Malampaya gas field

Business groups’ plea: Probe deeper into Dennis Uy’s Malampaya buyout

Aika Rey
Business groups’ plea: Probe deeper into Dennis Uy’s Malampaya buyout

ENERGY SOURCE. Depletion compression platform at the Malampaya gas field.

Malampaya

Business groups call on the government to scrutinize the 'financial and technical capabilities and interests' of Dennis Uy's companies, and to block transactions 'disadvantageous to the Filipino people'

Eight business groups urged the Senate and concerned government agencies to probe deeper into the Malampaya buyout controversy, stressing the importance of the gas field to the country.

In a joint statement on Wednesday, November 10, the groups said the “acquirer” will likely take on partners for the operation of the gas field, given its “lack of expertise and the heavily-financed nature of the purchases.”

“The government should scrutinize the buyer’s financial and technical capabilities and interests and should reserve, enforce, and exercise its right to block and invalidate transfers of shares and control that may be disadvantageous to the Filipino people,” the groups said.

The groups did not name the companies involved, but these are Udenna Corporation units UC Malampaya for Chevron Malampaya LLC and Malampaya Energy XP for the yet-to-be-approved Shell Philippines Exploration (SPEX) acquisition.

Udenna is led by businessman Dennis Uy, a friend and campaign donor of President Rodrigo Duterte.

With Uy’s takeover of Chevron Malampaya and SPEX, Udenna virtually holds 90% of the operating interest in Service Contract No. 38 (SC 38) or the Malampaya gas-to-power project. The Philippine National Oil Company holds the remaining 10%.

The joint statement was signed by the Makati Business Club, Financial Executives Institute of the Philippines, Energy Lawyers Association of the Philippines, Filipino CEO Circle, Integrity Initiative, Investment Houses Association of the Philippines, Philippine Women’s Economic Network, and Women’s Business Council Philippines.

The groups asked the Senate to get to the bottom of the following issues:

  • why the government did not exercise its right of first refusal or the right to match
  • explore if the government could easily get financing if it exercised its right to match
  • why the government failed to award a license in 2019 – whether by extending the contract or to a new consortium
  • why the government allowed the sale of a “critical” energy asset to a group with no experience or track record in gas exploration or production

The groups noted that by not exercising the right-to-match option, the government “gave up tens of billions of pesos” at a time when it needed it the most, and “put the country’s energy and national security at risk.”

They also pointed out that Uy’s companies got financing to acquire Chevron Malampaya and SPEX, so why did the government pass up the opportunity to do the same?

The government’s failure to extend SC 38 was said to be the reason that pushed Chevron and Shell to sell. The groups said the government may have “breached its fiduciary duty” or its commitment to act in the best interest of the people.

“From an energy security standpoint, the delay may be a breach of fiduciary duty given that the existing wells are expected to be depleted by 2025, and the estimated five years needed to explore and develop additional wells,” the groups said.

They also asserted that any breakdown in Malampaya operations “could severely harm the economy, the environment, and even lives.”

Uy and Energy Secretary Alfonso Cusi, among others, are facing a graft complaint at the Office of the Ombudsman over the alleged anomalous buyout.

In the past months, the Senate energy committee led by Senator Sherwin Gatchalian has been probing the Chevron-Udenna deal. Gatchalian accused the Department of Energy (DOE) of bending rules in order to approve the “midnight deal.”

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Gatchalian: DOE unit ‘bent rules’ to approve Udenna-Chevron Malampaya buyout

Gatchalian also said in Senate hearings that the DOE’s process of approval was not applied to protect the people but to “legitimize” the transaction instead.

Cusi and Udenna maintained that the Chevron Malampaya deal was aboveboard.

For critics, however, the deal is a form of cronyism, given Uy’s ties to Duterte. – 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.