The Hague-based LNG giant Shell will sell its 45 percent operating stake in the Malampaya gas field offshore the Philippines in a deal worth up to $460 million.
Malampaya Energy, a unit of Udenna Corporation led by Chinese-Filipino businessman Dennis Uy, is the buyer of the stake held by Shell Philippines Exploration (SPEX).
Udenna already has a 45 percent stake in Service Contract 38 (SC38), a deep water licence which includes the producing Malampaya gas field, which it bought from Chevron in 2019.
The firm will now have a 90 percent stake in the field while state-owned Philippine National Oil Company (PNOC) holds the remaining 10 percent.
Shell said the base consideration for the sale is $380 million, with additional payments of up to $80 million between 2022 to 2024 contingent on asset performance and commodity prices.
Subject to partner and regulatory consent, the transaction should complete by the end of 2021.
Malampaya supplies gas to power plants in the Philippines but its output is declining. The country expects the field to run dry in the next five, six years.
“Since it began commercial operations in 2002, Malampaya has supplied a significant portion of the Philippines’ energy demand and it will continue powering the country with indigenous gas following a safe transition of the asset and its experienced workforce,” said Wael Sawan, Shell’s upstream director.
“Today’s announcement is consistent with Shell’s efforts to shift our upstream portfolio to one that is focused on nine core positions,” he said.
Shell said SPEX staff would continue their employment under the new ownership.
In addition, the firm said this deal has no impact on other Shell businesses in country.
“The Philippines remains an important country for Shell after over a century of successful operations,” it said.
Shell added it would continue to pursue opportunities in the Philippines where it can leverage its global expertise in line with its strategy.
A unit of Shell has earlier this year won approval to go forward with an LNG import project in the Philippines, joining a number of developments looking to deliver the fuel to the country’s power plants.
Shell did not reveal any additional information regarding the project but local media reports cited DOE as saying that Shell plans to install a chartered floating regasification unit (FSRU) in Tabangao, Batangas.
The proposed project would have up to 3 mtpa capacity and it would deliver the fuel to mainly power plants, according to the reports.
The Philippines has several LNG import facilities on the table as the Malampaya gas field becomes less reliable in producing and providing sufficient fuel supply for the country’s existing gas-fired power plants.
These include the project led by Singapore’s downstream LNG player AG&P but also First Gen’s Batangas development.