The Department of Energy (DOE) said at a Congressional hearing on Thursday, Sept. 2, that the sale of the 45-percent operating stake of the Malampaya gas field has already been consummated by Shell Philippines Exploration B.V. (SPEX) and Malampaya Energy XP (MEXP), a subsidiary of Udenna Corporation of businessman Denniss Uy, despite the withheld consent of state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC).
“The sale between MEXP and SPEX, that was consummated,” Energy Undersecretary Donato Marcos stated during the budget briefing for the DOE and other energy agencies in Congress. Marcos said that had been the basis of MEXP now selling its acquired shares from SPEX to Prime Exploration Co. Ltd., a company owned by billionaire Enrique Razon.
When PNOC-EC withheld its consent in the transaction on the strength of their joint operating agreement (JOA) under Service Contract 38, there had been stipulations from members of the Malampaya consortium that the sale would not be able to reach financial closing if PNOC-EC will not give its consent.
Similarly, when Shell announced its signing of share purchase agreement (SPA) with MEXP on May 20, 2021; the Anglo-Dutch energy giant expressly stipulated that its deal with the Uy-led company would be “subject to partner and regulatory consent,” while noting that the transaction was “targeted to complete by the end of 2021.”
But the revelation of the energy department this week shows an apparent diversion from assertions of energy officials and also the SPA of SPEX and MEXP that the transaction cannot proceed to closing without first securing consent from its partners from the Malampaya consortium, as well as in clinching DOE approval.
As of December last year, there was no public announcement of consent given by PNOC-EC and there was no approval given also by the Department of Energy (DOE) on the SPEX-MEXP transaction.
The DOE has been directed to submit to Congress the copy of the SPA that was signed between Shell and the subsidiary-company of Udenna for the operating equity of the Malampaya project.
Relative to the ongoing sale process of the MEXP shares to Prime Exploration, PNOC-EC President Franz Alvarez indicated that “due diligence is ongoing to assess if the buyer (Prime Exploration) is really capable financially, as well as on legal and technical” aspects of operating the Malampaya gas field.
Marcos further divulged that on regulatory approval of the unloading of Malampaya’s operating stake, Uy-led MEXP already lodged at least three letters of appeal to the energy department.
“It (transaction) was not given a consent on December 20, 2021 by PNOC-EC, that’s why that (transaction) did not reach the DOE. So until now, they appealed, they have the second notice in which the red flags were still not addressed; two weeks ago, there’s already a third notice from MEXP,” the energy official conveyed.
Marcos further noted that a review committee has already been created at the DOE; so “we have tasking from the Secretary for a parallel review while PNOC-EC is reviewing the financial, technical and legal aspects” of the divestment of Shell’s stake in Malampaya.
He likewise hinted that the next step for the DOE would be to evaluate the corresponding action to be taken on the propounded license extension of the forthcoming new operator of the Malampaya field.