OMB asked to file graft charges vs. DOE Sec. Cusi, 10 others, on Malampaya deal

The Office of the Ombudsman (OMB) was asked on Friday, Feb. 4, to file graft charges against Department of Energy (DOE) Secretary Alfonso G. Cusi and 10 other persons on the Chevron Philippines-UC Malampaya transaction in March 2021.

The plea was contained in a report submitted to the OMB by Sen. Sherwin T. Gatchalian, chairperson of the Senate Committee on Energy.

In his 93-page report, Gatchalian also recommended that graft charges be likewise filed against DOE Undersecretary Donato D. Marcos, Undersecretary Robert B. Uy, Assistant Secretary Leonido J. Pulido III, Assistant Secretary Gerardo D. Erguiza Jr., Director Cesar G. Dela Fuente III, Director Arthur N. Tenazas, Director Arceli A. Santos-Soluta, Chief R.J.A. Delos Santos, Chief Thelma Cerdena, and Demujin F. Antiporda.

Gatchalian also sought the filing of administrative charges against Cusi, Uy, Pulido, Erquiza for alleged gross neglect of duty and grave misconduct pursuant to Executive Order 292 Series of 1987, and conduct prejudicial to the best interest of the service.

He also recommended that the Civil Service Commission (CSC) investigate and file administrative charges, if appropriate, against Dela Fuente, Tenazas, Soluta, Delos Santos, Cerdena, and Antiporda.

Gatchalian said in his report that the operations of Malampaya should be legally, technically, and financially qualified given its huge scope.

However, Cusi and the other DOE officials approved the Chevron Philippines - UC Malampaya transaction "despite the financial evaluation of the wrong entity, UC Malampaya's negative working capital, the failure to submit the required documents, and the use of unaudited financial statements."

Gatchalian said that DOE circular issued in 2007 mandates specific documentary requirements to determine the legal, technical, and financial qualifications of the transferee, which in this case was UC Malampaya.

"Yet, DOE in its financial evaluation, evaluated the wrong entity, UC38, instead of UC Malampaya," the report stated. "It failed to evaluate UC Malampaya which was, based on the DOE's own admission, not financially qualified as it has a negative working capital of USD137.156 million, which is clearly insufficient to meet its proportionate share in the Work Program and Budget for 2020 amounting to USD 64.455 million."

Cusi and the others were further accused of causing undue injury to the government for "giving UC Malampaya unwarranted benefits, advantage, or preference in the form of a 45 percent participating interest in the SC38 consortium and income from the operation of Malampaya by approving or recommending approval of the Chevron Malampaya - UC Malampaya transaction despite non-compliance with DC2007-04-0003 and UC Malampaya's negative working capital."

Gatchalian further bemoaned the fact that “DOE's technical evaluation did not include the fact that UC Malampaya and its mother company, Udenna Corporation, have no prior experience in oil and gas exploration.”

"The exploration and extraction of oil and gas in the country is a highly regulated endeavor because it is the State that owns all these natural resources," the report said.

"Thus, a service contract is a mere privilege subject of the laws and rules of the country, and the persons holding the service contract should be legally, financially, and technically qualified to fulfill their obligation to the State,” it said.

The Malampaya Deepwater Gas-to-Power Project is operated under Service Contract No. 38. The Senate report revealed that it supplies natural gas to five power plants, and six out of every 10 households within Manila Electric Company’s franchise area are supplied by Malampaya.

As of 2019, records showed that the participating interests in Service Contract 38 were: SPEX with 45 percent, Chevron Malampaya LLC Philippines branch with 45 percent, and Philippine National Oil Company Exploration Corporation with 10 percent.