Gov’t takeover of Malampaya a ‘foolish idea’ that will cost taxpayers $1 billion – solon

The Malampaya integrated platform (File photo from Philippine Daily Inquirer)

MANILA, Philippines — Surigao del Sur Rep. Johnny Pimentel slammed a proposal for the government to buy the 45 percent operating stake of Shell Petroleum N.V.  in the offshore Malampaya gas field, calling it “a foolish idea that would easily force taxpayers to suffer another $1 billion (P50 billion) in public debt obligations.”

Pimentel issued the statement on Sunday in reaction to several groups urging lawmakers “to fully explore if the government could easily get financing” to takeover Shell’s operating stake in the gas project.

“Right now, the government is already in a sweet spot, merely collecting 60 percent of the net proceeds from Malampaya’s petroleum business. The government is not spending anything and is not incurring any liabilities,” Pimentel.

According to Pimentel, the money which will be used to pay for the stake would only further the country’s already swollen foreign debts.

He explained that the takeover cost would cost $1 billion “because on top of paying $460 million to Shell, the government would have to borrow and spend another $500 million to $600 million to explore and develop additional production wells.”

“And the government simply cannot afford to incur additional debt obligations now, considering its worsening budget deficit,” Pimentel said.

The government reported an unprecedented P1.37 trillion budget deficit in 2020, due to its aggressive spending to fight the COVID-19 pandemic and stimulate the economy.

Pimentel warned that the government’s deficit-spending, while needed, was “bound to haunt businesses and the economy in the months ahead, if left unchecked.”

“Once the economy starts to recover, bank lending rates will climb fast as the government competes with the private sector in borrowing more money to repay the public debt,” Pimentel said.

Pimentel also pointed out that both the state-owned Philippine National Oil Co. (PNOC) and its subsidiary, PNOC Exploration Corp. (PNOC-EC), did not have the $1 billion needed to buy Shell’s Malampaya stake and run the gas project.

“The reality is, all government-owned or -controlled corporations, including PNOC and PNOC EC, have been remitting up to 75 percent of their annual net income as cash dividends to the national treasury,” Pimentel said.

These developments came after Shell recently agreed to sell its stake to Malampaya Energy XP Pte Ltd., a subsidiary of Udenna Corp., which is owned by Dennis Uy, one of the major campaign contributors of  President Rodrigo Duterte.

This means the Udenna is set to own 90 percent of the project, having also earlier bought the shares of Chevron Malampaya LLC that was under Chevron Philippines Ltd.

The remaining 10 percent is currently held by PNOC-EC.

On Oct. 19, some concerned citizens filed at the Office of the Ombudsman a graft complaint against Energy Secretary Alfonso Cusi and Udenna CEO Uy.

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