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PNOC-EC withholds consent to Malampaya deal

PNOC Exploration Corp. (PNOC-EC) said on Wednesday that it had withheld its consent to the sale of Shell Philippines Exploration B.V.’s (SPEx) 45% stake in the offshore Malampaya gas-to-power project to a subsidiary of Udenna Corp.

“As of Dec. 13 2021, PNOC-EC has officially communicated to SPEx that PNOC-EC is withholding its consent to the transaction,” PNOC-EC President and Chief Executive Officer Rozzano D. Briguez disclosed during a Senate hearing, reading the letter sent by the company to SPEx.

PNOC-EC is a unit of state-led energy company Philippine National Oil Co. (PNOC). It holds a 10% stake in the Malampaya project, which is covered by Service Contract (SC) 38.

Mr. Briguez said that after telling SPEx on Monday of the decision, it is now up to SPEx — the operator of SC 38 — to act on the withheld consent.

SC 38 is the agreement between the Malampaya consortium partners — SPEx, Chevron Malampaya LLC, and PNOC-EC — and the government covering the resource block that includes the Malampaya gas field.

In May this year, Shell Petroleum N.V. announced that it had signed an agreement with Udenna unit Malampaya Energy XP Pte. Ltd. for the sale of its 100% shareholding in SPEx.

Shell Petroleum said the base consideration for the sale is $380 million, with additional payments of up to $80 million between 2022 and 2024 “contingent on asset performance and commodity prices.”

The deal came after Udenna unit UC Malampaya Philippines Pte. Ltd. signed on Oct. 25, 2019 a sale and purchase agreement to acquire 100% of the shares of Chevron Malampaya LLC.

Chevron Malampaya is a subsidiary of Chevron Philippines, Ltd., which held a 45% non-operating interest in the Malampaya gas field.

The Chevron deal was approved by Department of Energy (DoE) Secretary Alfonso G. Cusi on March 26, 2021.

On June 8, SPEx requested for the DoE’s approval of the transfer of shares between Shell Petroleum and Malampaya Energy XP, according to information disclosed by the department in a Senate hearing in July this year.

During the hearing on Wednesday, Senate Committee on Energy Chairman Sherwin T. Gatchalian asked Mr. Briguez whether the withheld consent meant that SPEx could no longer sell its interest.

Mr. Briguez said, “we can’t enforce that for now, we don’t know how the operator will move forward, but I think it’s enough that we told them that we are withholding our consent.”

He also declined to explain how PNOC-EC arrived at the decision, but said that the company also did not include the reason in the letter sent to SPEx.

“Out of respect and deference to the other parties, we beg the committee’s understanding not to disclose the reasons behind our decision as of the moment because our other partners and our stockholders have to be informed first,” the retired general said.

Meanwhile, SPEx expressed its disappointment on the state-run exploration corporation’s decision during the six-hour hearing.

“We are very disappointed at the outcome of the decision of PNOC-EC. However, we will continue to engage with them to find out if there is anything we can do to address the concerns that might have led them to this decision,” said Kiril Caral, SPEx managing counsel.

Mr. Caral said the next step is for SPEx and PNOC-EC to meet and discuss the reasons behind the decision.

“Without the consent from PNOC-EC, we will not be able to proceed with the transaction at the moment,” he said.

PNOC-EC has the “right of to match” the offer to acquire the SPEx shares based on the joint operating agreement it signed with Chevron Malampaya and SPEx.

Under the right to match, the selling party must first offer its interest to the parties holding such right and it is only upon the refusal that the seller may offer it to other parties outside the consortium.

Earlier in the Senate hearing, Mr. Cusi admitted that he approved the decision of PNOC-EC not to match the offer of UC Malampaya to buy the 45% share of Chevron Malampaya. — Marielle C. Lucenio

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