“A FOOLISH idea that would easily force taxpayers to suffer another $1 billion (P50 billion) in public debt obligations.”
This was Surigao del Sur Rep. Johnny Pimentel’s answer to calls for the government to match the $460 million offered by a private firm to acquire Shell Petroleum N.V.’s 45 percent operating stake in the offshore Malampaya gas field.
“Right now, the government is already in a sweet spot, merely collecting 60 percent of the net proceeds from Malampaya’s petroleum business, regardless of the private operator. The government is not spending anything, and is not incurring any liabilities,” Pimentel said.
“There’s no point in the government suddenly having to borrow and spend a lot of money to match any private party’s offer to buy Shell out,” Pimentel, House good government and public accountability vice chairperson, said.
Several groups earlier urged lawmakers “to fully explore if the government could easily get financing” to takeover Shell’s operating stake in the gas project.
“But the takeover cost is actually around $1 billion, because on top of paying $460 million to Shell, the government would have to borrow and spend another $500 million to $600 million to explore and develop additional production wells,” Pimentel warned.
“And the government simply cannot afford to incur additional debt obligations now, considering its worsening budget deficit,” Pimentel said.
The government reported an unprecedented P1.37 trillion budget deficit in 2020, due to aggressive spending to fight the COVID-19 pandemic and stimulate the economy.
The gap between government spending and income is expected to further widen this year, after the Bureau of Treasury reported a P1.14 trillion budget deficit from January to September.
Pimentel warned that the government’s deficit-spending, while needed, “is bound to haunt businesses and the economy in the months ahead, if left unchecked.”
“Once the economy starts to recover, bank lending rates will climb fast as the government competes with the private sector in borrowing more money to repay the public debt,” Pimentel said.
Pimentel explained that both the state-owned Philippine National Oil Co. (PNOC) and its subsidiary, PNOC Exploration Corp., do not have the $1 billion needed to buy Shell’s Malampaya stake and run the gas project.
“The reality is, all government-owned or-controlled corporations, including PNOC and PNOC EC, have been remitting up to 75 percent of their annual net income as cash dividends to the national treasury,” Pimentel said.
Citing Department of Finance records, Pimentel said that in 2020 alone, PNOC and PNOC EC had to remit a combined P7 billion in cash dividends to help fund the Bayanihan programs meant to fight the pandemic.
Pimentel also questioned the claim of some groups that the government would be “giving up billions of pesos” if it did not acquire Shell’s Malampaya stake.
“What billions of pesos are they talking about? If you give something up, that means you had it from the start. But the government never had Shell’s operating stake,” Pimentel said.
Pimentel said Shell obtained its operating stake in Malampaya way back in 1990, when the government awarded Shell Philippines Exploration B.V. (SPEX), the petroleum service contract to develop the gas field at a cost of $4.5 billion.
Shell recently agreed to sell its 100 percent stake in SPEX to Malampaya Energy XP Pte Ltd, a subsidiary of Udenna Corp.
The transaction is valued at $380 million, with extra payments to Shell of up to $80 million between 2022 to 2024, contingent on Malampaya’s output and commodity prices.