Malampaya gas field

Citizens file criminal complaint vs Cusi, Dennis Uy over Malampaya buyout

Aika Rey
Citizens file criminal complaint vs Cusi, Dennis Uy over Malampaya buyout

FACING A COMPLAINT. Energy Secretary Alfonso Cusi.

Department of Energy's Facebook page

(2nd UPDATE) The complainants claim Energy Secretary Alfonso Cusi and other officials 'conspired' to give Dennis Uy undue advantage in the buyout of a Chevron subsidiary which held a 45% stake ​in the Malampaya gas-to-power project

Concerned citizens filed a criminal complaint against Energy Secretary Alfonso Cusi, businessman Dennis Uy, and several others over Uy’s acquisition of a Chevron subsidiary with a 45% stake in the Malampaya gas field.

In a 42-page complaint, the complainants alleged that Cusi and other energy officials “conspired to give unwarranted benefits and advantage to Uy’s Udenna Corporation and its subsidiary, UC Malampaya” for the buyout, which was called a midnight deal by the Senate energy committee.

The complainants accused the government officials and those involved in the sale on the side of Chevron and Udenna of violating Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act.

The complainants, including geologist Balgamel Domingo and concerned Filipinos Rodel Rodis and Loida Nicolas Lewis, filed the complaint at the Office of the Ombudsman in Iloilo City on Monday, October 18.

In a statement on Tuesday, the Department of Energy (DOE) said it will answer the allegations in the proper venue once it receives a copy of the complaint.

“The case is speculative, without basis, and malicious. The questioned transaction is aboveboard,” the DOE statement read.

Cusi also claimed that the complaint was politically motivated, as he heads a faction in the divided ruling party, PDP-Laban.

“I have no doubt the truth will vindicate me and the innocent people dragged into this purported action obviously filed for the singular purpose of political propaganda,” the energy chief said.

Uy’s Udenna Corporation said in a separate statement on Tuesday that it has yet to receive a copy of the complaint and learned about it only through media reports.

“At the proper time and venue, we will address all allegations raised against the company to prove that everything is done aboveboard,” Udenna said.

“At this juncture, we maintain that the acquisition of UC Malampaya…of the shares of Chevron Philippines in Chevron Malampaya LLC is within the parameters of the law.”

Alleged negligence

In 2019, Udenna announced that its subsidiary UC Malampaya Philippines acquired all of Chevron Malampaya LLC’s shares. Chevron Malampaya had a 45% stake in the Malampaya gas field, and was later renamed UC38 LLC.

In April 2021, the DOE approved the Udenna-Chevron deal, after evaluating the technical, financial, and legal capability of the firm that will take on the shares.

The complainants argued that Cusi “acted with gross inexcusable negligence for personal gain” in approving the buyout. They claimed that Cusi and other energy officials violated Service Contract No. 38, pursuant to Presidential Decree No. 87, which requires the prior approval of the DOE before the rights in a contract – in this case, SC 38 – are transferred or assigned.

The complainants also cited the findings of the Senate energy committee, which said that the DOE “bent rules” to approve the buyout.

The Senate panel findings showed that UC Malampaya, the buyer of Chevron shares, had negative working capital yet the deal was approved, and that UC38, the new name of Chevron Malampaya, has debt nearly twice its equity.

Cusi previously denied any irregularities in the review.

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Uy virtually has a 90% operating interest in SC 38, after acquiring both Chevron Malampaya and Shell Philippines Exploration. The Philippine National Oil Company-Exploration Corporation (PNOC-EC) holds the remaining 10%.

The complainants argued that the government, through PNOC-EC, should have exercised its right to match Udenna’s offer.

“This very profitable opportunity was squandered due to not properly exercising the right of first refusal prior to the closing of the sale transaction,” the complainants said.

According to them, the government could have earned a minimum of P21 billion a year if it widened its operating shares by acquiring the Chevron stake in the Malampaya gas-to-power project.

“This certainly is a lost opportunity of PNOC-EC and/or the Bureau of [the] Treasury that currently struggles with raising revenues in the past months to address the country’s widening budget deficit to fund the unpaid frontline healthcare manpower, additional hospital facilities and supplies, and much-delayed vaccine deliveries due to the ravaging pandemic,” they added.

Other respondents include former PNOC-EC officer-in-charge Lourdes Gelacio, Chevron Philippines chairman Billy Liu, Chevron Malampaya president Melinda Racela, and other PNOC-EC directors and Udenna directors.

CLOSE TIES. Businessman Dennis Uy talks to President Rodrigo Duterte during the 10th listing anniversary of Phoenix Petroleum at the Philippine Stock Exchange on July 11, 2017.
Malacañang

The Malampaya gas field delivers a fifth of the Philippines’ electricity requirements.

As the gas field is seen to be depleted by 2027, President Rodrigo Duterte lifted the moratorium on oil and gas exploration in the West Philippine Sea.

SC 38 or the Malampaya gas-to-power project is set to expire in 2024. Talks on extending the contract are ongoing, according to the DOE. 

Retired Supreme Court associate justice Antonio Carpio said the Udenna-Chevron buyout would be the “biggest presidential gift to a crony” if the contract is extended.

Uy, whose empire has grown during the Duterte administration, is one of the President’s close friends. According to official documents, the Davao City businessman was one of the biggest donors in Duterte’s presidential campaign in 2016.

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– Rappler.com

Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.