Green group questions entry of new player in Philippine gas facility project

October 21, 2021

A pro-environment policy group warned against the entry of a new player in the Philippines’ Malampaya gas facility project, calling the deal “anomalous.”

In a position letter sent to the Senate, the Center for Energy, Ecology, and Development (CEED) questioned the acquisition by the Malampaya Energy XP Pte. Ltd. of shares in the gas facility.

Malampaya Energy XP Pte. Ltd. is a subsidiary of Udenna Corporation of Davao-based businessman Dennis Uy.

In its letter, CEED said Malampaya Energy XP Pte. Ltd. “did not meet the standards set by the Department of Energy on its financial and technical capability.”

The letter said the company “has not exhibited technical capability to manage and operate the Malampaya gas-to-power facility.”

“Neither does it have proven financial capability having only submitted unaudited financial statements, which the [Energy department] surprisingly accepted without question,” the letter read.

In 2019, Udenna acquired Chevron Malampaya LLC’s shares, which has 45 percent in the Malampaya gas field.

This year, the company also acquired the shares of Shell Philippines Exploration, which holds another 45 percent operating interest in the facility.

The development of the Malampaya gas project started in 1991. The gas field, which is located about 80 kilometers northwest of the island of Palawan, has been the sole source of fuel for gas-fired power plants in Luzon since it came online in 2002.

Udenna now controls the gas facility with a 90 percent operating interest while the state-owned Philippine National Oil Company-Exploration Corporation holds the remaining 10 percent.

Uy entered the energy sector in 2002 when he established a petroleum trading business, which evolved into the largest independent fuel retailer Phoenix Petroleum.

It is the country’s third largest oil company with more than 600 branches nationwide and seven percent market share.

Recently, Uy ventured with China National Offshore Oil Co. to establish a liquefied natural gas (LNG) terminal in the province Batangas.

Uy’s company also partnered with other energy players to jumpstart talks on oil and gas joint exploration in the West Philippine Sea.

In the letter, CEED claimed that Malampaya Energy XP Pte. Ltd has a paid-up capital of only US$100, in comparison to Shell’s Php66,219,002,000 and Chevron’s US$33,979,000 at the start of Malampaya’s second phase of operations.

“Malampaya is our most important gas field, which means its takeover by a company that does not have the means financially or technically to take care of it would have serious repercussions for consumers,” said Gerry Arances, executive director of CEED.

Arances said Uy’s company “does not have a history of expertise in energy,” adding that it has “almost a thousand times more debt at Php120.81 billion” compared to other bidders.

Arances also questioned why PNOC-EC, which is already involved in Malampaya project, “did not purchase the shares given its mandate to take the lead” in the country’s fossil fuel resources.

He said the Energy department and PNOC-EC “should be held accountable” for allowing Udenna Corporation to take over the facility’s operation “when it is obviously incapable.”

On October 8, concerned citizens filed a criminal complaint against Energy Secretary Alfonso Cusi, Dennis Uy, and other personalities over Udenna’s acquisition of Chervon’s shares.

The complainants alleged that Cusi and other officials from PNOC-EC, Shell, and Chevron “conspired to give unwarranted benefits and advantage to Uy’s Udenna Corporation and its subsidiary” for the buyout.

The complainants, identified as Balgamel De Belen Domingo, Rodel Rodis, and Loida Nicolas Lewis, said the respondents violated the Anti-Graft and Corrupt Practices Act and the Petroleum Act of 1949.

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