Government weighs options on 4.9% stake in Malampaya project

The government is weighing its options for its 4.9 percent stake in the $4.5-billion Malampaya deepwater gas-to-power project. The 4.9-percent stake is part of the 10 percent block owned by the Philippine National Oil Co.-Exploration Corp. (PNOC-EC).

The Department of Energy (DOE), while earlier deciding to keep the PNOC-EC shares in the Malampaya project, is also mulling letting go of its stake and push through with the sale to raise revenues for the cash-strapped government.

DOE officials said they are meeting next week with PNOC-EC and the Malampaya consortium composed of Shell Phils. Exploration B.V. and Chevron Texaco Corp. to discuss the planned sale.

Previously, Energy Secretary Raphael PM. Lotilla said spiraling global oil prices was one of primary factors that made the privatization council decide to hold on to the shares.

"If you recall the privatization council took into account the impact on national interest, where you have increasing oil prices. This is the main reason why the Committee on Privatization (COP) raised its concern. They said there would be no problem on privatization provided its concerns (on high oil prices) are addressed," Lotilla said.

A South Korean consortium, with members including LG International Corp. (LGI) and Korea Gas Corp. (Kogas), earlier offered to buy PNOC-EC’s 4.9-percent stake for up to $140.5 million.

The bid included a cash payment of $125.5 million and bonuses worth $14 million to $15 million, depending on conditions such as future oil prices and production levels.

The Malampaya consortium, which originally backed out from the project, invoked its right of first refusal and decided to match the bid by the South Korean consortium. In deciding not to push through with the sale, PNOC-EC told the stock exchange that "the privatization council noted that the price offered to PNOC Exploration Corp. by LGI for the subject interest was no longer reflective of the current oil price."

The government had planned to use proceeds from the sale to pay down the debt of PNOC-EC and fund its projects, including a deal with the state oil firms of China and Vietnam for a three-year joint marine study in the South China Sea.

PNOC-EC borrowed the $175 million it used to pay for its 10 percent stake in Malampaya.

Located off the western island of Palawan, the Malampaya field has recoverable reserves of 2.5 trillion cubic feet of gas and 85 million barrels of condensate.

Currently, it fuels three power stations with a combined capacity of 2,700 megawatts.

The government and the local government unit in Palawan are projected to receive $30 billion in revenues from royalties and fees from the Malampaya project.