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process that government needs to undertake. Malampaya Energy, for its part has no such
But that evaluation process should also be in line financial challenges, with CEO Raouf Kizilbash
with the bidding process.” telling the hearing that his group had $200mn to
He added: “Shell should’ve been more pru- invest in the field after the transaction has closed.
dent in terms of choosing the right operator. The The executive said: “What we have provided
financial part is your prerogative but the opera- is about $100mn. We’ve retained in the Chevron
tional part is our prerogative here in the Philip- companies between UC 38 and Singapore com-
pines. And being a consumer and a Filipino, I panies, UC Malampaya. In addition, when we
want to be assured that whoever Shell sells to, it take over the Shell business, there will be cash
will be competent enough to run it.” in that company as well as about $100mn. There
Gatchalian’s argument against handing over will be about $200mn that can be used for explo-
control of a gas field that feeds about 30% of the ration and growth.”
power generation capacity of the country’s most He added that he expected that when the
populous island of Luzon is understandable. DOE and PNOC-EC reviewed the deal’s financ-
However, with the field in decline, its contract ing, they would see a “robustness” and “abun-
set to expire in 2024 and both Shell and Chevron dance of cash”.
clearly uninterested in continuing development, As such, he said: “The target date when the
finding a new operator that is willing to invest new shareholder would start making decisions
in exploration should be of the highest priority. for that business...would be end-November or
While Gatchalian has argued that PNOC could December 1. That’s the target.”
take over development, the state company has
been quite open about the problems with such What next
a suggestion. It is not entirely clear what Gatchalian’s reasons
are for protesting against the sale of the field
Finance focus to Udenna. Perhaps he believes the company
PNOC Exploration Corp. (PNOC-EC) has does not have the money or finances to prolong
right of first refusal to Shell’s equity and Energy the field’s life significantly or perhaps there are
Secretary Alfonso Cusi told the hearing that the longer-term concerns connected to decommis-
DOE was willing to expand the stake’s stake in sioning processes.
the block. Of course, the explanation is simpler than that.
PNOC-EC president Rozzano Briguez told Southeast Asia’s oil and gas history is frequently
the hearing, however, that state banks were fraught with resource nationalism for political gain.
unwilling to cover more than 50% of the esti- Gatchalian may be beating the war drums ahead of
mated amount of the transaction. next year’s national elections, when he will be up
“[Supporting] the remaining 50% is barely for re-election. Of course, he could have his sights
enough for us to sustain [operations]. Our cash set on something more ambitious, with ABS-CBN
is just probably a little above the in-house val- News quoting two unnamed senators this week as
uation that the bank will not support. If we do saying Gatchalian was mulling over whether to run
that, that already will compromise the remaining as Vice-President.
three operated blocks we have and the other four Regardless of current politics, Udenna’s bid
non-operated blocks,” Briguez said. seems likely to succeed. Between PNOC-EC’s
Beyond the financial challenges, Briguez also subdued interest in the field, coupled with the
pointed out that SPEX enjoyed an certain oper- fact that few international majors are eager to
ational flexibility as a private firm that would tackle end-of-life projects, Udenna’s bid is cur-
likely be lost as soon as the state took over. rently looking the most attractive.™

Week 28 15•July•2021 www. NEWSBASE .com P7