Gov't thumbs down PXP bid to take over Malampaya

Metro Manila (CNN Philippines, December 3) — The government has rejected the offer of businessman Manny Pangilinan to take over the operations of the Malampaya gas facility off Palawan.

Pangilinan's PXP Energy Corporation told the local bourse on Tuesday that its unsolicited proposal to further develop the Malampaya natural gas field has been rejected by the Department of Energy (DOE).

Quoting the agency's letter, PXP said the company's proposal cannot be accepted "because the service area covered by SC (service contract) 38 is still subject to a valid and existing contract."

Shell Philippines Exploration BV runs the show in the area, but PXP essentially wants to take over the drilling and extraction works from the Malampaya Consortium, whose deal to explore the area for oil deposits ends in 2024.

Once the petroleum exploration and production contract lapses, full control and ownership of the Malampaya natural gas and oil facilities will be turned over to the national government.

The search for additional oil reserves proves crucial for local supply. Energy Secretary Alfonso Cusi said back in September that the Malampaya reservoir — which supplies about 30 percent of the country's electricity needs — is only good until 2027.

PXP cited Malampaya's "strategic" position in the West Philippine Sea to justify its bid. This is where its subsidiary, Forum Energy, holds the rights to drill off the waters of Reed Bank (Recto Bank) — an oil-rich sea feature within the Philippines’ 200-nautical mile exclusive economic zone that China is also claiming.

"At this time, PXP is considering other options in pursuing the project including the submission of a letter to the DOE for a reconsideration of the unsolicited proposal given the expected benefits of the project to the country," PXP said in a disclosure.

PXP previously said it is eyeing to acquire Chevron's 45 percent stake in Malampaya as another route to gain access to the gas field. However, businessman Dennis Uy got there first.

Udenna Corporation completed the sale after a year of talks with Chevron, which allows Uy's empire to take part in upstream fields or gas-to-power value chains. Uy owns retail fuel chain Phoenix Petroleum.