IBP: Scrap Malampaya sale to Dennis Uy, let government take over

The Integrated Bar of the Philippines (IBP) took a strong stance on the Malampaya buyout issue as it called on the Department of Energy (DOE) to scrap the sale of shares to businessman Dennis Uy and instead let the Philippine National Oil Company (PNOC) take over the gas field.

"While the Senate investigation is ongoing, the IBP calls on the DOE to rescind its approval of Chevron’s transfer of its 45% interest in Malampaya to Udenna’s subsidiary, UC Malampaya, and hold in abeyance, its approval of SPEX’s transfer of its 45% to another Udennna subsidiary, Malampaya Energy XP," the IBP board said in a statement on Wednesday, November 24.

A Senate inquiry led by Senator Sherwin Gatchalian had raised red flags on the DOE approval of the transfer of shares of Chevron to UC Malampaya, alleging that UC Malampaya was not financially qualified for it.

Shell Philippines Exploration BV (SPEX) is on the way to finalizing the sale of transfer to Malampaya Energy XP. 

With this, Uy stands to acquire virtually 90% operating interest in the Malampaya gas field, a rich resource of oil connected to the Reed Bank in the West Philippine Sea. PNOC holds the remaining 10%.

IBP's presidential adviser for energy Fernando Peñarroyo said that while their statement is not meant to prejudge Uy and DOE, both facing a graft complaint at the Office of the Ombudsman, they nonetheless believe that the PNOC should take over the 90% for full control.

"The Philippine National Oil Company can get the same financing arrangement. In the first place it's a GOCC, it has a better financial and technical qualification than any third party at this time," Peñarroyo told Law of Duterte Land Podcast on Friday, November 25.

Under the Service Contract to explore Malampaya, the government is given the right to match the offer of the buyer. PNOC-Exploration Corporation President Rozzano Briguez told the Senate that they studied the option to increase the government share in Malampaya, but were told banks were only willing to lend up to 50% of the estimated amount. 

"I do hope that the government made their homework in determining whether or not it's not feasible for the Philippine government to acquire the shares being divested, because a lot of finance people are saying PNOC can form their project vehicle, borrow money from the banks," said Peñarroyo, a geology graduate with vast experience as counsel and manager of energy companies.

He added, "I believe PNOC has the technical capacity because it was created during the oil crunch of the '70s."

Udenna had earlier said that keeping the 90% share in the hands of the private sector would benefit the government because it would not have to shoulder operational costs.

National security

The IBP said a government takeover will further secure Malampaya, and by extension, the Reed Bank, from threats of foreign incursion – ultimately protecting national security.

"A buyer who is not technically and financially capable of operating Malampaya may tap companies from foreign countries having adverse interests in the West Philippine Sea dispute," the IBP said in its statement.

The issue is not so much that Uy is the one buying the shares, but that the Udenna subsidiaries appear to have no proven capability in oil exploration. At least with Shell and Chevron, there was a level of security in this regard, said Peñarroyo.

"Shell and Chevron are big oil companies, they have proven track record in developing very complicated petroleum resources, they also have track record in providing finance to such operations," said Peñarroyo.

"This is why the IBP wants transparency in the transfer of a very vital resource to a company whose technical and financial qualifications are being questioned," said Peñarroyo.

Malampaya gas field accounts for 30% to 40% of Luzon's power. Experts believe it may run out by 2027, posing the risk of a crisis that will plunge the island into dark times of outages.

"Kaya kung ililipat ang interes ng Malampaya, dapat siguraduhin natin na maililipat ito sa tamang kumpanya. Sa palagay namin, mas maganda na mapunta ito sa PNOC," said Peñarroyo.

(So if they're going to transfer Malampaya's interests, we should make sure it goes to the right company. We believe it is better if the PNOC takes over.)

Peñarroyo said the IBP was compelled to speak out because Malampaya is also an issue that involves the rule of law.

"We want to adhere to the principle of supremacy of the law, transparency and accountability of public officers.... We want to avoid any arbitrariness, and we vouch for procedural and legal transparency," said Peñarroyo.

– Rappler.com

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.

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