Who wants Dennis Uy out of Malampaya?

When Davao-based businessman and Duterte pal Dennis Uy gets into a deal, some just can’t help but raise eyebrows, for reasons real and imagined.

Months after Uy quietly acquired control of the country’s much-touted crown jewel in the energy sector, the deep water gas-to-power Malampaya project, complainants filed a case against him, Energy Secretary Alfonso Cusi and other officials, questioning the sale of Chevron’s Malampaya stake to Uy’s Udenna.

I wonder what’s the story behind this. I tried to narrow down the list of possible characters in this story.

Disgruntled bidders

Could disgruntled bidders be behind this move? As with almost every big-ticket project, there will always be unhappy parties who will cry foul.

But who could that be? There were at least 37 local and foreign groups interested in Malampaya.

However, it might be difficult for a disgruntled party to raise a howl over the process, considering that the sellers are global multinational giants, Chevron and Royal Dutch Shell. They must have employed a rigorous process.

It is of course surprising that Uy won both bids, considering that he’s relatively a new kid on the block, compared to some Manila tycoons.

But that isn’t his fault and neither is it entirely due to his own merits.  I heard Uy hired good advisers for this transaction, including veterans in the energy sector, enabling him to submit winning bids.

Imperial Manila versus Davao Group

If it’s not a disgruntled bidder, could it be some Manila businessmen unhappy with Uy’s aggressive buying spree? Could this be another episode in the Manila tycoons-versus-Davao Group tug-of-war?

This one is also very possible, considering that Duterte’s businessman friends and relatives from Davao have been bagging deals left and right since 2016, to the frustration of the old boys club of Manila.

But again, in the case of the Malampaya deal, Uy, though without doubt a major character in the Davao Group, dealt with multinationals and not with the government. I doubt one could prove any corruption in this.

PDP-Laban, election season

But wait, it’s also election season. Could it also be politically-motivated considering that Energy chief Cusi is the ring leader of one faction in the divided ruling party?

All of the above

Or could it also be all of the above? Perhaps some powerful individuals with common interest want to see Uy out of Malampaya and in court with Cusi?

This is also possible. But I’m only guessing.

Merits of the case

Of course, it’s also possible that complainants are simply concerned over what they deemed were “unwarranted benefits and advantage” extended by the Department of Energy to Uy.

Private transaction

Complainants would really need hard evidence to prove their case. My take is that it would be difficult to prove this because it was clearly a private transaction that is legitimate and very much valid.

Malampaya shareholders are allowed to sell their stake. The transaction must simply be in compliance with the guidelines for transfer of rights and obligations in the petroleum service contracts under Presidential Decree 87. The sale was also approved by the Philippine Competition Commission.

Extending the contract

But the extension of the operating contract for Malampaya is another matter and this one rests on the DOE. How would Cusi treat this given the recent issues raised against him and Uy?

The safest and best route is to do another round of bidding when the contract expires in 2024, instead of an outright extension, to erase all doubts that the Duterte administration is favoring Uy.

Note, however, that an automatic extension is allowed and provided for under Service Contract 38 as long as all the parties agree to a new agreement favorable to all including the government, Sec. Cusi told me. In fact, Shell and Chevron have been negotiating for an extension for years now.

But as I said, doing a rebidding would be the most ideal and fair thing to do. This, however, would have implications on our energy supply.

If an extension is granted, Uy’s group can begin to implement projects to enhance production, rejuvenate Malampaya, and arrest the decline of resources in a timely manner by end-2022.

But if the license is given to another contractor in 2024, there will be a lull and the reserves would have depleted by then.

Whatever the government decides to do, it must do so at the soonest possible time. Otherwise, the Malampaya facility will have to automatically shut down in 2024 when the existing contract expires.

Filipinos may have to say hello to higher electricity costs if that happens.

Dark days

Shutting down Malampaya won’t necessarily plunge Luzon into darkness. We will simply be paying for higher electricity costs because without natural gas from Malampaya, power companies would have to resort to imported oil to run their power plants. It doesn’t help that oil prices are skyrocketing at dizzying prices now.

Only time will tell what will happen to Malampaya and how Uy will resolve his very first major headache related to his acquisition of this energy asset.

I’m sure there will be more headaches for him to deal with in the future but hey, isn’t that part of the business of power and the power of business?

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