Shell Philippines Exploration B.V. (SPEX), the local subsidiary of multinational giant Royal Dutch Shell plc, formally exits today, Nov. 1, from the multi-billion Malampaya gas field project, following sale completion of its 45-percent operating stake to Prime Infrastructure Capital Inc. (Prime Infra) of Filipino billionaire Enrique Razon.

In an announcement to the media, SPEX said it already “completed the sale of its 100 percent shareholdings to Malampaya Energy XP Pte. Ltd. (MEXP), a subsidiary of Prime Infra.”

MEXP, originally owned by Davao businessman Dennis Uy, was bought by the Razon group to acquire the operating shares of the Malampaya venture.

“This sale completion transfers control of SPEX from Shell to Prime Infra effective November 1, 2022,” Shell stated.

According to Zoe Yujnovich, director of Shell Upstream, “this sale supports our strategy to create a resilient and competitive upstream portfolio,” with him stressing that “this deal has no impact on other Shell businesses in the country.”

With its departure from the Malampaya venture, Shell’s business interests in the Philippines will now be confined to the downstream oil industry, as well as its business process outsourcing (BPO) shared services unit and its Shell Energy portfolio which has been into renewable energy developments, retail trading of electricity and a targeted investment in liquefied natural gas (LNG).

“The Philippines remains an important country for Shell after over a century of successful operations. Shell will continue to pursue opportunities in the Philippines where it can leverage its global expertise in line with its powering progress strategy,” Yujnovich said.

The conclusion of Shell’s divestment was firmed up following the grant of consent by its strategic partners, primarily state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) as well as the approval of the government, via the Department of Energy. PNOC-EC has 10% stake in Malampaya; while UC38 of Uy’s Udenna Corporation holds the other 45% shareholdings in the project.

As previously disclosed by sources, the final payment made by the Razon group had been estimated at $170 million, factoring all deductions and discount rates in the transaction. The sale between Shell and MEXP was cemented in May 2021, but there was more than a year of delay to closing due to concerns on warranted partner-consent and government approvals.

On the SPEX employees that shall be left in the gas field project, Shell noted that their employment will continue “under the new ownership.”

From the start of the field’s operations in 2002, the consortium-members of the Malampaya field invested additional $1.0 billion within the 2012-2015 timeframe to reinforce gas production and for them to honor commitments with gas off-takers.

The Service Contract (SC) 38 for Malampaya will expire on February 23, 2024 and the new owner is expected to be given license extension, although there are no certainties yet on gas production getting sustained in the years ahead.

The gas sale and purchase agreements (GSPAs) of the gas field project will also lapse and the power plant-buyers have already planned their shift to LNG in the continuing operation of their electric generating facilities.