The ongoing query on the Malampaya transaction is not in the realm of publicity stunt. And, it’s nowhere near political grandstanding.
The Malampaya transaction, controversial as it now appears, is not an ordinary, regular financial transaction. In my opinion, the buy-out is a financial transaction imbued, more importantly, with social responsibility because it concerns the most basic commodity, oil.
I have come to admire Udenna’s man at the helm, 48-year old businessman Dennis Uy (not to be confused with Dennis Anthony Uy of Converge ICT Solution of northern Luzon) because at an early age he already displayed his business acumen. In his formative years, he already showed financial independence by selling school supplies and basketball cards to his classmates.
Now, however, his investments appear to have gotten entangled. He, along with Energy Secretary Alfonso Cusi, is facing graft complaints related to the acquisition of Udenna’s subsidiary UC Malampaya of the majority shares in the Malampaya gas field. Udenna is the holding company of Uy’s business interests.
What’s compounding the issue is that early this month F2 Logistics, another Dennis Uy owned firm, has bagged the contract with the Commission on Elections to distribute the ballots, voting-counting machines and other poll-related supplies for the national elections in May 2022.
It’s politically sensitive. These two deals – F2 with Comelec and Shell-Udenna, may be distinct and separate but the owner is just one and the same person. It’s common knowledge that Dennis Uy from down south is among the biggest contributors in the 2016 election kitty of the top resident of Bahay Pangarap.
The buzzword from the ground is that Udenna may have or could have obtained “tacit approval” for the extension of the service contract license. If this business rumor is not fake news, then, it’s easy as a breeze compared to the NR (no response) on the extension request of Malampaya operator, Shell Philippines Exploration (SPEX) that has been put forward earlier.
SPEX has been wanting and waiting for the license extension in order to explore other areas within the service contract, in anticipation of the drying up of the existing offshore wells. But it is hamstrung from conducting this activity because it involves a huge capital expenditure, a disincentive to potential interested partiesconsidering that the license extension hangs. Also, it would take a minimum of five years before any yield could be commercialized. Under such conditions, there’s no opportunity to recoup the investment during that period.
The scenario changed altogether when Shell Petroleum N.V., SPEX’s mother company, inked an agreement to sell its ownership in SPEX to Udenna for a base price of $460 million with $360 million earnest payment while the balance of $80 million will be settled between 2022 and 2024.
However, the settlement of the balance hinges on the asset performance and commodity prices. SPEX controls 45 percent interest in the service contract.
Government-owned Philippine National Oil Co. owns 10 percent. Prior to the SPEX buy-out, a subsidiary of Udenna acquired the 45 percent stake of American-firm Chevron Malampaya LLC in the offshore oil rig project.
TheSPEX and Chevron purchase gives Udenna effective control. The transaction with Shell is pending approval by the regulators. From what I gathered in the business community, Udenna has yet to satisfy certain conditions stipulated in the purchase agreement.
These coming weeks will be crucial. Udenna has only 35 days left to comply with the deadline by end 2021. Considering that Udenna’s camp maintains that the approval of the energy department on the deal is not required, the nagging question is: Will Udenna satisfy the remaining conditionalities or will Shell simply fade away?
It’s no brainer. To keep the wheels of business oiled and churning, this Malampaya controversy has to be rightfully resolved.
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