Government faces major setback in efforts to privatize PNOC-EC

MANILA, Philippines - The government faces a major setback in its efforts to privatize Philippine National Oil Company (PNOC)-Exploration Corp. after the board of the state-owned corporation failed to decide on the Department of Finance’s plan to sell the 10 percent participating interest of PNOC-EC in the Malampaya natural gas project.

With this development and the delays in the sale of other big-ticket state-owned assets, the government has again moved its privatization schedule to the second quarter of the year.

It now expects to raise in the second quarter the roughly P30 billion from the privatization of PNOC-EC, Food Terminals Inc. and its real estate property in Fujimi, Japan.

Last week, the DOF presented to the board of PNOC-EC the government’s plan to sell the company’s 10 percent participating interest in the Malampaya project off Palawan.

“However, there was no quorum so there’s no decision yet,” Finance Secretary Margarito Teves told reporters yesterday.

Teves said the DOF would now be waiting for a new PNOC-EC board to convene before raising the privatization plan again for approval. He said President Gloria Macapagal-Arroyo appointed some new members to the PNOC-EC board which is currently headed by chairman Jacinto Paras and president and chief executive officer Rafael del Pilar.  According to the PNOC-EC website, directors of the board are Carlos de Leon, Jaime Recio, William Dichoso, Leonides Plaza, Eduardo Hernandez, Renato Velasco and Crismel Verano.

Originally, the government was aiming to privatize PNOC-EC through the sale of its shares or its 60-percent stake in the exploration firm.

However, Teves said the asset-sale mode is deemed as a faster way to privatize PNOC-EC and is expected to raise more than P14 billion which is the amount estimated from the original privatization plan of selling the government’S 60-percent stake in the exploration firm.

According to the government’s privatization plan, PNOC-EC’s partners in the Malampaya consortium — Shell Philippines Exploration B.V. (SPEX) and Chevron  Malampaya LLC — hold the “right of first refusal” as stipulated in the service agreement covering the MalampayA project.

As such, SPEX and Chevron are expected to exercise their of first refusal over the assets.

PNOC-EC, SPEX and Chevron are partners in the exploration and development of the government’s Service Contract 38 area, now known as the Malampaya Deep Water Gas-to-Power project.

The project is a joint undertaking of the national government, through the Department of Energy and is developed and operated by PNOC-EC, SPEX and Chevron.

A much coveted asset, PNOC-EC is the upstream oil and gas subsidiary of state-owned Philippine National Oil Company. It is also into coal development, production and trading. It also monitors and administers the country’s oil and power supply.