VAL G. ABELGAS: ‘Biggest presidential gift to a crony’
“Biggest presidential gift to a crony.” “Most incredible crony deal in history.” “Lost opportunity for the government.” “Terrible for the country.” “Bigger anomaly than Pharmally.” “Lutong macau.” “Tubong laway.”
These words, among others, were how critics described the acquisition of 90% ownership share of Malampaya oil and gas field in the West Philippine Sea by Udenna Corp., a company wholly owned by known presidential crony Dennis Uy.
UC Malampaya, which is wholly owned by Uy’s Udenna, purchased from Chevron Malampaya LLC in November 2019 the entire 45-percent stake of Malampaya, worth $565 million. Shell Philippine Exploration has also agreed to sell its 45-percent stake to Udenna for $450 million, raising Udenna’s share to 90%. Both deals were approved by the Department of Energy, under Energy Secretary Alfonso Cusi, without a thorough assessment of Udenna’s financial and technical capability.
“This is unparalleled. This is the most incredible crony agreement in the entire history… not just in the history of the Philippines. I would say in the history of the world there is nothing that comes close to this,” said lawyer Rodel Rodis, one of three Filipinos residing in the United States who filed graft charges against Cusi, Uy, and several officers of DOE, Philippine National Oil Company’s Exploration Corp (PNOC-EC), Udenna, Chevron and Shell Philippines.
The other complainants in the graft complaints filed with the Office of the Ombudsman were Balgamel De Belen Domingo and Loida Nicolas Lewis
The three complainants said that monetary losses from the Chevron sale to Udenna is around P21 billion — based on the 45 percent share of Chevron in the years 2018, 2019, and 2020. If this is combined with the 45 percent share of Shell, it may grow to around P42 billion a year.
They claimed that despite the knowledge of the PNOC-EC board, headed by Cusi as chairman, that it had the right to match Udenna’s purchase offer, PNOC-EC did not do so while knowing the guaranteed good return of investments on the Malampaya field in the years to come. PNOC-EC also would not match the purchase offer of Shell.
Cusi and the other DOE and PNOC-EC officials knew that both Chevron and Shell have more than recovered their investments and expenses in Malampaya and know that it would earn much more if their service contracts were extended. They have, in fact, been asking the government to renew their license for gas exploration in the field. When Chevron and Shell realized they wouldn’t get the requested extension, they agreed to sell their stakes and take the sale proceed as pure profit.
The Malampaya gas field would have automatically reverted to the PNOC-EC when the licenses of Chevron and Shell expire in 2024, and yet Cusi and the PNOC-EC not only ignored this fact, but allowed Udenna, which has neither the technical or financial capability to operate the gas field, to grab the 90-percent stake.
Eduardo Manalac, former president of PNOC, said the government did not have to hire a foreign contractor to run the gas field. He said it is owned by the government and when the service contracts of Chevron and Shell expire in 2024, the gas reserves and the pipelines would revert to the government, and PNOC, which has the technical capability, can run it and gain 100 percent of the profits for the government.
“That is what most national oil companies – Petronas (Malaysia), Pertamina (Indonesia), and CNOOC (China National Offshore Oil Corporation) look for. They will take over it, produce it themselves, and get 100 percent benefit, and that is what makes them very big,” Manalac added.
Sen. Sherwin Gatchalian, who is leading the Senate investigation into the deal, said it was a “lost opportunity” for the government to take over a vital asset for the country’s energy security.
Natural gas from the Malampaya project contributed 26.92% of Luzon’s power generation mix in 2020. Its supply to gas-fired power plants serves 17% of the country’s households, Gatchalian said, citing figures from Manila Electric Co.
Gatchalian said DOE ignored telltale signs of Udenna’s financial incapability to purchase the shares and operate the gas field, noting that Uy’s company was P120.81 billion in debt as of 2019. It was also learned during the hearing that Uy did not spend a single centavo for the acquisition.
Rozzano D. Briguez, president and chief executive officer of state-led PNOC Exploration Corp. (PNOC-EC), said that the approved sale of the first 45% in the Malampaya project was largely financed by loans.
He said $375 [million] of the $565 [million] sale was done through loans from three major banks that executed their confirmed commitment to provide facility for the sale of Chevron-UC38. Of the remaining amount, $157 million was sourced through the gas field’s “net entitlements” while $33 million “probably” came from the buyer’s stock issuance, he said.
It was not clear which banks provided the loans, but critics have always suspected that Udenna would borrow money from Chinese banks as it had done in previous transactions, and hire Chinese contractors to operate the gas field, thus leaving a critical asset of the country’s energy security in the hands of foreigners.
Retired Justice Antonio Carpio agreed with Rodis’ assessment and called Uy’s seamless takeover of Malampaya “the biggest presidential gift to a crony,” especially if the Duterte administration, through Cusi, extends the Malampaya oil and gas project under Service Contract 38 beyond its expiration in 2024.
Is the President so beholden to his friend Dennis Uy, who reportedly contributed P30 million to his 2016 campaign, that he would give him a P4.5-billion gift on a silver platter less than a year before his term ends? That Cusi and company approved the purchase and did not even try to match the offer speak volumes and are good reasons to believe that the service contract would be extended before Duterte steps down on July 1, 2022.
What’s with Dennis Uy that, just like Pharmally, he is getting all these sweet deals from the Philippine government? In November 2018, Uy’s Udenna Corp, through its subsidiary Dito Holdings and in partnership with China’s state-run China Telecommunciations, were awarded a %.4-billion deal to operate the country’s third telco license. And on Monday, Uy’s F-2 Logistics, signed a P536-million to distribute ballots, counting machines and other supplies for the May 9, 2022 elections.
Duterte has been boasting that he has brought down the country’s oligarchy, citing the ABS-CBN as an example. But we all know that the media giant was closed because it was critical of him, and that he is simply propping up his own cronies and building his own oligarchy. The worst part is that the oligarchy he has been trying to build in the last five and a half years all have ties to China, the country that has trampled our sovereignty and now wants to also control our valuable mineral resources, critical public utilities and now even our elections.
Is the country headed to becoming a province of China, as President Duterte once said it could be?