Shell exits Philippine Malampaya gas field

Shell has agreed to sell its 45pc stake in the Philippines' offshore Malampaya gas and condensate field to local firm Udenna, completing the majors' exit from the project after Chevron sold its stake in 2019.

Shell will receive $380mn for its stake, with additional payments of up to $80mn between 2022 and 2024 based on the field's performance and commodity prices.

The sale is in line with Shell's efforts to align its upstream portfolio on nine core positions, the firm's upstream director Wael Sawan said today. Shell last year said it would focus on the nine areas — including the US, Brazil, Nigeria and the UK — that generate 80pc of its upstream operating cash flow.

The deal, which is effective from 1 January this year, is expected to be completed by the end of 2021. Philippine conglomerate Udenna will increase its ownership of Malampaya to 90pc after the transaction closes, following its purchase of Chevron's 45pc stake in the field for an undisclosed sum in November 2019. State-owned energy firm PNOC holds the remaining 10pc.

Malampaya, the sole fuel source for the Philippines' gas-fired power plants, was valued at $2bn when it came on line in 2002. Reserves are depleting rapidly and are on course to be nearly exhausted by 2024, spurring investment in LNG projects.

Shell indicated last year that it was looking to sell its stake in the field. The company is scaling back its Philippine operations, after last year closing its 110,000 b/d Tabangao refinery in the country and converting the facility into an import terminal for oil products. Shell's remaining business operations in the Philippines include service stations, lubricants and bitumen supplies, and a new retail electricity business.

By Kevin Foster