Government to sell 10% stake of PNOC-EC in Malampaya

MANILA, Philippines - The government has decided to sell the 10 percent participating interest of the Philippine National Oil Company-Exploration Corp. (PNOC-EC) in the Malampaya natural gas project to private investors, Finance Secretary Margarito Teves yesterday said.

At least two big-ticket private investors have already signified interest in acquiring the 10 percent participating interest, Teves also said but declined to disclose the identities of the interested parties due to non-disclosure agreements.

Teves said there was a shift in the privatization mode of PNOC-EC as the government is rushing to sell assets and raise more funds to contain the budget deficit which is expected to hit P293 billion this year.

Originally, the government was aiming to privatize PNOC-EC through the sale of its shares or its 60 percent stake in the exploration firm.

However, Teves said the asset-sale mode is deemed as a faster way to privatize PNOC-EC and is expected to raise more than P14 billion which is the amount estimated from the original privatization plan of selling the government’s 60 percent stake in the exploration firm.

“The vehicle that we’re using is the sale of assets. The sale of asset would have to be undertaken first. It would take a shorter time and the value could be larger,” Teves told reporters yesterday on the sidelines of the government’s first economic briefing for the year.

He said the government is hoping to complete the asset sale by the end of the month.

Despite the shift in the mode of privatization, Teves said the two other companies in the Malampaya consortium – Shell Philippines Exploration B.V. (SPEX) and Chevron Malampaya LLC – still hold the “right of first refusal” as stipulated in the service agreement covering the Malampaya project.

As such, SPEX and Chevron are expected to exercise their right of first refusal over the assets.

PNOC-EC, SPEX and Chevron are partners in the exploration and development of the government’s Service Contract 38 area, now known as the Malampaya Deep Water Gas-to-Power project.

The project is a joint undertaking of the government, through the Department of Energy and developed and operated by PNOC-EC, SPEX and Chevron.

As such, the government would have to first offer its PNOC-EC stake in the two other SC 38 partners as mandated by their “right -of-first refusal clause” in the SC 38 exploration agreement.

After the asset-sale, the government is still open to selling its 60 percent stake in PNOC-EC.

A much coveted asset, PNOC-EC is the upstream oil and gas subsidiary of state-owned Philippine National Oil Company. It is also into coal development, production and trading. It also monitors and administers the country’s oil and power supply.

Aside from PNOC-EC, the government is also selling the Food Terminals Inc. (FTI) property in Taguig this year for P9 to P10 billion after failing to bid it out last year. The government is also leasing out its real estate property in Fujimi, Japan for around P3 billion.

It hopes to raise at least P30 billion this year from the privatization of these assets.