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Philippine Tycoon Razon to Buy Majority of South China Sea Gas Field

June 2, 2022

Credit; Mammoet
Credit; Mammoet

Philippines ports and gaming tycoon Enrique Razon is acquiring a majority stake in a South China Sea gas field from a close ally of outgoing President Rodrigo Duterte, a move seen benefitting his oil exploration franchise on the Reed Bank.

Razon's Prime Infra Holdings Inc said in a statement on Thursday it will buy a controlling stake in the Malampaya gas-to-power project from Dennis Uy's Udenna Corp for an undisclosed amount, the latest in a string of corporate deals by Razon, Philippines' second richest man.

Razon's plan was first reported by Reuters in May when it revealed that Uy, whose business empire expanded rapidly under Duterte, was looking to sell businesses collectively worth several billion dollars, including the Malampaya gas field, to pay down debt.  

Uy had acquired a combined 90% share in the Malampaya gas field from Chevron and Shell for roughly $1 billion.

Prime Infra did not say how much stake it was buying. The deal needs to be approved by the Philippines' Department of Energy (DOE) and state-owned Philippine National Oil Co-Exploration Corp (PNOC-EC), which owns 10% of Malampaya. Both agencies did not respond to requests for comment.

Udenna declined to give more details about the deal, but in the same statement, Uy said he looked forward to partnering with Razon to sustain Malampaya's operations and meet the urgent need for energy security.

The deal is beneficial for both Razon and Uy, an analyst and a banker said.

"Amidst a rising interest rate environment, debt reduction is a must for Uy, hence the asset sale," Carlos Temporal, research analyst at AP Securities in Manila, told Reuters.

Temporal said the controlling stake would give Razon control over Malampaya's processing plant and pipeline, increasing the viability of his oil and gas exploration franchise in the Reed Bank, which the DOE previously said contained bigger natural gas reserves than Malampaya.

The Malampaya offshore gas field is located in Palawan province, in an area of the South China Sea not claimed by Beijing. It fuels power plants that deliver about a fifth of the Philippines' electricity requirements.

In December, Uy's Udenna said Malampaya may operate for several more years beyond its projected 2027 project life.  

Razon, with a net worth of $6.7 billion according to Forbes, is "an expert in thriving in highly-regulated businesses," a banker, who was not authorised to speak to the media, told Reuters.

The 62-year-old's major holdings include casino-resort group Bloomberry BLOOM.PS, global port operator International Container Terminal Services ICT.PS and utility Manila Water MWC.PS.

(Reuters - Reporting by Neil Jerome Morales and Karen Lema; Additional Reporting by Enrico dela Cruz; Editing by Ed Davies, Richard Pullin and Muralikumar Anantharaman)



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