PNOC junks Abacus' joint venture offer

MANILA, Philippines - After a thorough review, state-run Philippine National Oil Co. (PNOC) has junked the proposal of Abacus Consolidated Resources & Holdings Inc. and its two foreign partners for a joint venture to develop the 100-kilometer Batangas-Manila (Batman 1) natural gas pipeline project.

Sources privy to the review said PNOC has not found any reason to accept the proposal. “We rejected their unsolicited proposal because we found out when we reviewed their proposal that Abacus had no technical and financial capability to pursue the project,” the sources said.

The Abacus-led consortium consists of Abu Dhabi-based Sultan International Holdings (SIH) and Saipem SpA, a unit of Eni, Italy’s largest industrial company.

SIH reportedly did not pursue its participation in the consortium as Abacus was planning to “outsource” the development of Batman 1 to Saipem, which is not acceptable to PNOC, the same source pointed out.

PNOC is presently preparing the terms of reference for the public bidding of the 100-kilometer Batman 1 project which aims to deliver natural gas from the Malampaya project in Palawan to power stations and the transport sector in Metro Manila.

“We’re preparing the terms of reference for the bidding. We hope to conduct the bidding within the year,” the sources said.

They added that the review of the Abacus proposal had caused some delays in the bidding for Batman 1.

“At that time we were ready to bid out Batman 1 and then suddenly Abacus came forward with its unsolicited proposal and it took us six months to study it, only to find out that they were not technically and financially capable,” the same sources said.

The Batman 1 gas pipeline project, undertaken by PNOC-Exploration Corp., has drawn interest from foreign investors like PTT of Thailand, Japanese power firm Marubeni Corp., Russian power firm Gazprom and many others, but no agreement has been firmed up to date.

A few months back, PNOC said it would subject to a so-called Swiss challenge the offer of the group for the construction of the country’s first natural gas pipeline.

A Swiss challenge is a form of public procurement in some (usually lesser developed) jurisdictions which requires a public authority (usually an agency of government) which has received an unsolicited bid for a public project (such as a port, road or railway) or services to be provided to government, to publish the bid and invite third parties to match or exceed it.

It’s an offer made by the original proponent to the government ensuring his process to be best by his initiative (as a result of his own innovative approach) or on the demand of the government to perform certain task.

Some Swiss challenges also allow the entity which submitted the unsolicited bid itself then to match or better the best bid which comes out of the Swiss challenge process. It is a form of regulating public procurement.

Abacus is a holding company whose shares are listed and traded in the Philippine Stock Exchange. It was incorporated in 1981 as Piedra Negra Mining Corp., a coal mining company, and publicly listed its shares on Oct. 28, 1987.

Saipem is the engineering and construction unit of Eni, Italy’s largest industrial company, with a market capitalization of at least $138 billion.  

The group earlier signified intention to build a $1.2-billion natural gas integrated project.

PNOC is one of only two firms that hold a franchise for the gas pipeline project, the other one being First Gas of the Lopez Group.