Upstream

Shell sales stake at Philippine gas field due to narrowing strategy

Shell Malampaya

Royal Dutch Shell announced this Thursday it has sold its stake at a Philippine gas field. The selling had a value of $460 million, and it is part of the company’s strategy to narrow its oil and gas operations around the world, to focus on core assets.

Firstly, the gas field sold was the Malampaya field, discovered in 1991 in the Philippines. Shell has a 45% stake in the field, under Service Contract 38; which is a deep-water license that includes the producing of the Malapaya field, to a subsidiary of the Udenna Group.

Secondly, the sale agreement included $380 million for the sale itself, and additional payments of $80 million, between 2022 and 2024, contingent on asset performance; also, commodity prices and other factors; according to Reuters.

Thirdly, the deal, however announced this Thursday, will achieve completion by the end of the year. The selling is “consistent with Shell’s efforts to shift our Upstream portfolio to one that is focused on nine core positions.” Said Wael Sawan, Shell’s head of oil and gas production.

Moreover, the Malampaya gas field was discovered in 1991, as said above; currently supplies fuel to nearby plants; which in turn provide almost one fifth of the country’s electricity requirements; according to Reuters.

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Udenna expressed interest in buying from Shell a year ago

Nevertheless, the field is on its way down; as the Philippine’s energy ministry expects for it to be dried out by 2027. Nevertheless, Udenna Group will double its stake interest in the field, as it will own Shell’s part now.

In fact, Udenna bought the other 45% stake interest from Chevron, back in 2019, for $565 million. The state-owned company, Philippine National Oil Company (PNOC) holds the remaining 10%.

Furthermore, Udenna expressed interest in buying Shell’s part since last year; back then the company spokesman, Raymond Zorilla, said that the field was “high-quality asset; strategic to the future welfare and energy security of the country.”

Finally, aside from the gas reserves in the field, Malampaya’s assets include undersea pipelines and other facilities; ones that could be used for LNG exports. In fact, the government has already plans to develop an LNG terminal near the platform.

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