The Department of Energy said it found the $565-million sale transaction between UC Malampaya Philippines Pte. Ltd. and Chevron Philippines Ltd. above board.
Energy officials during a Senate energy committee hearing Tuesday affirmed the financial soundness and legality of the deal despite doubts raised by the Senate committee on energy chairman Senator Sherwin Gatchalian.
Chevron Philippines last year sold a 45-percent stake in the Malampaya gas project to UC Malampaya led by businessman Dennis Uy.
“When the DOE stretched the application of DC (Department Circular) 2007, it affected, among others, the evaluation of our financial services. Based on the memorandum we submitted, you will find that there were two entities evaluated: UC 38 which is the new name of Chevron, and of course UC Malampaya,” DOE Energy Resource Development Bureau director Cesar de la Fuente told the Senate panel.
Dela Fuente said while the parties to the deal took the position that DC 2007 was not applicable, the DOE insisted on its power to review and approve it.
He admitted that DC 2007 as well as PD 87, which govern the country’s indigenous petroleum resources, “do not contemplate a situation that there will be a transfer of 100-percent shares of interest of the same entity.”
Based on documents DOE submitted to the Senate, the agency’s financial services found “UC 38 LLC financially capable as transferee of the 45 percent participating interest under SC No. 38.”
Dela Fuente said UC 38 submitted audited financial statements, required under the evaluation mandated by 2007 DC, for 2018, 2018, and 2019. As for 2020, UC 38 said their financial statement for that year remained to be audited.
DOE director Araceli Soluta, head of the financial services, said they did not evaluate the financial standing of UC MPPL as the buyer or transferee-firm because it is not a member of the consortium operating the Malampaya gas field under Service Contract No. 38.
“That’s why we just focused our evaluation on UC38 LLC,” she said.
Dela Fuente said as the deal was already consummated, the financial evaluation focused on the capability of UC 38 to honor its 45-percent commitment under the work program and budget of the Malampaya operation for the succeeding year.
Dela Fuente also said the Chevron-UC Malampaya deal also passed DOE’s technical evaluation.
“The basis of our evaluation recommending the approval of transfer based on our technical evaluation is because from top management there is no substantial change in the setup of UC38 or Chevron Malampaya since it’s the same entity from the officers down,” Dela Fuente said.
Dela Fuente said Chevron is not the operator of the Malampaya gas field, but is merely the holder of 45-percent of participating interest.
DOE legal services director Arthus Tenazas also told the Senate committee that based on their evaluation, “UC Malampaya is a legally registered corporation and it is qualified to acquire the shares of Chevron Malampaya Philippines.”
Meanwhile, the DOE said national interest is the paramount consideration in its evaluation of the deal signed in May, where Shell Petroleum NV sought to sell its 45-percent stake in unit Shell Philippines Exploration to Udenna subsidiary Malampaya Energy for $460 million.
Once the deal is approved, Udenna will control 90 percent and operatorship of SC 38 or the Malampaya gas project in northwest Palawan. The Malampaya field supplies fuel to power plants that generate about 30 percent of Luzon’s energy requirements.