State-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) has withheld its consent on targeted transaction closing for the $460 million Malampaya stake divestment of Shell Philippines Exploration B.V. (SPEX) to Malampaya Energy XP Pte. Ltd. (MEXP), a subsidiary of Udenna Corporation of Davao businessman Dennis A. Uy.

In a six-hour Senate Committee on Energy hearing, PNOC-EC President and CEO Rozzano D. Briguez disclosed that “as of 13 December 2021, PNOC-EC has officially communicated that PNOC-EC is withholding its consent to the transaction.”

Because of that decision of the government-owned firm, Atty Kiril Caral, managing counsel of SPEX, forthrightly stated “without the consent of PNOC-EC, we will not be able to proceed with completion at the moment.”

He further stressed “we are very disappointed at the outcome of the decision of PNOC-EC. However, we will continue to engage with them to find out if there is anything we can do to address the concerns that might have led them to this decision.”

The agreement for the unloading of Shell’s 45 percent interest in the multi-billion Malampaya gas field venture was signed with Uy-led MEXP in May this year with transaction closing eyed to be consummated on or before the end of 2021.

The declaration of PNOC-EC, however, is a major plot twist to the targeted flow of the transaction, raising questions on whether or not the planned shares divestment will still push through.

When asked by Senate Committee on Energy Chairman Sherwin T. Gatchalian on the particular implication of that ‘consent withholding’ and what were the conditions or reasons that triggered PNOC-EC on coming up with that decision, Briguez requested if he could be “given to chance to refrain from answering the question, since we only gave the notice of withholding the consent to the operator two days ago.”

He added that out of respect and in deference to the other parties, "We beg the committee’s understanding not to disclose the reason behind our decision as of the moment because our other partners and stockholders have yet to be informed.”

The PNOC-EC chief executive said their next move is to ask clearance from its directors. Once approved, PNOC-EC will "move forward regarding how to communicate with our partners.”

He, however, stressed “We cannot speculate how the operator (SPEX) intends to move forward from here, so I cannot totally agree with what the Chair (Senator Gatchalian) said,but it’s enough that I’m reiterating we communicated two days ago our withholding consent to the sale.”

"We’re still into the process wherein the operator of the service contract – that is SPEX, might communicate to us and ask clarification on it – and maybe, ask clarification on us not giving consent – withholding of consent -- that’s where we are right now,” he said.

Meantime, Caral confirmed that Shell already received the correspondence from PNOC-EC stipulating its decision to deny its consent on the SPEX-MEXP transaction, and he also qualified that “they (PNOC-EC) did not explain the reasons.”

The SPEX legal counsel sounded off “we are very much interested to understand the reasons for the decision at the appropriate time as I understand from General Briguez that this may not be the right forum (Senate hearing) for this discussion at the moment.”

He explained that “under the joint operating agreement, basically the representatives of Shell and PNOC will need to meet and discuss to understand why the decision was made; and that would be the first step. I would not go beyond that at this point until we have a clearer picture of the reasons behind the actions taken by the board of PNOC-EC.”