Chevron invokes ‘first refusal’ option on Malampaya stake
American energy giant Chevron Corporation is formally seeking “right of first refusal” from its partners Shell Philippines Exploration B.V. (SPEX) and state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) in the multi-billion Malampaya gas-to-power project relating to the “unsolicited buyout offer” of Udenna Corporation of businessman Dennis Uy.
According to government sources, the official correspondence was sent by Chevron to its partners, informing them of the offer of Udenna Corporation, which the American firm reportedly classified as an “enticing offer.”
A source from the state-run company noted that “Chevron made calculations on how much more it could earn from the Malampaya project in the remaining four years of the production contract, and when it crunched the numbers, the offer of Udenna would be a viable one, so it is inclined to the sale proposition.”
It was further gathered from sources that Chevron’s exit in the upstream oil and gas business in Southeast Asia might be warranted after losing a deal that it has been eyeing in Indonesia
– and there are also reports that it might do the same in another market in the region.
SPEX and Chevron hold the majority stake of 45 percent each in the Malampaya deep water gas project, of which Service Contract (SC) 38 will expire in 2024.
SPEX confirmed that it “received advice from our Malampaya joint venture partner, Chevron Philippines, on its decision to sell its interest in the Malampaya project,” but it qualified that “our focus remains on operating the Malampaya natural gas facilities safely, reliably and efficiently to ensure we keep powering the Philippines with cleaner-burning, domestic natural gas.”
In the joint operating agreement (JOA) signed by the parties, it was explicitly prescribed that current partners in the gas field project can exercise their right of first refusal in case any of the interest-holders would decide to sell their stake in the Malampaya project.
Chevron’s targeted exit in the Philippine oil and gas industry was reportedly anchored partly on uncertainties surrounding the Malampaya consortium’s application for license extension – that is still currently pending with the Department of Energy.