Davao businessman Dennis A. Uy will be paying colossal $1.025 billion for the 90 percent stake in the Malampaya project, which gas production is expected to start depleting next year.

Udenna Corporation's UC 38 LLC first paid $565 million for the 45-percent shareholdings of American giant Chevron Corporation. By end this year, the Uy will be closing the sale transaction for the 45-percent stake of Shell Philippines Exploration B.V. (SPEX) valued at $460 million, inclusive of $380 million payment to Shell and additional spend of $80 million for the Malampaya field within 2022 to 2024 timeframe.

For the payment of the initial 45-percent Malampaya share acquisition, Udenna previously disclosed it tapped loans from Australia New Zealand (ANZ) Banking Group and the ING Bank. Udenna remitted the payment to Chevron upon their transaction closing in March last year.

On Udenna's acquisition of the Shell stake, the industry is abuzz with talks and guesses as to the sourcing of funds given recent reports that some of the Davao-based businessman's assets are under financial distress.

Based on previous studies submitted to the Department of Energy (DOE), Malampaya’s production will start declining on a precipitous pace by year 2022; while the Service Contract (SC) 38 of the project will expire in 2024 – hence, leaving Uy just two years to recover his massive investment on a gas field that is already nearing the end of its production life cycle.

The Malampaya consortium has a pending application with the Department of Energy (DOE) for license extension. But even if that will be granted, Udenna as a new field operator will still need to drill new wells to prove if there would still be remaining commercial reserves that can be extracted from the field.

Given the very high risk of investment in the upstream oil and gas sector, Udenna may still end up hitting wells that are of no commercial quantity, hence, jeopardizing the revenue stream that Uy could be expecting to recoup his mammoth investments or to pay off obligations with lenders.

Additional drawback on Udenna’s part is its lack of technical expertise in upstream petroleum ventures – be it in the exploration phase or even in the operation of a highly complex gas field that is supplying fuel to more than 3,200 megawatts of power capacity in the country.

In a related development, Senate Committee on Energy Chairman Sherwin T. Gatchalian is compelling the DOE “to divulge its plans and programs in light of the divestment of its operator SPEX and the nearing expiration of SC 38 of the Malampaya project.”

When asked on the matter, Energy Secretary Alfonso G. Cusi simply stated that he will “wait for the formal notice,” on the sale, before he gives official pronouncement.

Gatchalian further pointed out “given the significant role that the Malampaya project plays in the Philippines’ energy security, it is imperative that the DOE apprise the Filipino public on Malampaya’s operations.”

He said the information that shall be communicated clearly to the consumers must include the scale of remaining natural gas reserves and the government’s plans for continuous energy supply, as well as the status of the pending request for license extension.

The Senate energy committee indicated that it will be pursuing an inquiry “into the status of the sale of the stake of SPEX and the basis for the DOE’s decision if it approves the sale.”