A reader’s view on the Malampaya story

One of our readers, Napoleon T. Cabello, shares his views on the now-controversial sales of both Chevron and Shell Philippines Exploration’s interests in the Malampaya natural gas fields to Dennis Uy’s Udenna Energy Corp. His letter focuses on, among others, the importance of technical skills in operating Malampaya.

This column had also bared its position last week, foremost by cautioning the Department of Energy about approving the SPEX sale unless several “must” conditions are included in the contract since this would give Udenna a 90 percent stake in the private sector’s Malampaya share.

In a related development also last week, the Integrated Bar of the Philippines weighed in on the issue by calling for the cancellation of both sales, citing the possibility that Udenna could tap foreign interests “having adverse interest in the West Philippine Sea dispute” to fill in for its lack of financial and technical capabilities.

Let’s get back to our reader, who describes himself as “fully retired after working for over 50 years with various US multinational group corporations engaged in chemicals/pharmaceutical productions, and mining exploration.” Here are excerpts of his letter:

“Regarding your recent (column), below are some of my relevant insights from an ordinary consumer’s point of view. I presented my concerns without specifically tackling a troubling ethical question: If an action is not illegal, does it necessarily mean that it is not immoral?

“Based on recent published sources, the Malampaya gas field was temporarily shut down weeks before a scheduled preventive maintenance. As a result, the power rates automatically went up, adversely affecting the economy and the environment.

“Certain operational disruptions also ensued when a large number of operation engineers had left, and in the above maintenance shutdown, only 26 percent of the originally planned work was able to return due to manpower/materials delivery problems.

“As expected, my November electricity bill, which I got a few days ago, did show an increase by three percent (or an additional P500 in absolute amount based on my current monthly consumption). I’m sure all the other electricity users are in the same situation.

“The Philippines still lags behind when it comes to exploration activities for indigenous energy sources. Our vast energy reservoir potential remains untapped compared to our Asian neighbors. Only 566 wells have been drilled in the Philippines in the last 100 years, compared to 400 wells drilled in Indonesia in just one year, according to the Petroleum Association of the Philippines.

Global warming commitments

“The UN climate summit in Glasgow, Scotland has just concluded about two weeks ago with participating countries, including the Philippines, collectively pledging commitments to phase out coal before 2050, end deforestation by 2030, and cut emissions of methane, the second most potent warming pollutant, by 30 percent, within the decade.

“According to the 2019 Climate Analytic, we incurred P506 billion in losses over the past decade due to extreme weather conditions. We are ranked the fourth world’s most vulnerable countries to the impact of climate change.

“This is greatly problematic, given that Malampaya remains our only significant source of natural gas, the fuel of the future that provides 30 to 40 percent of Luzon’s electricity needs or about 20 percent nationwide. Worse, the Malampaya service contract will expire in December 2024, with its reservoir seen to be depleted by 2027.

Social responsibility programs

“Pilipinas Shell Foundation, the social arm of Shell in the Philippines, works with the province of Palawan to implement a USAID program in more than 300 villages. Beyond providing power for large cities and industries, the Malampaya project aims to bring sustainable and affordable energy to communities least likely to be connected to the grid.

“Pilipinas Shell Foundation has also put in place a micro-grid using hydropower and solar energy. The Malampaya Foundation, the project’s social arm set up by the joint venture partners, is also working with communities to help manage and restore their local marine resources and enhance livelihoods.

“Shell is helping to raise project expertise to world-class levels in the long term, enabling the Philippines to compete for future oil and gas projects regionally and globally. It has provided more than 1,200 new jobs for Filipinos, generated business for local companies, and is improving the skills of local workers.

“Poor young adults have gained skills for jobs in areas such as welding, pipe-fitting, and construction as part of a vocational training program run by the Malampaya Foundation. Through the Malampaya Health, Safety and Environment (HSE) Training Center, it has trained more than 6,000 Filipinos to world-class HSE standards.

Global experience

“Shell, being an internationally known energy company, drew its expertise from an extensive global experience in deep water oil and gas exploration and production. On the other hand, Chevron … provided technical expertise and resources in order to meet the world’s growing need for cleaner energy solutions.

“With their incredible expertise and global credentials, no wonder Shell and Chevron were able to successfully produce high-grade clean energy during the last 20 years in ways that are economically, environmentally, and socially responsible. Can Udenna match this exemplary performance?

“Not only should Udenna have the ‘depth of understanding the business – how it should be managed and how it can be rejuvenated’ as it repeatedly claims, it must also be financially sound with proven high technical expertise in onshore and offshore gas explorations in providing strategic industry direction, and long-term operational planning in operating our one and only Malampaya project.”

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.