For economy’s sake, Mr. President, please stop Uy’s Malampaya takeover

GOTCHA - Jarius Bondoc - The Philippine Star

I feel presumptuous as a journalist of 44 years to directly address the highest leader. But desperate times call for desperate measures. So I beg you, President Duterte, stop the takeover by your Davao City friend Dennis Uy of our Malampaya gas field.

Malampaya is the crown jewel of Philippine petroleum assets. It supplies one-fourth of Luzon’s electricity. Operating it entails technical expertise, financial stability and management savvy. Otherwise,  Malampaya collapses. That would be disastrous.

Two subsidiaries of Uy’s Udenna Corp. bought 90 percent of Malampaya’s operations. Both have no experience in exploration or production:

• UC Malampaya Philippines Pte Ltd was registered in Singapore (UEN 201928740R) Sep. 1, 2019. Paid-up capital: $40 million. (Derived by Senator Sherwin Gatchalian from Singapore Accounting and Corporate Regulatory Authority) Four months earlier, Apr. 30, the still unregistered company sealed the buy-out of Chevron’s 45-percent share, a graft complaint alleges. Guarantor was mother Udenna Corp. Sale of $565 million was formalized on Oct. 25, 2019, announced on Nov. 13.

Of the total 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. Remaining $33 million was “equity proceeds, from increase in capital.” Senate hearings deduced that UC Malampaya got 14 times its worth not from solid assets but loans, backed by guaranteed earnings from Chevron itself, and future capital call.

• Malampaya Energy XP Pte Ltd was listed in Singapore (UEN 202112248K) Apr. 7, 2021. Paid-up capital: $100, or P5,000. It bought Shell Petroleum NV’s 45 percent for $460 million on May 20, 2021. “To be completed by end-2021, it would be retroactively effective Jan. 1, 2021,” Shell said.

By this yearend Uy would control 90 percent of Malampaya.

Established in 1879 and 1907 respectively, Chevron (Caltex) and Shell have a combined 256 years of experience in petroleum and alternative energy. Each has hundred-billions worth of capital and petro reserves. Udenna’s subsidiaries were both one-and-a-half months old when they gobbled up the global giants.

Newborn, they lack financial, management and technological expertise. Taking over Malampaya operations is not buying “a car, a building or any ordinary asset,” the Philippine Bar Association analogized. The newbies can subsume the 55 or so experienced gas rig scientists and technicians. But vital too are such management tools as track record, institutional knowledge, funds, credit lines, suppliers, industry contacts and more.

Without those, operations can collapse. Extracting gas three kilometers below sea level and pumping it 500 kilometers to Batangas power plants can falter. Luzon will plunge into prolonged blackouts. Factories, offices, stores, banks, hospitals, schools, hotels, resorts, restaurants, churches will shut down. Filipinos will be unable to work, study or worship from home as there will be no power for WiFi and gadget charging. Water service will stop. Food distribution will be disrupted. An economy struggling from pandemic can relapse.

That scenario is not far-fetched, Mr. President. It has happened before, though on a smaller scale. You cited it in your 2016 campaign speeches. I refer to my exposés on faulty maintenance of Metro Rail Transit-3.

PH Trams was only two months old when chosen by the Dept. of Transportation to replace global giants Sumitomo and Mitsubishi Heavy Industries in October 2012. Capital: P625,000. No experience in rails, only connections to the ruling party then. It was paid P57.5 million a month for ten months. After using up the inventory it scrimped on vital parts for trains, tracks, signalling, power supply and stations. Shunned by suppliers, it subcontracted fly-by-night Bulacan foundries for wheel, axle and brake repair. Air-conditioning, catenaries, elevators and escalators broke down. Despite absorbing the old technical staff, PH Trams flunked DoTr standards.

You quoted me, Mr. President, that MRT-3 was “an accident waiting to happen.” It did happen – many times. Trains suddenly braked and doors opened between stations, injuring riders. Or simply conked out, forcing them to alight and hobble to the nearest exit. A train overshot the end-station and crashed onto the steel barrier; motorists below the elevated tracks were hurt.

They did not stop there, as you will recall, Mr. President. In the midst of congressional inquiries and court indictments, DOTr merely replaced the maintenance companies twice but with the same cronies behind new fronts: a house constructor, a general merchandiser, an agricultural supplier and a plumber. They even tried to gag me with a court order. Your administration ended the deterioration in 2017.

You can rescind the Malampaya takeover too, Mr. President. National and energy security depend on it.

P.D. 87, The Oil Exploration and Development Act of 1972, requires Department of Energy consent for entry, share transfers and exit of service contractors. DOE Circular 2007-04-003 details the procedures. Both allegedly were ignored in Malampaya.

Philippine National Oil Company-Exploration Corp., despite holding only ten percent, owns the $4.2-billion rig and pipeline. It could have matched Udenna’s offers to Chevron and Shell, then brought in experienced companies, experts say. It could even have left the two un-recompensed for walking away before contract expiration in 2024.

Energy Secretary Alfonso Cusi claims to have no authority to meddle in the purely private transaction. Strictness of the Procurement Reform Act and the GOCC Governance Law and the pandemic supposedly constrained him from exercising right of first refusal. The Integrated Bar of the Philippines and PBA say otherwise.

Mr. President, the ball is in your hands.

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