Government still hoping to sell its stake in Malampaya project

MANILA, Philippines - The Development Bank of the Philippines, the government’s financial adviser on the sale of its stake in the Malampaya deep water-to-gas project will try to convince the new board of Philippine National Oil Co.-Exploration Corp. (PNOC-EC) to proceed and approve the planned sale, Finance Secretary Margarito Teves said over the weekend.

“We will give the board a chance to look into the matter. They will have a chance to listen to the financial adviser,” Teves said.

The government is trying to sell PNOC-EC’s 10-percent stake in Service Contract 38 as part of its privatization program. It hopes to raise P17 billion from the transaction but critics have noted that the government has not been transparent when it opted for a negotiated sale with interested investors. Service Contract 38 covers the right to explore, develop and utilize Malampaya gas off the province of Palawan.  PNOC-EC, Shell Philippines Exploration B.V. (SPEX) and Chevron Malampaya LLC are partners in the exploration and development of this service contract.

Essentially, the sale of its stake in Service Contract 38 means that the government is selling its much-coveted stake in the Malampaya project, considered a crown jewel in the energy sector.

The new board of PNOC-EC needs to approve the sale. The company has installed a new board of directors during its annual stockholders’ meeting on June 8.

The new board, which will have a term until next year is chaired by Minita Chico-Nazario. Members are Tirso Danga, William Dichoso, Armando, Galimba, Jose Leviste Jr., Christopher Lindo and Guillermo Hernandez. Rafael del Pilar retained his post as president and chief executive officer.

Teves expressed hopes that the new board would back the privatization of PNOC-EC, saying that the expected proceeds from the sale are already counted as part of the P30-billion programmed revenues from privatization this year.

Earlier, the Department of Finance (DOF) has already secured legal opinions from the Department of Justice (DOJ) and the Office of the Government Corporate Counsel (OGCC) for the proposed sale.

Both the DOJ and OGCC have said that PNOC-EC may pursue a negotiated sale with interested parties. Moreover, they said the existence of the right to match by Shell and Chevron provides transparency and competition.

Despite this clearance, however, the DOF said the government still has to wait for the new board of PNOC to decide on the matter.

Last March, the Finance department presented to the old board of PNOC-EC its plan to sell its stake in the company.

The government needs the approval of the board because it has changed the privatization mode for PNOC-EC to an asset-sale mode instead of the original plan of selling its shares or its 60-percent stake in the exploration firm.

However, Finance officials 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.