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Gov’t wants 80% of natgas sale

DoE now wants 80:20 sharing so that the share of the government will be bigger

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The government is imposing a tough condition on the Malampaya consortium in its petition for a 15-year extension of Service Contract 38 (SC 28).

SC 38 is to end in 2024 but a provision in the deal allows an extension for another 15 years.

A Department of Energy (DoE) official said the government wants a cut in the revenue of the $4.5-billion facility which will be higher than the 70 percent share previously tossed in the negotiations between officials of the DoE and the consortium.

The Udenna group of Davao City businessman Dennis Uy has yet to seal a series of transactions that would transfer to it 90 percent control of the consortium.

Through biddings, Udenna units UC Malampaya and Malampaya Energy won the right to purchase the stakes of Chevron Corp. and Shell Philippines Exploration Corp. in the project.

In a virtual briefing, Energy Assistant Secretary Gerardo Erguiza Jr. said the negotiation of SC 38 or the license that the government issued to the consortium is ongoing, but the agency contends it will require the project’s revenue-sharing in favor of the government.

“At present, the government sharing is 60:40 in favor of the government. The DoE’s position is (to increase it to) 80:20 and the alternative position is 70:30. But the DoE now wants 80:20 sharing so that the share of the government will be bigger,” Erguiza told reporters.

 

P332B from natgas share

As per Section 7.3 (b) and 7.4 of SC 38, the government is entitled to 60 percent of the net proceeds from Malampaya while the consortium members will get the remaining 40 percent of the net proceeds from petroleum operations.

From January 2002 to 30 June 2021, the DoE said the government had already raked in P332,061,684,842.47 from Malampaya.

Erguiza said the DoE is discussing eight parameters with the Malampaya consortium members with regard to the license extension of SC 38.

The DoE official said two of the eight items are still being negotiated, one is the banked gas, which the government stocks for future use, and the government’s share in the revenues from the Malampaya operations.

“We are in the thick of it, the three groups that are evaluating it are finalizing it and it’s just a matter of consolidating it,” he said.

“We are doing this in parallel of the evaluation of the PNOC-EC (Philippine National Oil Company-Exploration Corp.), with regards to its consent with the transaction. As soon as we have the evaluation or the decision of the PNOC-EC, we will come up with the decision as soon as possible. Time is also important and we are aware of that,” he added.

 

Udenna-Shell deal under scrutiny

Relatedly, Erguiza said the review of the Udenna-Shell deal for the 45 percent operating interest in SC 38 will be independent of discussions on the Malampaya service contract extension.

“At the rate, we are going right now, we are going to decide on the transaction first, most likely. The extension can proceed independently but we see we have to address the concerns being raised right now,” he said.

Energy Secretary Alfonso Cusi had explained that the sale is deemed legal as long as it passed the consortium level.

“The sale is reviewed by international auditors. They cannot sell it and approve it if the buyer has no money. I already said that this transaction was reviewed by a member of the board,” he said.
“This issue is a case of damned if I do, damned if I don’t,” he added.

SPEX and Malampaya Energy’s transaction is under DoE review. SPEX has a pending request with DoE for the SC 38 extension.

The Malampaya consortium, in which state-owned PNOC-EC has a 10 percent stake, has been asking for an extension since 2012. The request was refiled in 2017.

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