How desperate can we get?
The Philippine Sta
r08/20/04

Desperate times call for desperate measures.

Unfortunately, this is how the Arroyo administration seems to be acting things out when it comes to pressing issues on energy security.

For instance, the energy department’s position to sell half of government’s 10 percent stake in the multi-billion Malampaya natural gas project seems to be bereft of deep analysis. Or worst, it is disaster in the making.

Then there is the unthinkable proposal to use the Bataan nuclear power plant by converting it into a natural gas-fired facility and selling it to the private sector. This was followed by a proposal to re-nationalize Petron Corp., the country’s largest oil refiner, coming no less from the Senate President. Times must really be that bad.

Malampaya: Going The Other Way

The Department of Energy recently confirmed that talks are ongoing with a South Korean consortium led by Korea Gas Corp. for the sale of close to half of government’s 10-percent stake in the Malampaya project.

The Malampaya deep water gas-to-power project, at $4.5 billion, is the largest and so far the most significant industrial investment in the country. It provides 2,700 megawatts of power to the Luzon grid for a 20-year period starting 2002, serving 30 percent of the country’s power requirements and reducing our reliance on imported fuel, which has continuously soared to record highs.

Apart from the project’s importance to being a crucial engine of economic growth, the Malampaya also stands to help government through the billions of dividends it is expected to earn as 10 percent owner of the multi-billion dollar gas project.

State-run Philippine National Oil Co.-Exploration Corp. (PNOC-EC), a publicly listed corporation, holds 10 percent stake, while majority ownership is with operator Shell Philippines Exploration BV and joint venture partner Chevron Texaco.

The President was very clear that while government is hard pressed to earn billion in revenues to finance a running budget deficit, government would see to it that no way should power assets be sold in a rush and, worst, on onerous terms. Unfortunately, the government may be heading in that direction given its plans on the Malampaya project.

Energy Secretary Vincent Perez says that the government will not sell the 4.9 percent stake below its acquisition cost of $85.75 million (P4.8 billion in peso terms). Unfortunately, if anyone is missing the point here, it is no less than the energy chief himself. That the Malampaya sale plan is being maliciously linked to his previous employer when he was an investment banker is of course another unfortunate development.

Selling the stake below or above government’s acquisition cost is not necessarily the only issue at hand. The important question that needs to be asked is: Why should government rush the sale of its Malampaya share when the country’s biggest project is sure to give it a steady source of revenues in the next 20 years?

Granted the government needs to raise the cash. But why should the PNOC-EC equity on the Malampaya project be sold (and in the process reduce government’s direct claim on the project) when they could instead offer PNOC-EC shares to the public or investors through the stock exchange?

With PNOC-EC being a publicly listed company, that proposal should not be hard to do.

Bataan Nuclear Plant

The plan to convert the Bataan nuclear power plant into a gas-fired facility is one of the most desperate proposals I have heard so far. We Filipinos do have the penchant for melodrama. We do not only refuse to let this white elephant die; worst, we even want it to grow bigger. Yes, bigger than the $155,000 in daily interest we continue to pay for a mistake committed some 20 years ago.

Several studies done in the past find the conversion of the Bataan facility severely impractical to do. One particular feasibility study conducted by Australian firm METTS Pty Ltd in 1995 at first look showed that converting the plant using natural gas "provides the cleanest option for the conversion of the Bataan power station to fossil fuel firing. It further offers the most flexible power output to the grid."

This should have been good news for supporters of the gas-conversion proposal, except that "Over a billion dollars in capital would be needed to build the plant, plus an additional substantial sum to supply the fuel; either as LNG or pipeline gas."

You do not need to be a genius to know that investors would spend the same amount – or even less – to build a new power plant. And if you were the investor, why spend millions to buy a piece of junk to construct a new one from scratch?

Whoever whispered this plan to the President is certainly ill-advised. I sure hope they are not from her energy family, for surely this kind of proposal exposes the naiveté of some energy advisers.

Any more desperate ideas?

‘Breaking Barriers’ With Gen. E. B. Aglipay, AIDSOT Force

"Breaking Barriers" on IBC (11 p.m. every Wednesday) will feature Gen. E. B. Aglipay, Commander of AIDSOT Force on Wednesday, 25th August 2004.

Executive Order No. 218 issued on 18th June 2003 entitled "Strengthening the Support Mechanism for the Philippine Drug Enforcement Agency" led to the activation of the Anti-Illegal Drugs Special Operations Task (AIDSOT) Force.

Since then more than P22 billion worth of shabu and ephedrine were seized, more than 35,000 drug offenders arrested and charged, 22 shabu factories and shabu warehouses raided and knocked out of operation. Yet everyone knows that illegal drugs keep on flowing into the market, and users and pushers are still roaming in corridors of learning, places of business, and entertainment and dark alleys.

From where does this unending illegal drugs supply flow? Why has the entry into the Philippines of illegal drugs remained unabated? Are the ranks of anti-drug law enforcers completely clean? What keeps the illegal drug business humming despite apparent success of AIDSOT Force? Watch it.

Gloria’s Promises On TV

"Isyung Kalakalan at Iba Pa" on IBC News (5 p.m., Monday to Friday) ends today with a discussion of the President’s promises for the next six years. During her State of the Nation Address, she announced five main thrusts that her administration would pursue: job creation through economic growth; anti-corruption through good government; social justice and basic needs; education and youth opportunity; and power independence and saving. How will she deliver on these promises? Is she on the right track? Watch it.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.

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