Wise decision on Malampaya

Many saw it coming.

When side court watchers started throwing brickbats at the prospective sale of 49 percent of the 10 percent stake of the PNOC Exploration Corporation in the Malampaya natural gas project, coffee shop pundits began to say this is one transaction that is definitely going to be waylaid.

And waylaid it was. Last week, the Cabinet-level Privatization Council chaired by the Department of Finance decided to order PNOC EC to halt the privatization of its Malampaya shares and bring back the already two-year old process "to where it was before March 22, 2005."

March 22 was when the Council gave PNOC EC the go-signal to sell to the South Korean consortium led by LG International. Many looked to that event as a shining moment, albeit brief, for the country’s petroleum exploration sector.

Not that we want the Koreans in the sector. It is just that the earnings from the sale could have spurred renewed energy, pun intended, in the search for oil in Philippine waters.

Finance Undersecretary Gabriel Singson Jr. explained the reason for the suspension of the sale. The Council, he said, noted that "valid issues were being raised by various quarters" about the sale. The young Singson – "Jay" to his Ateneo and Wharton buddies – said the Council felt it "wise" to address all these issues before pushing through with the privatization.

A wise decision, indeed.

Our guess is the Cabinet has learned its lesson. In this country, a deal – even after being signed – is no deal unless all stakeholders and kibitzers are "satisfied and pacified."

Even if the privatization of the Malampaya shares were allowed to proceed, it would have been eventually waylaid anyway. Some quarters would have slapped it with the notorious TRO. Others would have threatened to haul both sellers and buyers to the halls of the legislature for a year or two of "congressional investigations."

So, who wants to go through all that trouble? The Council may therefore be right, indeed. Let’s listen to everybody now and proceed with economic development later.

By opting to step on the brakes, the Council also spared the country from embarrassment. The specter of subjecting South Korean investors into our ritual of post-deal signing "investigations and inquiries" would wipe out whatever is left of investor enthusiasm in the Asian region for prospects in the Philippines. And what if PNOC EC’s partners Shell and Chevron-Texaco were to acquire the shares after matching the Korean offer? Could we have subjected these long-standing investors to the same embarrassing ritual?

By staying on the frontlines for this crucial decision, Jay Singson may have finally realized what he has gotten himself into by opting to join government. The gentleman, who displays the disarming ways of his well-respected father, former Bangko Sentral Governor Gabriel Singson Sr., has barely warmed his seat at the finance department. Jay has just given up private sector bliss to follow in dad’s footsteps.

Jay could draw a lot of inspiration from the another recruit from the private sector, PNOC EC president Eduardo "Ed" Manalac, himself. Ed, who has the global reputation as the expert geologist who discovered China’s biggest oil field, has been raring to discover "just one more Malampaya" for the country. Ed was hoping the proceeds of the shelved privatization could be used for seismic studies and drilling in various parts of our internal waters. We hope Ed could withstand the disappointment. This should be temporary, Ed. Well, we hope.

But no one will fault Ed if he should be frustrated. In the international petroleum exploration industry, when Ed says there’s oil, everyone listens. Everyone remembers that when Ed found China’s biggest oil field, all other exploration companies had already surrendered and declared the holes dry. But Ed said there’s oil. And oil gushed out, proving the Bicolano geologist right.

But Ed is not the only one who is saying there’s oil in the country. The Norwegian Agency for Development confirmed studies that Sulu Sea has the same geology as the oil and gas fields of Malaysia, Indonesia and Brunei. Studies by the Department of Energy also showed that oil wells in the country could contain 260 million barrels of oil. At $48 per barrel on average price estimate, imagine how much that could fetch our starving coffers!

Here’s the catch: the drilling projects will need P27.3 billion in investments in the next few years. Ed knows no foreign investor will put in money into these projects unless the country’s national oil company puts in the first centavo. The Malampaya sale proceeds could have generated the cash we needed.

But Ed and the rest of the exploration industry know that this is a game of patience. The search for oil in our country has been going on since 1896 when Smith Bell dug the first hole for Toledo I in Cebu. . While the search has not been active and high-profile, it has not stopped. Maybe, it is because there really is oil.

So, let’s hope our guys at the forefront of the oil search effort can remain patient. And we do hope some moneys from the Malampaya sale would still come in the near future, so the search can be supported.

There is a saying which goes like this: Geologists are the only people who are wrong nine times out of 10 and still get paid.

Ed was right one time and China got its biggest oil field. If we can help him do his job, we just might get as lucky as China.

In aid of what?

Just before the Holy Week break, we saw 14 executives of Standard Chartered Bank led by its CEO Paul Simon Morris being held at the Senate detention room for six hours on the instigation of Senator Enrile who went fuming mad over SCB‘s contention that the Senate committee on banks, financial institutions and currencies‚ hearings "in aid of legislation" on charges of alleged sale of unregistered securities against the bank are actually "in aid of collection."

The SCB executives could be right. You see, there are already seven pending cases in court on the same matter, instigated by two "aggrieved investors" — former SCB vice president Manuel Baviera and lawyer Mark Bocobo who want to collect money from the bank. The recourse to the Senate is probably the last venue for the two who have obviously engaged in "forum shopping" to the hilt.

As early as 2003, Baviera through his lawyer Frank Chavez demanded $2 million from SCB as settlement for being allegedly gypped in an investment scheme where he put in $8,000 while Bocobo wants to be fully reimbursed of the $100,000 he invested with interest plus P5 million in damages. They invested in SCB’s Global Third Party Mutual Funds or TPMF and are the only complainants among hundreds of Global TPMF investors. Because SCB refused to give in to what it claims is clearly extortion and harassment, the two decided to bring the matter to the halls of the legislature.

(This incident sounds awfully familiar. They are represented by the former Solicitor General who was also the counsel for a former telco chief executive who having failed to collect the separation pay he was demanding from his company, filed complaints in court and after failing to get relief from the legal system, went to Congress and initiated a probe that was also clearly in aid of collection.)

Baviera and Bocobo complained because the bank allegedly promised them a sure yield of 40 percent on their investment in six months to one year.

In addition to the pending court cases, Baviera also filed other complaints ranging from illegal sale of investment products, syndicated estafa, tax fraud, money laundering, and violations of the Securities Regulation Code with the DOJ, BIR, SEC, BSP, Anti-Money Laundering Council (AMLC) of which have been dismissed in favor of the bank. These agencies were of the consensus that Baviera was well aware of the risks inherent in investments. In fact, the DOJ said Baviera, being a senior officer of SCB, was in a unique position to know and have free access to all relevant information necessary to make an informed decision before investing in Global TPMF. The AMLC noted that Baviera is a sophisticated investor based on his experience in securities investment and was fully apprised of the risks involved through the brochures that SCB provided and the trust agreement he voluntarily signed.

As for Bocobo, it is unbelievable that a lawyer of his caliber would part with his $100,000 without first weighing the risks against the prospects of a 40-percent ROI.

There are clearly more important matters that the Senate should be dealing with and acting as a collection agent is obviously not one of them.

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