The Udenna Group is set to take control of the $4.5-billion Malampaya gas-to-power project in northwest Palawan after the Shell Group agreed to sell its 45-percent to the camp of businessman Dennis Uy for up to $460 million.
Shell Petroleum N.V. said Thursday it signed an agreement with Malampaya Energy XP Pte. Ltd., a subsidiary of Udenna Corp., to sell its 100-percent shareholding in Shell Philippines Exploration B.V. Spex holds a 45-percent operating interest in Service Contract 38, which includes the producing Malampaya gas field.
Aside from Spex, the other partners in SC38 are UC38 LLC, a subsidiary of Udenna (45 percent) and state-owned PNOC Exploration Corp. (10 percent).
Udenna earlier acquired the 45-percent interest from Chevron Malampaya LLC for about $565 million in March 2020.
Udenna’s Malampaya Energy said that following the Spex deal, “the central pillar of the nation’s energy infrastructure will be 100-percent operated by Filipinos for Filipinos.”
“We are tremendously proud of Malampaya Energy for acquiring one of Shell’s most successful natural gas assets in Asia, which of course includes the world-class SPEX team currently operating Malampaya,” said Udenna Corp. chairman and chief executive Dennis Uy.
Shell said in a statement the base consideration for the sale is $380 million, with additional payments of up to $80 million between 2022 and 2024, depending on asset performance and commodity prices. Subject to partner and regulatory consent, the transaction is targeted to be completed by the end of 2021. The transaction has an effective date of Jan. 1, 2021.
“Since it began commercial operations in 2002, Malampaya has supplied a significant portion of the Philippines’ energy demand and it will continue powering the country with indigenous gas following a safe transition of the asset and its experienced workforce,” said Shell’s Upstream director Wael Sawan.
“Today’s announcement is consistent with Shell’s efforts to shift our Upstream portfolio to one that is focused on nine core positions,” Sawan said.
Shell assured the Spex staff would continue their employment under the new ownership, providing continuity and contributing to ongoing operational reliability and safety. Malampaya and its staff made significant contributions to the Philippines and to the local community over the past two decades and are expected to continue playing an important role in providing energy for the Philippines.
Belinda Racela, a top executive of Malampaya Energy, said the ongoing safety and reliability of Malampaya is the group’s top priority and would be delivered by the same experienced team of upstream professionals from SPEX working with consistent practices.
“They will be strongly supported by our newly established Upstream Decision Review Board of industry leaders and the ex-Chevron and ex-Shell upstream specialists in our Malampaya Energy business, who are already actively involved in managing the Malampaya consortium,” Racela said.
“We are excited about the future growth opportunities at Malampaya. Our teams are accelerating exploration and production plans to extend the life of the Malampaya field and expand supplies of affordable, safe, low-carbon and indigenous energy for the nation,” Racela said.
Malampaya Energy said it is committed to developing more jobs for Filipinos and supply chain opportunities for local businesses as it continues to grow its energy business.
Spex received its license to operate in the Philippines in 1991. Since then, it became the operator of Malampaya to explore and develop SC38 offshore northwest Palawan.
“Shell and the country leadership will always be grateful for the dedication, professionalism, and support that the entire Spex organization has contributed to the wider SciP family in particular, and to our country in general,” Shell Companies in the Philippines country chairman Cesar Romero said.
The Shell Group said the deal would have no impact on other Shell businesses in country as the Philippines remains an important country for Shell after over a century of successful operations.
Shell said it would continue to pursue opportunities in the Philippines where it could leverage global expertise in line with its strategy.
Shell was earlier granted a notice to proceed by the Department of Energy with its planned liquefied natural gas import terminal project.
Before this, Spex asked the government to extend the SC 38 contract beyond 2024 amid the decline in output of the Malampaya reservoir but had not received a favorable response from the DOE. The Malampaya reservoir is seen to be depleted by 2027, thus needing for more oil and gas exploration works to be underway.
To prepare for the depletion of the Malampaya gas project, the government positioned the Philippines to become a regional hub for LNG.
The Malampaya gas project began commercial operations in 2002. The major components of Malampaya include subsea wells and flowlines, a shallow water platform and a depletion completion platform to process natural gas, a catenary anchored leg mooring-buoy for the export of liquid condensate, a 504-kilometer long gas export pipeline on the seabed, an onshore gas plant and pipeline in Batangas City.
The Malampaya gas project provides natural gas as fuel to power plants with a combined capacity of over 3,000 megawatts.