State lacks cash to buy into SPEx stake in Malampaya – Gatchalian

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THE PHILIPPINE GOVERNMENT does not have the cash now to buy into Shell Philippines Exploration, B.V.’s (SPEx) stake in the country’s sole natural gas field as the ongoing pandemic drained its financial resources, according to a senator.

The Udenna Group of Davao-based businessman Dennis A. Uy has called on the government to jointly acquire the 45% operating interest of the domestic exploration unit of Royal Dutch Shell in the Malampaya gas-to-power project under Service Contract (SC) 38.

For the group, the remaining partners in the project — UC Malampaya LLC and the Philippine National Oil Co.-Exploration Corp. (PNOC-EC) — are the “most suitable party to assume Shell’s interest.”

But according to Senator Sherwin T. Gatchalian, the chairman of the Senate’s energy committee, the government lacks the money to buy those shares as the budget deficit is high this year and the debt-to-gross domestic product ratio might expand more than 50% by next year.

“From a fiscal standpoint, we don’t have the cash to buy those shares because of COVID-19 (coronavirus disease 2019)… we don’t have the ready cash to buy the remaining shares,” the senator told reporters in a virtual briefing on Friday.

The government through PNOC-EC owns a 10% stake in Malampaya, while the Udenna group holds the other 45%.

Mr. Gatchalian, however, pointed out that buying into SPEx’s interest will provide the state a ready revenue source.

“We should not also discount the opportunity that it’s a ready-made cash flow for the government,” he said.

This year, the government, so far, received $11.7 billion in revenue share from the $4.5-billion gas-to-power project.

The PNOC exploration subsidiary said it was studying its position in the share purchase. In the meantime, it is readying a country-wide study of various sedimentary basins that bear potential oil and gas resources.

The planned sale of SPEx’s Malampaya stake comes as the Anglo-Dutch multinational firm is grappling with the pandemic’s impact.

In August, Pilipinas Shell Petroleum Corp., its locally listed firm, announced the permanent closure of its 110,000-barrel-per-day refinery in Tabangao, Batangas as margins worsened with the slump in demand. The refinery, though, will be converted into an import facility to continue supplying fuel for its customers in Luzon.

Shell will “ensure a smooth transition of the asset to a credible buyer who would be well placed to optimize the value from Malampaya,” SPEx General Manager Rolando J. Paulino, Jr. previously said in a statement.

Mr. Gatchalian wants SPEx’s successor as operator to have the technical expertise in running a gas platform, assuring the country that it will “not run out of natural gas in the immediate future.” It is expected that the natural gas depot will be completely depleted by 2027, according to estimates by the Department of Energy (DoE).

So far, Ramon S. Ang of San Miguel Corp. and Manuel V. Pangilinan’s group expressed their interest in buying the Malampaya stake.

The Malampaya field provided 3,200 megawatts of electricity, accounting for 21.1% of the country’s gross power generation in 2019.

Besides looking for other natural gas spots around the country, the government is also looking into liquified natural gas imports as an alternative.

Meanwhile, the present consortium is preparing its application with the government to extend its operations in the gas field beyond 2024, or the end of its service contract, Energy Secretary Alfonso G. Cusi earlier said. — Adam J. Ang