Calls Grow For A Probe Into The Sale Of Malampaya To Dennis Uy

The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business organization, expressed its support for an investigation into the sale of the Malampaya gas field – though it fell short of taking an official position.

“Malampaya involved a lot of questions that need to be resolved,” said PCCI president and former ambassador Benedicto Yujuico in a press conference on Thursday, Nov. 11. “We should actually look into it. Let us really find out what is going on.”

Yujuico however stressed that PCCI is a very cautious organization and will thus only issue a statement once it has reviewed the merits of the sale. “We want to see both sides of the coin. We want this ventilated properly,” he said.

“It is very hard for PCCI to say this or to say that, or that this is good, or this is no good, because we do not yet have a fact—the set of facts which we need to actually make a value judgment on the transaction,” he added.

Davao businessman Dennis Uy, whose subsidiaries are taking over the gas-to-power project, is the director for transportation and logistics of the PCCI.

Last year, Uy’s Udenna Corporation acquired 45% of Malampaya previously held by Chevron. Then in May this year, it struck a deal with Shell Philippines Exploration BV (SPEX), to take another 45% stake in the gas field project. The Department of Energy (DOE) cleared the first sale and is now reviewing the second one. If approved, Uy will hold 90% of Malampaya, leaving state-owned Philippine National Oil Company with 10%.

PCCI’s comments follows a Nov. 10 statement signed by eight business groups calling on the Senate and concerned agencies to find out why the government did not exercise its right of first refusal over Chevron and Shell’s shares in Malampaya.

“By failing to do so, the government may have given up tens of billions of pesos at a time when the government needs money more than ever and more importantly, has put the country’s energy and national security at risk,” the statement read.

The signatories were: Energy Lawyers Association of the Philippines (ELAP), the Financial Executives Institute of the Philippines (FINEX), Filipina CEO Circle (FCC), Integrity Initiative Inc., Investment Houses Association of the Philippines (IHAP), the Makati Business Club (MBC), the Philippine Women’s Economic Network (PhilWEN), and the Women’s Business Council Philippines (WomenBizPH).

The organizations did not name the companies involved, but they are referring to the two subsidiaries of Udenna Corporation – UC Malampaya and Malampaya Energy XP.

In the same webinar on Nov. 11, Sen. Sherwin Gatchalian said the non-extension of Service Contract 38, which covers the Malampaya gas field, is what drove Shell to sell out.

“SC 38 is quite a prolific area and Shell wanted to drill more wells around that area. Apparently, before they can drill, obviously they want to extend their contract first, because these things take time to recover, but they were not given that opportunity,” he said.

Gatchalian, who chairs the Senate energy committee, has repeatedly accused the DOE of bending the law to favor Udenna despite its lack of experience and financial capacity.

“To drill one well costs about $20 million. The problem with drilling, is it’s like [playing] Russian roulette, because the risk is so high. The [$]20 million, we don’t even know if you can get your returns,” said Gatchalian, stressing that whoever takes over the project should have deep pockets.

The eight business groups that issued the statement pointed out something parallel – if Uy’s companies had to rely on financing to acquire the stakes, why couldn’t the government do so by itself?

Located in Palawan, Malampaya is the sole natural gas field in the country. It supplies one-third of Luzon’s energy and is expected to be depleted potentially as early as 2025.

Former Supreme Court associate justice Antonio Carpio wrote in a column in October that, “Whoever owns the Malampaya gas pipeline has a leg up in the commercialization of the Reed Bank gas since the same pipeline will be used to deliver gas to Batangas.”

Last month, a trio of private citizens led by Fil-American businesswoman Loida Nicolas Lewis filed graft complaints against Uy, DOE Secretary Alfonso Cusi, and several others before the Office of the Ombudsman and described the deal as the “most incredible crony agreement in history.”