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Key legislator calls for voiding of Malampaya deals, citing faulty process

SHELL GLOBAL

SENATOR Sherwin T. Gatchalian said Wednesday that the Department of Energy (DoE) must void its approval of the Chevron Malampaya LLC’s transfer of its 45% stake in the Malampaya gas project to Udenna group subsidiary UC Malampaya (Pte Ltd.), calling the approval process defective.

Mr. Gatchalian, who chairs the Senate’s Committee on Energy, said the Energy department has admitted to lapses in the processing of the stake sale approval.

“When there’s a gap in the law, there’s a lapse in the process,” Mr. Gatchalian told BusinessWorld in a video interview.

Mr. Gatchalian said the DoE can therefore rescind the approval of Chevron Malampaya’s sale of its stake to Dennis A. Uy-controlled UC Malampaya.

“They can because if they admit that the process is defective, therefore the approval is invalid. Then the transaction should be voided,” he said.

He also noted that the Senate can only pressure and make recommendations to the Executive and Judiciary branches of government to initiate proceedings to void the deal.

Assistant Energy Secretary Gerardo D. Erguiza, Jr. told reporters Wednesday that instead of finding fault with the deal, gaps in the law need to be addressed.

Mr. Erguiza said that there is no need for the DoE to rescind the deal as the law does not authorize the agency to regulate the sale of shares between private parties on a willing seller-willing buyer basis.

Mr. Gatchalian, on the other hand, countered by saying, “Nowhere in the documents that they submitted to us indicate that there are any gaps in the law. We were made to understand that the law is sufficient and Department Circular 2007-04-003 (DC 2007) — Prescribing the guidelines and procedures for the transfer of rights and obligations in Petroleum Service Contracts under PD 87 as amended — and Presidential Decree 87 will be used to evaluate this transaction.”

Mr. Gatchalian, who is leading an investigation into the Malampaya transaction, said that the DoE sent an e-mail during its budget hearing indicating that it does not deem it necessary to amend the law.

The DoE was also asked during a Senate hearing in November last year about the sufficiency of the current regulations, which the department said were sufficient.

Mr. Erguiza said the DoE is drafting a circular to clarify the process for approving such sales.

Mr. Gatchalian said a circular does not have the force of law and will not suffice as an amendment.

PD 27 or the Oil Exploration and Development Act of 1972 allows for the discovery and production of petroleum as pursued by the government and private sector.

Under the decree, parties working with the government to explore petroleum in the Philippines work under Service Contracts (SCs) — SC 38 in the case of Malampaya — under which exploration labor and technology will be provided by the contractor, with financing from the government, which will assume ownership of any discoveries.

DC 2007 prescribes the procedure for approving requests for the transfer or assignment of rights and obligations under a Service Contract. — Marielle C. Lucenio

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