TAGUIG CITY - The Department of Energy said it exercised due diligence and followed existing rules and regulations in the evaluation and approval of the $565-million transaction between UC Malampaya Philippines Pte. Ltd. and Chevron Philippines Ltd.
During a Senate Energy Committee hearing on Tuesday, DOE officials affirmed the financial soundness and legality of the $565-million transaction between UC Malampaya and Chevron deal that transferred 45 percent stake in the Malampaya Energy project to the Udenna Group of Davao businessman Dennis Uy.
At least two senators had expressed doubts on the soundness of the financial evaluation, as required by a 2007 department circular, noting it focused mostly on Chevron instead of UC Malampaya.
“When the DOE stretched the application of DC 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 stressed that although 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.
However, he admitted that DC 2007 circular 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% participating interest under SC No. 38.”
Dela Fuente clarified 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 has yet to be audited.
Director Araceli Soluta, head of the financial services of the DOE 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 (SC 38).
“That’s why we just focused our evaluation on UC38 LLC,” she said.
Dela Fuente explained further since 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.
In addition, Dela Fuente 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.
Besides, Dela Fuente pointed out that 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 Atty. 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.”
As to the suggestion of several senators that the government should have grabbed the opportunity to acquire Chevron’s share, Philippine National Oil Company chief Lt. Gen. Rozanno Briquez said the state-owned firm had no opportunity to do it at that time.
“We didn’t have the opportunity. We were only given 15 days for the right to match (the offer of UC Malampaya). At most we could only borrow about half of the amount,” he said.
Meanwhile, the DOE said national interest is the paramount consideration in its evaluation of the deal signed last May, where Shell Petroleum NV sought to sell its 45 percent stake in unit Shell Philippines Exploration (SPEX) to Udenna subsidiary Malampaya Energy for a total of $460 million.
Together with the Chevron-UC Malampaya deal, the twin transactions worth more than $1 billion that will bestow a 90 percent control of the Malampaya natural gas project to the Udenna units.
The Malampaya field supplies fuel to power plants that generate about 30 percent of Luzon’s energy requirements thus providing cheaper electricity bills for consumers as well as reducing our country’s dependence on foreign oil imports.
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