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Gatchalian’s torpedoing of Malampaya sale to a Filipino will benefit an Indonesian oligarch

First of 3 parts

ECONOMISTS have been claiming that one major reason for the failure of democracy in the Philippines, and its ineffectiveness to develop the economy, is that Congress, purportedly the check and balance institution to the powerful powerful presidency, has instead often become oligarchs’ tool for advancing their interests to the detriment of the economy.

The official justification for Congress’ investigations of whatever its members want is “investigation in aid of legislation.” Because of its notoriety in raising oligarchic funds for congressmen making such investigations, which also lands them in newspapers’ front pages, the phrase has morphed to the more popular “investigation in aid of election.”

There is now a classic case of such oligarchic intervention right before our eyes, a most brazen one as it is most despicable. This involves the ongoing attempt by Senators Sherwin Gatchalian and Risa Hontiveros as well as the Senate president himself, Vicente Sotto 3rd, to torpedo the $560-million sale in October 2019 of the US multinational Chevron Corp.’s 45 percent stake in the Malampaya Gas Field Project off Palawan. (Royal Dutch Shell also sold its 45 percent stake for $460 million to Uy in May 2021.)

The field has provided the country with natural gas equivalent to a fifth of our energy consumption since 2002. It has been, however, 90 percent-controlled, through corporate layers, by oil giants the American Chevron Corp. and the Royal Dutch Shell, with only 10 percent of its profits going to the government-controlled Philippine National Oil Co. (PNOC).

The characters: Senators Gatchalian and Hontiveros who want government to stop the sale of Malampaya consortium shares to Chinese Filipino tycoon Uy (lower left), which would allow Indonesian oligarch Salim (lower right) to purchase it instead.

Now that a Filipino tycoon, Dennis Uy, has been able to acquire those 90 percent shares, these three senators shamelessly want to block it, I think, in aid of reelection.

Taking advantage of the fact that the nation’s attention has been focused on the elections in May, the three senators have been pressuring, through four different proposed Senate resolutions since November 2020, the Energy department to cancel the transaction by threatening criminal and administrative charges against them — not just against Energy Secretary Al Cusi but 11 other officials, mostly mid-level, who have had distinguished, impeccable careers at the energy department.

What makes this so abhorrent is that the beneficiary of this plot if it is successful — according to my sources in Malacañang and bolstered by documents as well as the sequence of events — is the Hong Kong-based First Pacific conglomerate, owned 45 percent mainly by the Indonesian oligarch Antoni Salim. (His well-known top executive Manuel Pangilinan owns 1.6 percent.)

The conglomerate’s exploration subsidiary PXP Energy Corp., lost the bidding conducted by Chevron for the 45 percent shares in 2019, as well as for Shell’s 45 percent undertaken in May 2021. PXP bid too low, apparently believing that bidders believed that Malampaya’s reserves would last only until 2024, only to be provided by better analysis that it has deposits that can be extracted until 2030. If the Gatchalian gang succeeds in voiding the sale to Uy, the First Pacific group is set to bid for the Chevron shares.

That would mean that from being owned mainly by US and Anglo-Dutch oil multinationals, Malampaya would be owned by an Asia-wide Indonesian-controlled conglomerate.

In a rare move, President Duterte issued a statement on February 4, the day after Senate Resolution 137 was passed, claiming that the sale was tainted with corruption:

“I have seen the report on the sale and purchase of the stock of Chevron Malampaya LLC. Based on this, I am convinced that this was a private transaction between private entities that must be respected. This casts undue, undeserved and unwarranted aspersion on the part of some of our key government officials. This is grossly unfair to them and to the public… I will not allow this valuable resource to be jeopardized and embroiled in the political antics of some members of the Senate.”

Sources said Executive Secretary Salvador Medialdea persuaded Duterte to issue the written statement as he was worried that after blowing his top when the issue was explained to him, the President might also do so in a press conference, as he was livid knowing that First Pacific was behind the senators’ move to torpedo Uy’s acquisition of the shares.

What also angered Duterte was that the Yellow opposition had joined the fray with its US-based plotters led by billionaire Loida Nicolas filing the other day a ludicrous case with the US Securities and Exchange Commission. This case is merely a propaganda move to spread the lie that just like Marcos, Uy is Duterte’s crony.

Al Cusi, the main target of Gatchalian’s wrath, vibered this writer when asked for comment: “It’s time to give the public the facts at a fair venue where the noise created by business and political interests cannot cloud the truth.”

It isn’t coincidental of course that Senators Gatchalian and Hontiveros, who are enthusiastically campaigning for the purchase to be rescinded, are reelectionists while Sotto is running for vice president. Going by current surveys, they will have to spend tremendous amounts of money to win, or at least to make a good showing.

Gatchalian’s speech in endorsing the Senate Resolution 137 passed February 2 on the matter was so amateurish as it was without basis. He shamelessly merely played to the crowd, using old clichés, thinking perhaps this could help him in his election, and please the Indonesian who would profit from his plot. “Maliwanag pa sa sikat ng araw, lutong macau ang nangyaring transaction (As clear as the sun’s brightness, the transaction [the sale of Chevron’s shares in Malampaya] was rigged),” Gatchalian declared in his speech.

What Gatchalian knows about the workings of capitalism is obviously limited to the plastics companies of his father in Valenzuela, and he is really clueless what the “transaction” was.

Why would Chevron Corp., the second largest oil company in the US with current market value in the New York Stock Exchange of $190 billion (as big as the GDP of Greece or New Zealand), want to rig the bidding for the sale of its 45 percent share in the Malampaya Gas Field Project? Would Chevron officials risk their salaries, careers and even criminal cases by rigging a bidding, knowing that the US Securities and Exchange Commission has a tight supervisory system (that includes rewarding corporate whistleblowers) over listed firms?

Uy has been based in Davao City and was a campaign contributor as well as personal friend of Duterte. Is Gatchalian saying that Duterte called Chevron officials to favor Uy’s bid?

Again, Gatchalian shows gross ignorance of the workings of capitalism when he claimed that Uy’s Udenna subsidiary that won the bidding “is financially unqualified because it has negative working capital.”

It is plain common sense that doesn’t require any financial literacy that a company need not have all the capital it needs before it starts operations — or its financial officer would be fired.

But more importantly, how the heck can Gatchalian claim that Uy’s firm doesn’t have the resources to buy Chevron’s shares in Malampaya? Is he saying that Chevron, one of the world’s biggest corporations, doesn’t have its due-diligence department, with the brightest finance men, which concluded that Uy’s firm has the financial resources and the iron-clad guarantees to buy the shares it is selling? Doesn’t he know of the existence of global financial advisors who package a mega-deal by raising most of the funds needed for it from huge US and European hedge funds?

Gatchalian isn’t a lawyer, yet he concluded in his speech that Cusi and the 11 other DoE officials are criminally liable under the Anti-Graft and Corrupt Practices Law — solely on the basis of his interpretation of Presidential Decree 87 of 1972, which specified that the “rights and obligations under a contract [with government to explore and extract hydrocarbons] shall not be assigned or transferred without the approval of the energy department.”

He claims that Chevron and Udenna violated this law as the sale of the former’s shares in 2019 had not been approved by the energy department. This is Gatchalian’s main objection to Uy’s purchase, which is the most preposterous actually.

The law refers to the contract of the consortium, in this case the Malampaya consortium which as a group has with government, not with the ownership of the shares of each company that is a member of the consortium.

This interpretation has been the accepted one ever since the government started giving contracts to explore for gas and oil in the 1970s. Incontestable proof of this is that most members of the consortia that had such contracts from the1970s to this day are firms listed in the stock exchange, whose ownerships change every trading day, and which do not have to get the DoE’s approval for every single share that is sold. Indeed, trading for oil firms’ shares in the stock market — which had been its main source of financing — would be impossible if they had to get the DoE’s approval for each sale.

Forum Energy Ltd. has the contract to explore for hydrocarbons in the Reed Bank, and its insistence on sending a survey ship there despite China’s longstanding opposition to it, triggered the Aquino regime’s disastrous hostility towards the superpower.

Yet Forum Energy’s ownership, both its immediate and ultimate owners, has changed several times starting 2007, with its controlling owner emerging to be First Pacific Ltd. These numerous changes in ownership had not been approved by the energy department. In fact to this day, the owners of a mysterious Asian Coast International, based in the tax-haven city of Panama, which has an indirect stake in Forum Energy, remains a secret to this day.

The members of the Malampaya consortium itself that has the contract to extract gas in that area, have changed, or their ownership structures have changed, five times since the consortium got the contract in 1999, all made without the prior approval by the Energy department.

Ten senators voted for the resolution: Sotto, Gatchalian, Hontiveros, Pimentel, Pacquiao, Drilon, Pangilinan, Poe, Recto and Villanueva. Six rejected it: de la Rosa, Cayetano, Go, Tolentino, Lacson and Zubiri. Four abstained: Binay, Villar, Revilla and Marcos. Five didn’t vote at all: Gordon, Angara, Lapid and de Lima.

That is such a sad commentary on the institution that supposedly embodies the dreams of this nation. After nearly two decades, the 90 percent of this national treasure that had been controlled by two foreign oil giants would have been acquired by a Filipino, Uy.

Yet solely on their view that he is a crony of Duterte whom they detest, and for some of them for the “funds of it,” the 10 senators are trying to torpedo the acquisition, which would allow an Indonesian-owned First Pacific conglomerate to instead take control of that colossal gas producer.

Remember the names of those who betray the country on May 9.

Note: The author emailed Sunday Pangilinan (through his top PR official) as well as the three senators mentioned in this piece to give their side of the story. None responded.

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This Post Has One Comment

  1. Dorina Rojas

    Most of those who voted for the resolution will most probably lose the coming elections anyway. They will not miss their torpedo because it will boomerang against them. Well-deserved, they should thank themselves for being brilliant and ambitious the wrong way.

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