DOE refuses to tie-in license extension with Uy’s Malampaya buy

Published January 6, 2020, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2020/01/06/doe-refuses-to-tie-in-license-extension-with-uys-malampaya-buy/

The Department of Energy (DOE) is not inclined to tie-in any decision on the Malampaya license’s extension application to the anticipated entry of Davao businessman Dennis Uy into the gas field project.

When asked by the media if the department will finally decide on the gas field’s license extension since there will be a new investor coming in, Energy Secretary Alfonso G. Cusi stipulated “that is not being discussed.”

If the service contract of the gas field will ever be stretched beyond 2024, the energy chief emphasized that “it will be extended based on the position that we have.”

Cusi asserted that the department’s stance has not changed so far, and any decision “will not just be based on simple extension.” Nonetheless, he has not given details on the specific parameters that the government has been looking at on lengthening the contractual arrangement for the country’s only commercial gas field.

As previously divulged by the energy secretary, Uy’s UC Malampaya Philippines Lte. Ltd. which is a subsidiary of Udenna Corporation, offered to buy the 45% stake of American energy firm Chevron in the gas field for US$565 million.

Relative to that, state-owned Philippine National Oil Company-Exploration Corporation (PNOC-EC) indicated parallel plans to increase its stake in the Malampaya venture by acquiring the 10% equivalent of Chevron’s interest; on top of its existing 10% shareholdings in Malampaya.

While the Udenna-Chevron transaction has yet to be finalized, a government official has hinted that the American firm’s exit in the project may not come as easy as it should have wanted given the pending legal case relating to the Commission on Audit-questioned income tax payments on the revenues generated from the gas field over the years.

While the Malampaya consortium already secured a favorable ruling from an arbitration proceedings at the International Chamber of Commerce (ICC) in Singapore, the award of P146.8 billion (equivalent worth of paid taxes) to the field operating entity led by Shell Philippines Exploration B.V. (SPEX) has yet to be affirmed by a decision of the Philippine Supreme Court.

The estimate was just based on a ‘partial award’ verdict of the arbitration court, with additional P9.6 billion (under fourth notice of charge) also lodged to the ICC for its decision at the issuance of the full ruling on the case.

Given the pendency of the case, the government source noted that legal questions might be raised as to how the tax case shall be handled, especially if the eventual decision of the high court will not be in keeping with the ‘award verdict’ of the ICC.

With the 45% interest of Chevron in the Malampaya project, it has been noted that its stake in the tax case will be immense – calculated at roughly P70 billion based on the percentage of its shareholdings in the project.