Why did Chevron sell its Malampaya stake?
EYES WIDE OPEN - Iris Gonzales (The Philippine Star) - January 20, 2020 - 12:00am

The big stories usually come when you least expect it. When I first learned that Chevron sold its 45 percent stake in the Malampaya deep water gas to power project, I was quite surprised.

It was a quiet weekend when I got the tip from my sources and initially, I didn’t think Chevron would give up a project as big and lucrative as the Malampaya. Sure, the gas was thinning out, but it’s not as if the wells would dry up tomorrow. 

Chevron, the American multinational giant, prides itself as one of the biggest investors in the country. Aside from Malampaya, it is behind the Caltex brand which is among the top three oil players in the country.

But my sources were 100 percent sure. Dennis A. Uy, Davao’s favorite son nowadays, quietly acquired Chevron’s Malampaya stake, they said.

Quite serendipitously, I was meeting with Dennis or DAU — as he is known in the business circles — the following day, a Sunday, because he had an announcement to make. But the announcement had nothing to do with Chevron. It was about Wendy’s, the American burger chain which he just acquired. 

Nevertheless, I got some details on the Chevron deal. I broke that story the next day, Monday, which DAU’s Udenna Group confirmed later on. 

That DAU acquired nearly half of Malampaya was not surprising. After all, it’s no secret that he has been on a buying binge the past two years -- from shipping companies to a restaurant famous for cakes. 

The country’s newest tycoon, a proud supporter of President Duterte is also behind Phoenix Petroleum so it’s really no surprise that he would be interested in the power and energy business.

What I didn’t expect was Chevron’s move in the first place to sell its 45 percent stake in Malampaya. While the multinational giant was selling some assets abroad, I didn’t think it would give up Malampaya.

But industry sources said it was not surprising at all.

Chevron’s $11 billion write-down

The California-based company, it turns out, continues to rethink its future. Last December, it announced a major write down of some $11 billion worth of natural gas assets across the globe, including its gas holdings in the Appalachia region, a deep-water Gulf of Mexico project, and its proposed Kitimat LNG export project in British Columbia. 

According to a Jan. 14,  article on the Rigzone, the write-down is in response to Chevron’s own long-term forecast for oil and gas prices which predicted much lower energy prices, than previously. 

The article quoted  Chevron chief executive Mike Wirth’s interview with the Wall Street Journal: “We have to make the tough choices to high-grade our portfolio and invest in the highest-return projects in the world we see ahead of us; and that’s a different world than the one that lies behind us.”

Decision makers at Chevron have realized the company is facing a market surplus in both oil and gas worldwide, which is impacting profit margins, the article also said.

Indeed, it has become difficult for Chevron to justify investments in gas large projects. 

Bloomberg, meanwhile, reported in December that the US oil company is considering the sale of its shale-gas holdings, along with its Kitimat liquefied natural gas project in Canada.

“Chevron said it will keep its 2020 capital budget at $20 billion, the third consecutive year it hasn’t boosted spending,” Bloomberg said.

Will Chevron leave the Philippines?

Here at home, market observers are speculating that Chevron may pack its bags and totally leave the Philippine market and not just its natural gas business. The speculations aren’t surprising given that some Caltex stations have closed shop.

In February last year, it said it was expanding its retail business and had opened 29 new stations across the country in 2018. There are at least 600 Caltex stations nationwide. 

Let’s wait for the 2019 numbers, but I heard that one businessman already sold his network of Caltex stations, replacing this with Phoenix Petroleum stations. 

Is this a portent of things to come? Will Dennis Uy fill the gap in the retail market as well as he did in the Malampaya business? 

One man’s trash after all is another man’s treasure and in the case of the Malampaya stake, DAU — or his lenders — are banking on finding new gas sources within the service contract.

We’ll have to wait and see what’s in store for Chevron here in the country.

For now, it’s too early to tell if Chevron will pack its bags and leave Manila for good, but if it does, I’m sure many market players will all be too willing to fill the void the US giant will leave behind. 

Iris Gonzales’ email address is eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com

CHEVRON DENNIS A. UY
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