A lawmaker on Sunday warned that proposals for the government to takeover Malampaya will only increase the country’s debt obligation by around $1 billion.
House Committee on Good Government and Public Accountability vice chairperson and Surigao del Sur Rep. Johnny Pimentel said there is no point for the government to suddenly borrow and spend a lot of money to match any private party’s offer to buy Shell’s state at the Malampaya oil project.
“A foolish idea (buy Shell’s stake) that would easily force taxpayers to suffer another $1 billion (P50 billion) in public debt obligations,” said Pimentel in a statement.
Shell recently agreed to sell its 100% stake 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.
Pimentel explained that the takeover cost could be 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.”
“Right now, the government is already in a sweet spot, merely collecting 60% 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.
Several groups have been pushing the government to takeover Shell’s operating stake in the gas project.
“And the government simply cannot afford to incur additional debt obligations now, considering its worsening budget deficit,” said Pimentel adding that the government right now does not have $1 billion to buy Shell’s Malampaya stake and run the gas project.
He noted that 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.
While deficit spending is needed, Pimentel warned that this “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 explained.
Foolish idea! Gov’t takeover of Malampaya to cost taxpayers $1 billion – Pimentel
Source: Philippines Clips
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