Senator Win Gatchalian’s statements regarding the sale of Shell Philippines Exploration BV (SPEX) shares of stocks to the Udenna Group are “misguided,” the Department of Energy (DOE) said.
“This revelation of Sen. Gatchalian is unprecedented, as the matter is still being heard by the Senate Committee on Energy. The senator’s statements are misguided, lacking in factual and legal basis,” the DOE said.
The DOE also said the inquiries of Gatchalian is causing undue delay to the timeline of consortium corporations, and this may eventually take its toll and put the country’s energy security at risk.
The DOE said approval of the sale shares of stocks of Chevron Malampaya LLC, one of the three corporations in the Malampaya Gas Field Project consortium, has been dubbed by Gatchalian, chairman of the Senate Committee on Energy, as “lutong macau.”
“This revelation of Sen. Gatchalian is unprecedented, as the matter is still being heard by the Senate Committee on Energy. The senator’s statements are misguided, lacking in factual and legal basis,” the DOE said.
The sale of Shell Philippines Exploration BV (SPEX) shares of stocks to the Udenna Group led by businessman Dennis Uy is now pending for review by the DOE.
“In any case, the department would like to note that when the sales were made, both Chevron Philippines, which owns Chevron Malampaya and Shell Petroleum NV, the owner of SPEX, followed rigorous global standards,” the agency said.
The DOE said while there is no law or any rules or regulations that squarely directs the agency to review the sale of shares of stocks between the corporations, it conducted the review because the Malampaya Gas Field is a backbone of the country’s power generation mix.
“Revisiting the sale has become imperative to ensure that national interest is protected and energy security is not put at risk,” it said.
Consistent with the standards of due diligence, the DOE decided to apply, as a benchmark, Department Circular 2007-004-0003 (DC), entitled “Prescribing the Guidelines and Procedures for the Transfer of Rights and Obligations in Petroleum Service Contracts under PD 87”.
This DC is, by analogy, akin to a sale of shares of stocks.
“While the DOE applied the DC in its evaluation, the Department was confronted by the question – which corporation’s financial soundness and capability should be evaluated? UC Malampaya’s, the buyer of shares, or Chevron Malampaya LLC? Since Chevron Malampaya LLC, even if its shares of stocks are now owned by another corporation, will remain as implementor/operator of Service Contract (SC) 38, the DOE took the liberty to evaluate it,” it said.
If the transaction were a farm-in, or transfer of rights and obligations agreement, as envisioned by DC 2007-04-0003, the evaluation will be different because SC 38’s implementing corporation will then be the buyer and transferee of the rights and obligations, which is UC Malampaya, DOE said.
“Sen. Gatchalian, who is confused, holds on to this theoretical framework. He must, however, realize that it is the financial soundness and capability of the implementing corporation that should be evaluated because it is the one that is operating the project,” DOE said.
“The Department would like to emphasize that Presidential Decree (PD) 87 and DC 2007-04-0003 are square pegs in a round hole when applied to a sale of shares of stocks,” it said.
DOE urged Congress to introduce remedial legislation through amendments, or even revise the entire charter governing the upstream industry, PD 87, which has been existing and has remained untouched in almost 50 years.
On one hand, the DOE is also currently working on issuing the appropriate rule.
Gatchalian earlier said DOE’s approval of the sale of Chevron Malampaya’s 45 percent stake in the Malampaya gas project to the Udenna group is defective and invalid.
“My opinion of this is that it is a defective approval, therefore the approval is invalid because clearly there’s a lot of inconsistencies and any major transaction like this should not lead to confusion.
Instead of us appreciating it, we got more confused by the DOE’s own admission that there is indeed confusion,” Gatchalian said.