PHILIPPINES: PNOC Exploration Corp., a unit of state-owned Philippine National Oil Co., has approved the sale of 4.9 percent of its participating interest in the Malampaya natural gas project in Palawan to LG International Corp. of Korea.

The board of directors of LGI, which was led proponent of the Korean consortium, has resolved on March 21 to acquire PNOC-EC’s stake in the Malampaya gas well, which is earlier valued at $300 million.

LGI accounts for 35 percent of the 4.9 percent Korean equity. The remaining stake would be held by other members of the consortium-Korea Gas Corp., 30 percent; Daesung E&C, 20 percent; and Seoul City Gas Co. Ltd., 15 percent.

Based on a statement posted on its Web site, LGI expects to earn steady profits of $800 million per year for 18 years from 2005 to 2022 from the investment in the Malampaya gas well. It is seen to be a stable mid- and long-term revenue base for the group together with its other projects in the Middle East.

In a disclosure to the Exchange, PNOC-EC general counsel and corporate secretary Elpidio Gamboa Jr. said the boards of both PNOC and PNOC-EC have approved the execution of a Farm-in Agreement containing the terms and conditions of the sale to LGI of PNOC-EC’s stake in accordance with the privatization efforts of government.

The sale was then endorsed and approved by the government privatization council, which is chaired by the secretary of finance with the secretaries of budget and management, trade and industry, justice and the National Economic Development Authority head as voting members. The national treasurer and the chairman of the Presidential Commission on Good Government are nonvoting members.

"The foregoing approvals notwithstanding, the sale is not yet consummated as it is subject before closing to the right of the other members of the Service Contract 38 consortium to match the offer of LG International if they wish to acquire a proportionate share of the interest being privatized and to the satisfaction of other conditions precedent, including approval of the transfer and assignment of the interest to LG International by the Department of Energy," Gamboa said in a statement.

The Malampaya gas project has a proven and minable reserve that is equivalent to 52 million tons of liquefied natural gas, in comparison to say, Korea’s annual LNG consumption of 20 million tons.

LGI said the minable reserve is expected to increase, considering the exploration situation of other promising areas in the same mine lot.

In the company Web site, Byung-Joo Keum, the president and chief executive of LGI, said LGI is focusing on investment in foreign resource development in the middle east, central and southeast Asia.

Based on the initial privatization plan, EC will create a new subsidiary, PNOC Malampaya Production Corp. (PNOC-MPC), which will absorb its 10 percent share in the $4.5 billion Malampaya project and some $175 million worth of loans.

PNOC president Eduardo Mañalac earlier said the partial divestment was in compliance with the condition set by government on a sovereign guaranty provided to a $130 million credit facility from Citibank.

PNOC, in turn, lent the facility to PNOC-EC for the acquisition of its participating interest in the Malampaya project. The facility stands currently at $175 million.

Mañalac said the government, through the Department of Finance, required PNOC-EC to privatize this interest as a condition to the sovereign guarantee.

The privatization process began in 2001 after PNOC and PNOC-EC formed a privatization committee to map out divestment options and oversee the process. The privatization plan was approved in 2002 by the committee, the boards of PNOC and PNOC-EC, the DoF and the government’s privatization council, he added.

In December 1999, PNOC-EC finalized its participation in the largest energy infrastructure undertaking in Philippine history —the Malampaya Deepwater Gas-to-Power Project. PNOC-EC’s involvement in Malampaya effectively joins it with the rank of such other petroleum majors as Shell Exploration and Texaco.

The Malampaya Gas-to-Power Project will bring natural gas to Luzon from a petroleum reservoir located 3,000 meters beneath the South China Sea, 80 kilometers northwest of Palawan. This natural gas will be used as fuel for three power plants in Batangas, which can provide up to 2,700 megawatts of electricity, representing 25 percent of the installed capacity of the Luzon grid. Commercial productions commenced in January 2002.

Source:
http://www.manilastandardonline.com:8080/mnlastd/?page=business01_mar24_2005