The Department of Energy (DOE) on Wednesday said the government is seeking a higher revenue share under the ongoing negotiations for the extension of service contract 38 or the Malampaya gas project in northwest Palawan.
Energy Assistant Secretary Gerardo Erguiza Jr. said the DOE has eight items that constitute a framework that has to be reviewed in deciding the contract extension, which is set to expire in 2024.
“DOE will not approve it without discussing these concerns,” Erguiza said.
He said the concerns being discussed include the Malampaya remaining reserves, the work program, commissioning, exploration, asset disposal, gas pricing, social development fund, government contractor, and banked gas sale.
The DOE official said the talks are ongoing on the government share of the Malampaya revenues as it wants a higher stake of 70 percent from 60 percent at present.
The current Malampaya revenue sharing is 60 percent to the government and 40 percent to the contractor.
Erguiza also said DOE will first decide on the Spex transaction before the contract extension.
He said DOE is also set to come out with a circular that will address the “gap in the law” regarding the sale of shares of oil and gas companies such as the controversial Malampaya gas project.
“We have to include in the evaluation of DOE, because of these problems, how do we proceed now with the sale of stocks between corporations?” Erguiza said.
DOE is now at the center of controversy for approving the sale of the 45 percent stake of Chevron Malampaya LLC to the Udenna Group amid issues regarding lack of technical, financial, and legal basis.
DOE is also presently reviewing the sale of the 45 percent stake of Shell Philippines Exploration B.V. to Udenna in the Malampaya gas project.
Erguiza said DOE is set to conduct public consultation of the draft circular in the next two to three weeks.
“That DC 2007 is an implementing circular or regulation of PD (Presidential Decree) 87 and PD 87 was not envisioned by the DC… On our part, we can issue or make an amendment to the extent that authorities delegated, to include the sale of shares and provide the parameters on what the DOE, based on the controversies that are happening now. We see there is a gap and we have to address it,” he said.
He said the sale of shares in Malampaya involves the sale of shares of stock and the corporation remains the same.
Erguiza said DOE used a benchmark DC 2007-004-0003 entitled “Prescribing the Guidelines and Procedures for the Transfer of Rights and Obligations in Petroleum Service Contracts under PD 87” to which it said is akin to a sale of shares of stocks.
DOE earlier said 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 fas field is a backbone of the country’s power generation mix.
DOE said if the Chevron 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.
Erguiza said “it is a matter of national urgency” that we have to address this as soon as possible.”