Malampaya gas field

Dennis Uy’s Chevron Malampaya acquisition ‘not a midnight deal,’ says DOE

Aika Rey
Dennis Uy’s Chevron Malampaya acquisition ‘not a midnight deal,’ says DOE

ENERGY CONCERNS. Energy Secretary Alfonso Cusi gives updates during a meeting of the Duterte administration's coronavirus task force in Davao City on September 2, 2021.

Malacañang

Energy Secretary Alfonso Cusi asks: If Dennis Uy weren't the one buying Chevron Malampaya, would it be an issue? The point, says Senator Sherwin Gatchalian, is that 'the government did not follow its own rules.'

Energy Secretary Alfonso Cusi denied irregularities in his department’s review of Dennis Uy’s acquisition of a Chevron subsidiary with a 45% stake in the Malampaya gas field.

In an interview on ANC’s Headstart on Monday, October 4, Cusi echoed energy officials’ statement in a September 28 Senate hearing, saying that the deal between UC Malampaya Philippines, a subsidiary of Uy’s Udenna Corporation, and Chevron Malampaya LLC was private.

“Wala po tayong magagawa doon, nagbentahan sila (We can’t do anything about that, there was a sale between them). That is a private transaction,” said Cusi.

“Hindi nga po midnight deal ‘yun (It was not a midnight deal),” he later added.

Due to the nature of the deal, added Cusi, the Department of Energy (DOE) was not obliged to scrutinize company books, though it did so.

“In fact…we are not duty-bound to look at the books of the buyer, kasi hindi naman kami ang nagbebenta (we’re not the seller of shares). It is Chevron,” he said.

Senator Sherwin Gatchalian had alleged that the DOE “bent rules” in order to accommodate Uy’s entry into operations of the Malampaya gas field.

Gatchalian also said the transaction could be a “midnight deal” given that talks on extending Service Contract (SC) No. 38 or the Malampaya gas-to-power project supposedly moved “faster” after Uy’s entry into the consortium.

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 holds the remaining 10%.

Gatchalian claimed the DOE review only “legitimized” the questionable buyout.

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Cusi questioned why the Senate energy panel, chaired by Gatchalian, had to hold a hearing on the matter.

“We don’t need a Senate hearing for that. Why don’t they give us a copy of their analysis so we will know, we will learn? We’re not hiding anything,” said Cusi in a mix of English and Filipino.

‘Cloud of doubt’

In an interview with Rappler, Gatchalian cited SC 38 and Presidential Decree No. 87 in saying that the government must first give approval before the rights stipulated under a contract – in this case, SC 38 – are transferred or assigned.

“Kung private transaction lang, dapat ‘yung batas wala nang pakialam. Paulit-ulit sinasabi na private transaction (If it were purely a private transaction, then the law shouldn’t have indicated a review. They keep on insisting it was a private transaction),” the senator said.

“If, in the eyes of the law, it’s not important and the private sector can do whatever they want, then the law should not have made it mandatory anymore.”

Cusi also asked on Monday: If Uy weren’t the one buying Chevron Malampaya, would it be an issue?

Gatchalian responded that regardless of who bought Chevron Malampaya, the DOE should have been more prudent in reviewing the transaction.

“You also cannot remove the cloud of doubt because Udenna is close with the administration. You cannot erase that, but the personality is beside the point. Did the government follow its own rules?” Gatchalian told Rappler. 

“The government did not follow its own rules. They customized it so that Udenna will be approved,” he added.

Gatchalian reiterated that the financial aspect of the new owner is crucial, given that the gas field is an important asset to energy security. He also noted that UC38 LLC, the new name of Chevron Malampaya, has debt nearly twice its equity.

“For every P2 debt, they only have P1 equity. Their asset is bought by debt. That’s quite risky because if they cannot pay, then it will be the banks [partly] owning Malampaya,” said Gatchalian.

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. – 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.