Several readers sent comments and views on last week’s columns about the country’s Malampaya-Camago gas and condensate oil fields, that are now on its late life operations and face eventual decommissioning.
One of them is an exploration and production (E&P) practitioner with broad experience in the energy and power sector, and who has served in senior positions in government agencies and at the Department of Energy (DOE). He shares his views below.
“I’ve followed your two-part series on Malampaya, and as an E&P practitioner, I can honestly say they are excellent articles explaining the ins and outs of the SPEX/Razon deal and some of the aspects of the service contract itself.
“But first, let me introduce myself. I’m Ed Mañalac, former president of PNOC and PNOC-EC, and chairman of the defunct PNOC-EDC. Prior to that, I was undersecretary at DOE handling petroleum matters. All these during PGMA’s term, and towards the end of [former] Secretary Vince Perez’s and [now] Secretary Popo Lotilla’s terms.
“As I was saying, I agree with most of the points you raised and how important for the government to carefully evaluate its decision on this deal. Because, as you have said, a wrong one could lead to gas supply problems, and later, environmental issues during decommissioning.
‘Seemingly harmless’
“But I noticed also some seemingly harmless statements regarding the first deal between Chevron and Udenna.
“In part 1, paragraph 6, it says “… earlier in 2020, Udenna had bought Chevron’s share in the consortium through another subsidiary, UC Malampaya … which was approved by PNOC-EC and DOE …”.
“As I’ve said, it sounds innocuous, but the fact of the matter is that that deal (Chevron-Udenna) was never approved by DOE prior to completion of the transaction in March 2020! In fact, this is the core of the Ombudsman criminal complaint against Cusi/Uy/Chevron et. al. in that Cusi allowed the transfer of the 45 percent from Chevron (as seller) to UC Malampaya (as buyer) without “prior approval” by government, and also dispensing with DOE’s circular on the process to follow when a service contractor wants to transfer its rights to a third party.
“I just don’t want these erroneous facts to become the accepted truth, especially as there are evidences presented in court to be otherwise.
“There are a couple of more points I’d like to explain to you that might result in a clearer understanding of what you have said in your article. They are key points that connect the two deals, that if it was recognized, and government officials implemented the law and the contract properly and in good faith, we should not be facing this crisis of decisions now.
“It will be too long to explain, but I’m prepared to meet with you anytime in your office at your convenience. I’m quite sure it will be both beneficial for you and your reading public.”
Legal challenges
While published reports have indicated that businessman Dennis Uy’s UC Malampaya-Chevron deal has the approval of DOE, there are legal challenges that are still pending as indicated by Mr. Manalac. However, pending resolution and action by the court, the parties involved may have completed the transaction to their mutual benefits.
The other deal involving the acquisition by Dennis Uy’s Malampaya Energy XP of the shares of Shell Philippines Exploration (SPEX), operator of the Malampaya field is another story. Published reports indicated that the deal was not approved by DOE as there are issues related to financial and technical capability of Dennis Uy’s company to undertake the operatorship of the fields.
Razon’s entry
Apparently, billionaire Enrique Razon is seriously interested to take over from Dennis Uy the acquisition of the shares of SPEX through his subsidiary company, Prime Exploration.
While the transaction is still subject to the approval of DOE, Razon has demonstrated his commitment and readiness to assume as operator of the Malampaya fields by hiring a former key staff of SPEX to head his operations.
We can assume this as just one of the key steps in Razon’s bid to successfully acquire the SPEX share and the role of project operator. PNOC-EC, the third joint venture partner, as well as the DOE, will have to do their share of vetting to ensure that Malampaya can continue to operate to the maximum of its late life.
More exploration needed
Compared to other oil and gas producing countries in the Southeast Asian region, the Philippines is considered one of the smallest producers. Countries like Brunei, Indonesia, Malaysia, and Vietnam mine significant more, although the latter three are also now confronting diminishing reserves and a future of being net importers of oil and gas.
Oil and gas exploration in the Philippines is considered largely underdeveloped in the more than a century of recorded searches. Since 1973 when the service contract system was introduced, only a handful of fields including Nido, Matinloc, and Malampaya-Camago successfully gave way to commercial production.
The DOE needs to seriously look at past exploration and development activities that may have the potential for additional reserves, especially with recent advances in deep water production technologies. Natural gas, while still a finite energy source, is today still regarded as a cleaner fuel over coal or oil.
More gas and condensate are believed to be just waiting to be discovered in adjacent areas of the Malampaya-Camago fields, as well as in the politically sensitive South China Sea areas where the Reed Bank and Mischief Reef are located.
Erratum: In the BizLinks column published last Aug. 18, the full depletion of the Malampaya-Camago field should have been 2027, not 2017.
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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.