Asset A&D

Udenna Acquires Shell's 45% Interest in Service Contract 38 in the Philippines

By Sakshi Jain
May 20, 2021
2 minutes read
Gas Flare

Privately-held Udenna Corp. has entered into an agreement with Royal Dutch Shell Plc to acquire 100% of Shell Philippines Exploration BV (SPEX), which holds a 45% operated interest in Service Contract 38 (SC38) (containing the Malampaya deep water gas-to-power project), offshore Philippines, for a total initial consideration of US$380 million plus certain additional contingent payments. UC38 LLC, a subsidiary of Udenna, currently holds a 45% interest in the project while state-owned Philippines National Oil Co. (PNOC) holds the remaining 10%.

In 2019, UC Malampaya Philippines Pte Ltd., a wholly-owned subsidiary of Udenna, had acquired an initial 45% interest in the contract through the acquisition of 100% of Chevron Malampaya LLC (now UC38 LLC).
Under the terms of the deal, Malampaya Energy will acquire SPEX for a base consideration of US$380 million plus a further consideration of up to US$80 million contingent on asset performance and commodity prices between 2022 and 2024.

SC38 is located offshore in the Palawan basin, approximately 80 km north-west of Palawan Island in water depths of around 850 m. The service contract contains the Malampaya-Camago gas field, which was discovered in 1989 and commenced production in 2002. The associated Malampaya deepwater gas-to-power project is comprised of five production wells, a shallow-water production platform, a depletion compression platform (DCP), and a 504 km.-long underwater pipeline connecting an onshore gas processing plant at Batanga. The field contains estimated resources of approximately 319 million barrels of oil equivalent (MMboe) as of December 31, 2019, and had a net average daily production of approximately 25.7 thousand barrels of oil equivalent per day (Mboe/d) during 2019, of which around 88% was gas.

“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. Today’s announcement is consistent with Shell’s efforts to shift our upstream portfolio to one that is focused on nine core positions,” said Wael Sawan, Upstream Director of Shell.

Davao-based Udenna operates across the oil & gas, retail, shipping & logistics, real estate development, gaming & tourism, infrastructure, and food services segments in the Philippines.

The transaction is subject to customary closing conditions, including partner consent, and is expected to close by the end of 2021, with an effective date of January 1, 2021.

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