"At this time, there is still volatility in oil prices. This is the main reason why the Committee on Privatization raised its concern. It said there would be no problem on privatization provided its concerns are addressed," Energy Secretary Raphael P.M. Lotilla said.
Lotilla, however, clarified that the Department of Energy (DOE) still has to give its go-signal should the government decides to proceed with the PNOC-EC privatization.
"It will still be subject to DOE approval if we will award the shares to Spex (Shell Philippines Exploration B.V.) consortium," he said.
"In light of recent development, it appears that we will be better off by holding on to the assets than privatizing, as what we will be earning from these investments is much higher than the interest rates that will be paid," Lotilla said.
The National Government recently junked plans to sell a 4.9-percent stake held by PNOC-EC in the $4.5 billion Malampaya natural gas development project.
In an earlier disclosure to the Philippine Stock Exchange (PSE), PNOC-EC general counsel Elpidio Gamboa Jr. said the Committee on Privatization (COP), which decides on the privatization schemes of the government’s assets, deemed the price offer made by Korea’s LG International Corp. "not reflective of the current oil price".
Gamboa said "the privatization council, during its meeting held on April 12, 2005, withdrew its March 22, 2005 approval for PNOC Exploration Corp. to accept the offer of LG International Corp. (LGI)."
According to Gamboa, the National Government will maintain the privatization of the said shares as pre-condition to the sovereign guarantee it extended to the loan used to finance the acquisition of EC’s 10 percent stake in the Malampaya project.
The COP approved LGI’s to purchase the EC shares at half the price or $140 million of its current value of $280 million. EC borrowed $175 million to finance its purchase of the 10 percent stake in the oil and gas development project.
But the Malampaya consortium composed of Spex and Chevron Texaco which controls 45 percent stake each in the project, exercised the right to match the offer made by LGI.
It was not clear why PNOC-EC allowed the Malampaya consortium to match the offer of LGI when in the first place, the COP would not accept the price offer of LGI.
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, 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.