The government through PNOC-Exploration Corp. (PNOC-EC) lost its chance to have a “true” state-controlled oil and gas exploration firm when it did not use its right to match the bid of Udenna Corp.’s Malampaya Energy XP for Shell Philippines Exploration B.V.’s (SPEX) 45 percent operating interest in Service Contract 38 which includes the Malampaya gas field, according to Sherwin Gatchalian, Senate committee on energy chairman.
In a virtual hearing yesterday, Gatchalian said that could have been a good opportunity for PNOC-EC to be like other state-owned firms in the region like Petronas of Malaysia and PTT of Thailand especially that the transaction “was sold at a discount and the payback period is quite short.”
Last May, SPEX said the transaction has a base consideration of $380 million with additional payments of up to $80 million between 2022 to 2024 contingent on asset performance and commodity prices.
In the same hearing, PNOC-EC president Rozzano Briguez, s aid the company’s in-house assessment showed pursuing the right to match could cause difficulties in operating and financing the project.
“We learned that if we buy more than half of that 45 percent, SPEX group (shares) will become a GOCC (government-owned and controlled corporation) and if it becomes a GOCC, part of the risk is for that to lose its operational flexibility. We will lose operational flexibility especially in prompt decision making that’s required of a very complex offshore exploration company,” Briguez said.
Briguez said losing operational flexibility would affect procurement of materials, consultancy and staffing.
But Gatchalian said issues on operational flexibility could be remedied by legislation.
Briguez said PNOC-EC also negotiated for loans with government banks which were only willing to support up to 50 percent of the amount needed to match Udenna’s offer.
“The remaining 50 percent was barely enough for us to sustain because that time, our cash was just probably \a little above our in-house valuation of the 50 percent that the banks will not support,” Briguez said.
“If we (had done) that, we (would have) compromised the three remaining operated blocks … and the other four non-operated blocks that we have because in our pursuit of energy security and efficiency, we need to support other exploration activities…,” he added.
Briquez said PNOC-EC submitted a waiver on its right to match but has not issued a consent for the transaction between SPEX and Udenna pending the Department of Energy’s (DOE) review of the deal.
DOE Secretary Alfonso Cusi said the agency is evaluating the transaction and no decision has been reached.
Cusi said the parties concerned still have to comply with the requirements of the government before the latter gives its stamp of approval on the sale.
If the transaction between SPEX and Udenna is pursued, 90 percent of the Malampaya resource will be controlled by Dennis Uy’s flagship company with the remaining 10 percent owned by PNOC-EC.
