PNOC-EC action allows government to weigh Malampaya options

Vital electricity supply using Malampaya gas is assured – for now. Giant Shell will continue pumping fuel from the offshore rig in Palawan to generators in mainland Luzon. Buyout of Shell by an inexperienced, undercapitalized shop was not approved by the state PNOC-Exploration Corp. This gives government time to weigh options for the country’s energy security.

One such option is to extend Shell’s operating contract beyond the January 2024 expiration. Shell since 2017 has been asking the Dept. of Energy for 15 additional years. Gas can still be extracted for three to five years followed by oil underneath.

“Near wells” can be developed within the vast Service Contract 38. The Senate energy committee under Sherwin Gatchalian has been informed. Various business and law groups urge government to look into it.

Another option is for PNOC-EC to take over the entire operation upon expiration. Then it can bid out to global subcontractors. That way the government can maximize hundred-billion-dollar revenues, said petroleum geologist Eduardo Mañalac.

“National oil companies worldwide look forward to taking over upon expiration of private operators’ contracts,” added Mañalac. The former energy undersecretary and PNOC president cited the buildup of knowhow by Indonesia’s Pertamina and Malaysia’s Petronas after takeovers. Norway’s sovereign wealth fund is over $1 trillion, the world’s biggest, sourced mainly from government-run Statoil.

Gatchalian the other week commended PNOC-EC for “upholding national interest.” Fueling 20 percent of the country’s energy and more than 30 percent of Luzon’s, he said Malampaya “is an asset of future concern. [PNOC-EC] put first the interest of Filipinos and generations to come.”

PNOC-EC, which owns ten percent of Malampaya’s operation, withheld consent of Shell’s buyout by Davao City tycoon Dennis Uy. The state firm’s president, retired Lt. Gen. Rozzano Briguez, disclosed it during the Dec. 15 Senate hearing, but would not detail the reasons.

Only a month old and with $100 (P5,000) paid-up capital, Uy’s Malampaya Energy XP Pte Ltd bought Shell Petroleum NV’s 45 percent in May for $460 million, Senate hearings showed. Retroactive Jan. 1, 2021, the purchase was to be concluded this year-end, Uy’s parent Udenna Corp. announced. But the Petroleum Exploration and Production Act (P.D. 78) and the operating contract require partner PNOC-EC’s prior consent. Without it, no go.

With that, Shell Philippines Exploration Corp. will go on extracting Malampaya gas, legal manager Kiril Caral told the hearing. “Without the consent of the PNOC-EC we will be unable to pursue the sale at the moment,” he said. “We’re very disappointed ... We will continue to engage with them to find out if there is anything we can do to address the concerns that might have led them to this decision.”

Atty. Rico Domingo said the PNOC-EC action proved that there was no consent prior to the sale earlier this year. That debunks DOE claims in earlier hearings, noted the president of the Philippine Bar Association: “Shell will have to stay because it has a contract till 2024.”

Domingo is legal adviser in the graft complaint against Energy Sec. Alfonso Cusi, PNOC-EC, Uy, Udenna, Malampaya XP, UC Malampaya Philippines Pte Ltd, Shell and Chevron. Complainants are geologist Balgamel de Belen Domingo and Filipino-American lawyers Loida Nicolas Lewis and Rodel Rodis.

Six-week-old UC Malampaya, another Udenna subsidiary, bought Chevron’s 45 percent in October 2019 for $565 million. Capital: $40 million. Still-unregistered UC Malampaya sealed the sale in April 2019, the complainants allege. Cusi and Uy deny accusations of gross negligence and undue advantage to the private parties.

Lauding PNOC-EC board directors, a group of citizens publicized in part: “Your decision ... is justified and in order. It is important to the national interest to protect PNOC-EC’s ten percent amounting to P3-5 billion, and government’s 60-percent profit share of P75 billion annually.

“We request you to remain steadfast ... We hope that as a result of your assertive wisdom, [Shell] will be obligated to stay as operator and provide expert, technically competent, safe and healthy environment for Malampaya.

“Should you be subjected to any kind of pressure from any source or quarter to change your resolve, be assured of our staunch and unwavering support.”

Signatories: Dr. Celia Lamkin, founder, National Youth Movement-West Philippine Sea; Retired Justice Antonio Carpio; former foreign secretary Albert del Rosario; Leonardo Cuaresma, Scarborough Shoal fishermen leader, Masinloc, Zambales; Ramon de Leon, Noveleta, Cavite; Sonny Fernandez, Antipolo City; Jerry Adevoso, Grand Commander, Golden Kris Fraternal Society (Descendants of Filipino WWII Veterans); Rev. Jerry Bitoon, San Pablo City; Medardo Alfonso, founder, Catangcas Aguman Capampangan, Rome, Italy; Amb. Bayani Mangibin, Iloilo City; Prof. Nicanor Melecio, convenor, Maka Kalikasan, Dagupan City; Fr. Albert Alejo, SJ.