Press Release
October 28, 2021

ONE News Agenda Interview of Senator Win Gatchalian with Cito Beltran on Energy and Oil issues

Q: From the looks of it, while Senator Dick Gordon has essentially started wrapping up the Pharmally anomaly investigations, mukhang umiinit. It seems that this issue on energy, the Department of Energy, and all related matters seems to be heating up. Could you just give us a preamble to all of this Senator?

SEN. WIN: Well, Cito, it's part of our mandate of holding the departments to account. That's part of our responsibility, exercising our oversight functions. So, ganyan talaga Cito, that's our system. And it's important that the departments are doing their job and it's important that they're transparent in terms of policy making. So in the realm of energy, there are two things that we are looking at. Number one is the power situation this coming 2022. As we all know, you mentioned earlier, election year next year, and we want to make sure that there is constant supply of electricity throughout the summer season, and then number two, there's this issue of the Malampaya transaction which we investigated and inquired, and we have some conclusions as to what happened, but this is an ongoing still an ongoing evaluation and an ongoing inquiry.

Q: Okay. Let's do it, piece by piece. First of all, DOE. Sa DOE the concern is, with all of these problems happening, do we have a functioning Department of Energy Secretary. Kasi marami ang nag-aaccuse sa kanya ngayon na masyado siyang naka-focus sa politics when we have very serious issues on hand. As you pointed out the Malampaya case, there are people who filed cases against him and Dennis Uy of Udenna regarding that deal, and it's a multi billion deal, it seems they claim it was injurious o nalugi ang gobyerno. And then yung presyo ng gasolina kasi ang mga Jeepney drivers at saka mga bus driver ang sabi wala na silang kinikita. So what is your assessment of Secretary Cusi? I want to be objective about it, but it's hard to be objective if everything I see on the front page relates to a political statement or action on the part of the Secretary and nothing to do with energy.

SEN. WIN: It's very difficult for me to answer that directly because his political activities and his political inclinations are his own prerogative. What's important for me is what I covered, which is the energy sector and this is a task and a responsibility that was given to me by the Senate. Therefore, I have to do my job, to conduct oversight and to hold the department into account. And this is where all of these things are coming up. For example, as you mentioned, the power situation next year, the Malampaya issue, and then you have the rising oil prices, which cannot be solved overnight, but we need to have a long term solution to this. And all of these things are very serious and very immediate in terms of attention and we need all hands on deck specially this coming next few months because oil prices are going up.

Q: Okay. To be fair with the DOE, they have forwarded several suggestions. One was to go to Congress and say pakibigyan nIyo kami ng authority, give us the authority to intervene that in the moment that the prices get out of hand, we can either implement price freeze or push forward for the removal of certain taxes etc. How do you view these suggestions, first on the request of authority to intervene?

SEN. WIN: There's merit to that request. I saw the letter of Secretary Cusi to us, the legislators that includes me and Congressman Mikey Arroyo in the House. And there's merit to look at that, especially in the aspect of transparency dahil kapag tumataas ang presyo ng langis, we cannot discount from our mind that there are people who are trying to abuse or trying to take advantage of this increase in prices. So for purposes of transparency, yes we are looking at this law. We're looking at the oil deregulation law and how it can be more transparent, especially at these times but it will take time, amending the law will take time. And that's what I'm saying to the department that if we want to amend the law, we have to plan this because hindi yan mangyayari overnight. We have to debate on this. We have to look at this and it will take time. So the immediate solution is Pantawid Pasada which the DOF already implemented, and it's good to put that in motion because the price of oil is really going up and it will go up in the next few weeks.

Q: We have a saying in the Philippines, sa Tagalog 'aanihin ang damo kapag patay na ang kabayo'. What good is the hay if the horse is dead? Now in this Pantawid Pasada I agree with you. It's a good solution. But doesn't it come too late? Because it's already the end of October. By the time they get this on the ground, it will probably require 15 to 20 days by the time it comes out tapos na ang boksing.

SEN. WIN: The job of the DOE is to forecast, to forecast supply, to forecast demand, to forecast pricing, to forecast global trends. We all know that we import 99% of our oil, given na yan, Cito and that's not going to change in the next few years. So in other words, our country is very susceptible to changes in global supply and demand as well as global prices. So in other words, the job now of the DOE is to forecast and come up with solutions ahead of time. And that's why to be frank about it, the solutions that were sent to us should have been put in motion 5-6-7 years ago, because we all know that. we're susceptible to price shocks. And in fact, this is not the first time, if you remember when Saudi Aramco refineries were bombed by some terrorists, supply went down and again prices went up as high as 80 dollars per barrel and we all scrambled again. And that's why what's important right now is to put something, a mechanism in place, that we can call on as quick as possible and forecast ahead so that we can budget because even though we have that mechanism kung wala naman tayong pera, then nothing's gonna happen and you're right, the administrative portion, the rolling out portion also takes time, even though we implement it today, drivers will not feel it probably one or two weeks after.

Q: I must point out, Senator the last time we did that, the drivers didn't get the Pantawid Pasada until a month after, if not longer. In fact, others were even complaining that they were excluded, but that's a different topic. You mentioned the role of the DOE is forecasting. I think we both agree and many people agree that these problems that we are facing now have been with us in the last 20-30 years. So it is not new. And nothing is being done about it. Why is that?

SEN. WIN: We have to approach this both short term and long term. Short term is in my observation and I don't have a crystal ball to predict but relatively you can forecast aberrations in the oil and gas sector. And because we import 99% of our oil, more or less, there are fluctuations at least once a year. And in my six years covering the energy sector, I've seen fluctuations twice, actually three times. So that's more or less once every two years. But to be conservative about it, let's forecast once a year. So meaning we have to keep at least P1.5 billion to P2 billion on standby for those fluctuations so that we can draw money and execute cautioning mechanisms so that our drivers will not feel the pinch. That's in the short term. In the long term, we have to reduce importation. And that's why in the next few weeks, we'll be approving already our first law on electric vehicles and charging stations, and this law will encourage proponents of electric vehicles and proponents of charging stations to come in the country and roll out the necessary infrastructure to adopt electric vehicles and this is a mechanism or a policy that will lower down the importation for it but of course it will take time. It will not happen overnight, but a lot of countries are now rolling out their electric vehicles policy precisely to lower down the consumption of oil.

Q: That is the case in fact, napapakamot na nga ako ng ulo because every time I go on the internet, all I see from other countries is electric vehicles, electric buses, electric motorcycles, etc. And in the Philippines when Toyota first introduced its hybrid electric hydrogen car, what the government did was slapped it with a 1 million tax importation and then I have been a proponent for solar for backyard solar adaptation para sa mga Pilipino. But all my friends said, 'Cito we appreciate you championing backyard solar pero parang ang mahal mahal kapag brineak down mo yung taxes andun pa rin.' How do you resolve that issue, Senator?

SEN. WIN: Actually, the advocacy on solar rooftops because of the RE law will remove a lot of the taxes. For example, importation, we have removed that. We've also removed taxes for local manufacturers. The biggest problem of solar rooftops is red tape and also the lack of knowledge from the local government units. For example, in my case, I'm putting a solar rooftop in our house and I discovered there's so many things that local governments need to approve and most of the local government don't know how to approve it because it's quite new, relatively new. To simplify, when you buy a solar rooftop, the installer can install it as quickly as possible and connect it to the grid as quickly as possible. So you can buy and sell as quickly as possible, probably less than 14 days, we can do it as quick as that. So the problem here is actually more of the process other than the taxes but you are right these are the things that we should promote so that we can reduce dependence on grid electricity.

Q: Yeah, but at the end of the day, none of all of this bright ideas of Filipinos, and there are many brilliant Filipinos who can put up all of this, but there is no real, ewan ko pasensya na Senator, maybe I'm I'm generalizing, maybe I'm being presumptuous, but I have not heard of a real group in government that is solely dedicated to the energy switch.

SEN. WIN: The energy transition? Yeah, actually we funded, I managed to insert about P20 million for this year's budget to jumpstart our energy transition. The whole world is moving to that. These are the trends globally. Number one, the whole world is moving into energy transition. Number two, the whole world is electrifying everything from cars, to electricity to other things. Meaning they're going out of oil, and then number three renewables are coming in fast because prices are dropping. So these are the three big trends globally and we need to follow those trends because kung hindi maiiwanan tayo. Kapag maiwanan tayo, the cost will go up because for example, no one's already lending to coal. So meaning the cost of building a coal fired power plant is expensive and that will be passed on to our consumers. So in short, in a nutshell, we need to transition. And we need to fund that transition. And we need people to appreciate that transition or else hindi nila ma-aappreciate yan, legislature can fund all of these transitions, we have done that but at the end of the day, it's the department that will push for the study and jumpstarting of that transition.

Q: Abroad, especially in Europe, the political parties that are making a comeback and winning the elections are the parties they call Green parties. The parties who are pro-environment, pro-transition to energy etc. And one of the big picture programs is that countries like the Philippines should adopt a minimum travel, minimum carbon footprint program na kung saan, like you are in Metro Manila, and I'm in Lipa, Batangas, most Filipinos in Metro Manila still get their vegetable from from Bondoc Province, etc. So there is travel etc. And the idea is dapat ang food chain ninyo will not be more than 5-10 kilometers. Ang inyong power supplies dapat solar etc. Do we have a group or a party or leadership or government program towards that where zonal planning, etc considers all of this because I think that like even universities everything is in Metro Manila, spreading it out, Senator.

SEN. WIN: Well, Cito, the pandemic will change many many of our activities. It will change our lifestyle actually. For example, you mentioned earlier buying of food or going to work or even driving to work. All of this will change. Like for example, simple things like this, this type of a zoom or teleconference,before it was off but right now even in our office, we're thinking of doing this even post pandemic because it's more convenient. It consumes less oil, you don't waste time in traffic, so it's more efficient. So in other words, the pandemic will change a lot of things. But then again, ang problema kasi to be honest about it, the government has this dinosaur mentality. They like to do things over and over again, and we don't have that reformist mentality to be honest about it. And even if you look at our energy mix in our Philippine energy plan, it's business as usual which is not what we need. What we need is to reform so that we adopt all the new technologies and to make our lives more efficient.

Q: Why is it that way? Is it driven by a vested interest group? Is this because the industry's concerned control DOE? I'm not trying to create a conspiracy theory dito pero parang ang tagal na nating problema ito. And taun-taon pagdating ng November, December ang taas ng krudo. Pagdating naman ng Summer ang taas ng kuryente.

SEN. WIN: Wala kasi business as usual mentality. Kapag tumaas ang krudo, we react, kapag tumaas ang kuryente, we react. But we don't forecast and we don't reform and reforming takes a lot of political will. And that's what's missing, to be frank about it.

Q: You can manipulate all of that when in the budget hearings, like you are now. Pinagbibintangan ka pa ng iba diyan na you are politicking when you investigated the DOE regarding the Malampaya which I want to talk about after the break. But, bakit ganun, bakit hindi natin mabago, why can't we change the business as usual mentality?

SEN. WIN: The answer is simple. It's leadership. And if the leader of the department or the leader of the organization is not reform-minded or does not accept change and the mentality is just doing the same things over and over again, yan talaga ang makikita natin. It's a reactive culture, and I've seen that many, many times. We can be certain, many things in the budget. We have enacted many laws to react to new trends, but if the leader itself is not appreciative of reforms and of changes then wala paikot-ikot lang tayo.

Q: Senator, I'm going to ask you, regarding the issue of leadership, you said if the leader is not reformist and traditional, nothing will happen. Setting aside whoever is head or secretary of the DOE, is this problem because most of the people who appointed secretaries in the past or even in the present are not really energy experts, kumbaga they're mostly political appointees from the secretary down. So, hindi nila talaga expertise o gamay ang problema.

SEN. WIN: Let me just qualify, I'm not pointing to a specific department. When I made that statement, it's not towards a specific person or this specific department. It's a general comment based on my experience. But going to your question, yes, experience is preferred, especially in a very technical industry, it plays a very important aspect. Energy is not an ordinary sector, it's not a general knowledge sector, you need some level of experience to get things done, but what I've encountered in the past, I mean, I've talked to, I've been consulting with our past energy secretaries and a lot of them didn't have energy experience from the start, but they managed to transform themselves and learn the sector very quickly. A case in point here will be Attorney Lotilla and Secretary Vince Perez. Secretary Vince Perez was a well known investment banker. I have high regards for his work and he managed to transform himself into an energy expert in a short time span and I consult with him on many things. And Attorney Lotilla tells us the same thing. He came from the academe but he managed to learn the energy sector and implemented a lot of reforms, especially some of the circulars that we are using right now in the oil and gas sector. But my point is you need to have the drive and passion to learn and you can. It's a difficult sector, admittedly, but you can and once you're in there, and once you learn the intricacies, you need that passion to push for reform so that the sector will transform for the better.

Q: Okay, ayaw mong mamersonal. You don't want to target people or be you know, criticize people in particular but given our situation, we have raging fuel prices. We have PUV drivers trying to survive. And we have a Cabinet Secretary for energy, who is heard more because of politics and because of his involvement in the Malampaya sale. I was just reading my notes earlier, and I did not know that Dennis Uy of Udenna actually bought the starlight group or shipping group of Secretary Cusi and now they are linked together so parang ayaw mo mang mag-isip nang malisyoso, it's inappropriate. In the United States, he would already be under investigation. How is it possible that you got involved in this transaction and you have another transaction?

SEN. WIN: Correct. Actually Cito and that's the peril of joining the political parade. Again, I make this statement as a general statement, while you are a secretary and at the same time having a political party and during the time of election, the political side will be highlighted a lot and that's the reality of life. And you'd have to be careful that the political pronouncement will not overshadow the policy pronouncements but in this scenario, in this environment, you can help avoid it but the focus will be on the political side and you just have to bear the brunt of negative public perception of leaning towards more in politics.

Q: It should be treated as merely you know, public perception or from my point media perception because he is the cabinet, he is the Secretary of Energy, we have issues in the Department of Energy, should he continue as Secretary of Energy or simply let someone else handle that while he can devote his time to the politics of the party.

SEN. WIN: Again, I will answer this indirectly. But my philosophy is let the evidence and the facts speak for itself. We have issues at hand and the facts and the evidence will reveal those issues and those issues, the gravity of those issues will be judged by us, the consumers and the constituency. So let those issues come out and I will continue to hear on those issues because in my opinion, those issues are very important issues that we need to resolve. And for me, that's the most important whatever political, whatever political activities that the secondary has, that's his prerogative, but my concern are the issues most specially the controversies that surround those issues.

Q: Here's the problem. Senator. You basically, you're overseeing all of this at the Senate, the energy related issues. Now, during the budget hearing, you question the transaction of Udenna Group and the Department of Energy concerning the Chevron and Shell shares. And because you questioned, biglang tinitira ka na ngayon sa diyaryo. You are now being criticized by certain people in the newspapers, as politicking. You're doing your job. Now the question is, is he doing his job?

SEN. WIN: Ganyan talaga, I've learned to absorb this type of commentaries, and it's part of the trade. Admittedly ang DOE yung sarili nilang circular circular at ang batas. That's the basic issue here. There's no politics, the facts will speak for itself.

Q: For the benefit of our viewers, can you please educate us on what went down because ang alam lang namin, ibinenta na ang Malampaya kasi nalulugi na. Mahina na raw ang idinedeliver na gas. That's what we ordinary Filipinos learn and then suddenly they're all of this. Could you tell us what the situation is?

SEN. WIN: This is a very simple issue. And I'll break it down in very simple terms. The oil and gas contracts cannot be sold without government approval. That's in the law, and the law PD 87, Presidential decree 87. To operate this law, to operationalize this law you have the DC 2007, which was promulgated by Secretary Lotilla. So meron kang batas which is PD 87. To operationalize it, you have DC 2007. And in these two documents, very simple lang ang sabi walang bentahan na pwedeng mangyari kung walang approval ng gobyerno. So that's very clear. So what happened here is, the government twisted the law PD 87 and DC 2007 to approve the contract of Udenna buying Chevron. So this is where the problem comes in. Because in the law and in DC 2007, it's very clear. The steps are very clear. You don't need to be a lawyer to follow it. Just follow the steps. You can follow the steps. So inamin nila aprubado ito, but when we look at the documents, we saw that there are a lot of inconsistencies, and I have to point out, all of those documents came from the DOE. Wala kaming star witness. Wala akong star document. It came from them. We just made sense and analyzed piece by piece how they came out with their evaluation and their approval, and we saw a lot of inconsistencies. All of that is reflected in the records and in the hearings.

Q: But what about the allegation you are just trying to dig there so that you can gain a lot of media mileage, just like Dick Gordon did. Saan ba nagsimula? How did this issue of the Udenna Chevron Shell thing start?

SEN. WIN: Tama ka. This was triggered by a resolution filed by Senator Sotto and Senator Lacson and me in 2019 because there was news that Udenna is buying the chevron portion in Malampaya and we filed the resolution to look at this transaction. So that was triggered two years ago. And since the review is an ongoing review, we conducted ongoing hearings. And this all came out. That's why we didn't have any star witness. We just reviewed the transaction, the transaction in itself, if the transaction is consistent then the conclusion here is they followed government rules. But this one is being reviewed, everything is on record. I'm not inventing now, everything is on record. It came out that the concept review, the evaluation is inconsistent. So how can you approve a transaction where the evaluation is inconsistent and defective? And that's where the controversy comes in.

Q: Okay, well, I don't know if what you see in this evaluation and inconsistency is too technical. Ewan ko kung technical kasi ang lumalabas sa diyaryo ang isyu, paanong mabibili o bakit ibinenta kay Udenna kay Dennis Uy yung Chevron shell shares when then Udenna group or dennis Uy, allegedly reportedly in the papers is challenged. Kumabaga nabasa ko pa inutang lang ang pambabayad sa shares na yun.

SEN. WIN: The first is hindi nila sinunod ang sarili nilang proseso. The second is the evaluation of the buyer at dito na lumalabas that it is highly leveraged meaning maraming utang and how can they buy and operate this asset, Malampaya if they are in very precarious financial state. We have to remember, to put this in context, Malampaya powers 4 million homes out of the 22 million homes almost. So we have to make sure that whoever operates that has the technical, financial and the legal qualifications. That's all prescribed in the law kaya sinabi ng batas kailangan ng approval ng gobyerno dahil sinisigurado ng gobyerno that whoever steps in is qualified or else wala nang pakialam ang gobyerno whoever steps in.

Q: Senator, I'm worried, does Udenna group have a history or technical expertise regarding running a place like Malampaya because Shell does, Chevron does but Udenna is essentially a capitalist organization if I can call it that?

SEN. WIN: In fairness to Udenna, they have experience in retail, gas stations in retail. They don't have experience in oil and gas explorations. These are worlds apart, even though they have the same product but activities are worlds apart. One is a gas station, one is an oil and gas platform. And in our hearing it came out, that they don't have any experience and they will just get experience from contractors. What they are saying is yes, we don't have experience but we can contract all of those services. So my point of the matter is these are future pa, iko-contract pa namin ito. So that's some risk, that becomes a risk on our part.

Q: Exactly and there's a security clause in all of that? That is bulletproof, tamper proof that those subcontractors will not be foreign contractors kasi that issue was raised, what if they get Chinese contractors or whatever and puts our energy security at risk?

SEN. WIN: The geopolitics is another question pa yan ha. That's a whole new conversation actually, to be honest about it if you look at the structure of Udenna...

Q: Sabi mo kasi 20% of the power grid is supplied by Malampaya. Eh kung hawakan ng Chinese group 'yan at diniktahan sila ng mainland China, isara niyo yan.

SEN. WIN: ....certainly, highly leveraged or highly indebted. It's also the technical experience that is lacking with Udenna. And that's what we are questioning because this is no ordinary, we have to understand hindi ito ordinary asset that you can buy and operate. This is a very technical asset.

Q: Last question ko na lang Senator kasi talaga kailangan dito dalawang oras na interview. Pero you said cash challenged ang Udenna and a lot of people have said that in the media. Now the question is, if he's borrowing money to bankroll the purchase of all of those or borrowed money, what were the banks that lent him money? Did he borrow from foreign banks, or did he borrow from local banks?

SEN. WIN: Based on our hearing, they borrowed from foreign banks and this was disclosed by the PNOC. Part of it and this is the catch, part of it came from the internally generated funds because Malampaya is generating money, so he used part of that money to pay for Malampaya.

Q: Sandali parang binibili ko ang bahay mo, pinaupahan ko ang bahay mo para ibabayad ko sa iyo.

SEN. WIN: Correct. That came out from the hearing also. It's called entitlements. And that's why my conclusion there, from a business standpoint, the government should have bought it because number one, it's utang. Government can obviously go and borrow and number two, portion of the payment came from the proceeds itself. So, in other words walang inilabas ang proponent, so gobyerno na sana ang bumili nun so that we control and take all the proceeds.

Q: Okay. Among those banks who gave the loans, are they established foreign banks or are they in mainland China banks?

SEN. WIN: In fairness, they are foreign banks meaning Western banks, if I'm not mistaken, one of them is A and Z which is a New Zealand bank so therefore, these are established banks, reputable banks. But the point there is, as long as you have revenue coming in those banks will lead you.

Q: If the bank forecloses for whatever reason, may control pa ba tayo, if the bank decides to sell it to whoever?

SEN. WIN: Actually that's my point also, because what we don't want is the banks owning this. We don't want banks owning our Malampaya assets. We want operators, owning the Malampaya because banks are not operators, and that's another risk if banks will own it eventually, for whatever reason, na-foreclosed yan. How can we run the rig? First of all, they're not here in the Philippines. Second, they don't have technical capability. Then the risk is on us again as Filipinos.

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