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Opinion

Uy’s $100 Malampaya firm now makes $1.15 M a day

GOTCHA - Jarius Bondoc - The Philippine Star

Dennis Uy took over Malampaya gas field via a company with $100 capital. It now earns the Davao City businessman $1.15 million a day. Another Uy firm earlier entered Malampaya and also makes $1.15 million a day. The combined daily $2.3 million should be going to the government, had energy officials done their duty.

Those are the crux of a graft complaint against Energy Secretary Alfonso Cusi and Uy. Filed with the Ombudsman Oct. 18, the rap alleges that:

• Uy’s Malampaya Energy and UC Malampaya are financially, technically and legally unqualified – yet given unwarranted advantage.

• Cusi “grossly, inexcusably neglected” government’s right to match Uy’s offers to buy out Shell and Chevron’s 90-percent interest.

• “Conspiracy” among Cusi, other officials, Uy, Shell and Chevron injured the government.

Complainants are geologist Balgamel Domingo and Filipino-American lawyers Loida Nicolas Lewis and Rodel Rodis.

Udenna Corp., chaired by Uy and parent of the two firms, said Tuesday, “UC Malampaya is qualified to be the shareholder of the Chevron company, and in the future to become the shareholder of the existing operator via Malampaya Energy XP. We were awarded because of the depth of our understanding of the business – how it should be managed and how it can be rejuvenated.”

Cusi texted Gotcha: “Actions taken by the government [on] the private transaction between Chevron, a multinational corporation, and Udenna are proper, legal and in furtherance of the best interests of the government.” The Philippine National Oil Company-Exploration Corp., which Cusi chairs, was constrained by “restrictions imposed by... the Procurement Law and GOCC Governance Law... and the pandemic’s strain on government resources and allowed period under the Joint Operating Agreement (JOA) to exercise the right to match.”

Malampaya offshore gas field in northwest Palawan is the Philippines’ primary petroleum asset, says former PNOC president-CEO and energy undersecretary Eduardo Mañalac. Pumping gas to five power plants in Batangas, it supplies one-fourth of Luzon’s electricity. Operators Shell and Chevron each had 45-percent interest; PNOC-EC has ten. Their JOA will expire in 2024 although the well can be productive at least three more years. The two foreign giants repeatedly had asked the Dept. of Energy for extension till 2039; Shell sought renegotiations on Sep. 3, 2020.

Udenna subsidiary Malampaya Energy XP Pte Ltd. was registered in Singapore on Apr. 7, 2021. Paid-up capital was $100 (P5,000), Senator Sherwin Gatchalian cited the island-state’s Accounting and Corporate Regulatory Authority.

On May 20, 2021 Shell Petroleum NV announced the sale of its 45 percent to Malampaya Energy for $460 million. “To be completed by end-2021, it would be retroactively effective Jan. 1, 2021,” Shell said. “Capitalization of this company is only P5,000,” Gatchalian grilled Cusi in a July hearing of his Senate committee on energy.

Cusi doubted the figures, saying, “No, I do not think this is the capital, Mr. Chairman. I have to check this information that is being presented. Because definitely, with P5,000, they will not be allowed to borrow billions of pesos to fund the transaction.”

Gatchalian countered: “If we will be evaluating the buyer... the capitalization is P5,000. Obviously, this is a shell company, correct? And just like the Chevron deal, there is a parent company that will shoulder all the expenses.”

That Chevron deal was on Oct. 25, 2019. Udenna subsidiary UC Malampaya Philippines Pte Ltd. bought Chevron’s 45 percent for $565 million and announced it on Nov. 13, 2019.

UC Malampaya was registered in Singapore on Sep. 1, 2019 with $40 million paid-up. Four months earlier, Apr. 30, the still-unregistered UC Malampaya sealed the buy-out of Chevron, the graft complainants allege. Guarantor was mother Udenna Corporation.

Of the total sale price, $375 million was borrowed from New Zealand and Singapore banks. $157 million was from “proceeds of Chevron’s 45-percent entitlement from Malampaya” up to March 2020. The $33-million balance were “equity proceeds, from increase in capital.” The Senate hearings derived the data.

“It is absurd and against human experience for Chevron to sell its shares to UC Malampaya, wherein a condition was for Chevron to assign part of its income from the Service Contract to the buyer, which in turn would use such funds to pay for its purchase,” the complaint states. “Increase of Udenna’s capital stock amounting to $33 million was not yet issued and subscribed. The Senate committee concluded Udenna did not shell out a single centavo.”

Shell and Chevron broke P.D. 87 in not informing DOE beforehand of their sale, the complaint states. Also the DOE and PNOC-EC in not exercising the right of first refusal, after finding out.

The Philippines owns Malampaya, petroleum geologist Mañalac says. The rig, platform and 500-km pipeline are worth $4.5 billion. With such asset, PNOC-EC could have borrowed the same amount as Udenna to buy out Chevron and Shell.

Had the operators refused an offer and wanted out, the DOE should have let them leave without remuneration, Mañalac adds. Taking over from Chevron would have given PNOC-EC experience in production, to then take over Shell. “The world over, petroleum producing states welcome the expiration of service contracts so they can take over after gaining experience,” he says.

The government forfeited Chevron’s yearly P21 billion or $420 million – $1.15 million a day. Same in not taking over Shell. Losses will reach P126 billion by 2024, Mañalac says.

In September 2019 Cusi announced that extending Shell and Chevron’s JOA was not automatic, a damper on the two, says Mañalac. The Udenna subsidiaries are now seeking a 15-year extension to 2039. Gatchalian warned Cusi against such “midnight deal.”

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Catch Sapol radio show, Saturdays, 8 to 10 a.m., DWIZ (882-AM).

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