COP okays sale of government’s 4.9% stake in Malampaya project

The Committee on Privatization (COP) council has approved the sale of the 4.9-percent stake of PNOC-Exploration Corp. (PNOC-EC) in the $4.5-billion Malampaya deep water gas-to-power project to a Korean consortium led by LG International Corp. (LGI).

PNOC-EC, a subsidiary of state-owned Philippine National Oil Co. (PNOC), owns a 10-percent interest in Service Contract (SC) 38 or the Malampaya project. The majority owners and lead operators of the Malampaya project are Shell Philippines Exploration B.V. (Spex) and Chevron Texaco.

In a disclosure to the Philippine Stock Exchange, PNOC-EC general counsel and corporate secretary Elpidio Gamboa Jr. said "the PNOC and PNOC-EC boards approved the execution of a farm-in agreement containing the terms and conditions of the sale to LGI of 49 percent of PNOC-EC’s 10-percent participating interest in Service Contract 38 and endorsed the said sale to the Privatization Council for the latter’s approval."

Gamboa added that the COP has approved and authorized the sale last Tuesday.

But he pointed out that "the sale is not yet consummated as it is subject before closing to the right of the other members of the SC 38 consortium to match the offer of LGI if they wish to acquire a proportionate share of the interest being privatized and to the satisfaction of other conditions precedent, including the approval of the transfer and assignment of the interest to LGI by the Department of Energy."

PNOC-EC president Eduardo Manalac said the DOE will give the SC 38 consortium at least 15 days to match LGI’s offer.

Though declining to give the purchase amount as the Spex-led consortium still has the option to make its own offer, Manalac said the government was able to get a good price for the EC shares in SC 38. "As we have said before, this is not a fire sale. We got good price for the shares."

LGI, one of the largest Korean general trading companies and a leader in trading, financing and international investment, said its entry to the Malampaya project is part of its active participation in resource development in the Middle East, Southeast and Central Asia.

The consoritum expects to earn $8 million per year for 18 years from 2005 to 2022 from its investment in the Malampaya gas well.

Under the sale, LGI will take 35 percent of the 4.9-percent stake; partner Korea Gas Corp., 30 percent; Daesung E&C, 20 percent; and Seoul City Gas Co. Ltd, 15 percent.

The Philippine government is selling the stake to raise funds to help reduce its $3.6-billion annual budget deficit.

The Malampaya natural gas in Northern Palawan could yield three trillion cubic feet of gas that could be used to fuel up to 3,000 megawatts of electricity for 20 years, which is equivalent to more than half of the electricity requirements of Luzon even during peak hours. It also has recoverable reserves of 85 million barrels of condensate.

At present, it fuels three power stations with a combined capacity of 2,700 megawatts.