called on the Senate and concerned agencies to dig deeper and hold the government accountable for its failure to exercise its right of first refusal on the sale of Chevron and Shell shares.
“By failing to do so, the government may have given up tens of billions of pesos at a time when the government needs money more than ever and more importantly has put the country’s energy and national security at risk,” the groups said in a statement.
A subsidiary of Dennis Uy’s Udenna Corporation acquired Shell Philippines Exploration (SPEX) 45 percent interest in the Malampaya gas field. Through the deal, Udenna effectively controls Malampaya with a 90 percent operating interest. It bought Chevron Malampaya LLC’s 45 percent interest in the gas field in 2019. State-owned Philippine National Oil Company-Exploration Corporation holds the remaining 10 percent.
The groups said the Senate and the concerned agencies and groups should fully explore “why the government did not exercise its right of first refusal over Chevron’s and Shell’s shares in Malampaya.”
“The undersigned business associations call on the Senate and other concerned agencies and groups to continue to investigate, speak, and act on the recent transactions involving shares of the members of the Malampaya consortium,” the statement added.
The groups, however, said that they understand that, especially at this time, the government may have reservations about purchasing and paying cash for the Chevron and Shell shares even if it knows these will be offset by future revenue.
Nonetheless, they urged the Senate and concerned agencies and groups to fully explore if the government could easily get financing for such a purchase, as was done by the private purchaser, given Malampaya’s stable and highly guaranteed revenue stream.
In addition, the groups also urge the Senate to fully explore why the government failed to award a licence (whether extension or to a new consortium) by 2019. From an energy security standpoint, the delay may be a breach of fiduciary duty given that the existing wells are expected to be depleted by 2025, and the estimated 5 years needed to explore and develop additional wells.
“We urge them to more fully explore the government’s reasoning for allowing the sale of a critical energy asset to a group with, at the time of the bid, no experience or track record in gas exploration or production. Any breakdown could severely harm the economy, the environment, and even lives. Given the acquirer’s lack of expertise and heavily-financed nature of the proposed purchases, it is highly likely that they will take on partners. The government should scrutinize the buyer’s financial and technical capabilities and interests and should reserve, enforce, and exercise its right to block and invalidate transfers of shares and control that may be disadvantageous to the Filipino people,” the statement concluded.
Signatories to the statement include Energy Lawyers Association of the Philippines, Financial Executives Institute of the Philippines, Filipina CEO Circle, Integrity Initiative Inc. Investment Houses Association of the Philippines, Makati Business Club, Philippine Women’s Economic Network (PhilWEN), and Women’s Business Council Philippines.