China-linked Philippine tycoon Defends South China Sea Gas Field Acquisition

Philippine tycoon Dennis Uy (center-right) has always had a strong relationship with Philippine President Rodrigo Duterte (center-left), owing to their shared hometown of Davao City (Wikimedia Commons).

Amid allegations of graft, nepotism, and national security violations, Philippine tycoon Dennis Uy defended his acquisition of the crucial Malampaya gas fields in the West Philippine Sea on November 16, according to the Inquirer. In a letter addressed to the Makati Business Club (MBC) board, a vocal group of prominent businessmen, Uy said that the acquisition of such gas fields by his company, Udenna, did not skirt any legislative processes and will ultimately be beneficial for the country. “[Government] approval is not required,” Uy wrote, “as has been the practice for the previous transfers of interest at the parent company level.”

The deal, which occurred between Udenna and British oil and gas giant Shell, bequeathed Uy’s company a 90 percent share of the Malampaya gas fields for $460 million, according to Forbes. These fields constitute the sole source of fuel for gas-fired power plants in Luzon, the Philippines’ largest island, and therefore are a salient economic and strategic asset. 

Widespread public outrage regarding the process in which the deal was conducted followed Uy’s acquisition of the Malampaya gas fields. Many prominent groups, like the MBC, complained that Uy secured the deal despite having no experience in the petroleum industry. Many critics also brought up the fact that the government did not “scrutinize the buyer’s financial and technical capabilities and interests and should reserve, enforce, and exercise its right to block and invalidate transfers of shares and control that may be disadvantageous to the Filipino people,” according to Rappler. Department of Energy (DOE) Secretary Alfonso Cusi was also slapped with accusations of graft—concerned citizens filed a complaint detailing how the DOE’s handling of the sale violated numerous anti-graft and corruption policies.

These concerns are not ill-founded. As a Davao City businessman, Uy has always been a close advisor and ally of Philippine President Rodrigo Duterte, who was previously the mayor of Davao City. During Duterte’s 2016 campaign, Uy was one of his most reliable and generous campaign donors. Uy has since been able to construct a diverse conglomerate owing to lucrative telecommunications and shipping licenses awarded to him by a congress packed with Duterte allies, according to CNN. Critics see the government’s nonchalance towards Uy’s acquisition of the Malampaya gas fields as an extension of that nepotistic relationship.

Moreover, critics are concerned about the potential national security implications brought about by the deal. Lawyer Rodel Rodis stated, “With Dennis Uy now in the Malampaya gas field, can China be far behind?” Uy also has close ties with China National Offshore Oil Corp (CNOOC), which has partnered with Uy for natural gas terminals in the past. Given China’s recent predatory behavior in the South China Sea, many fear that Uy’s acquisition of Malampaya will give Chinese corporations a foothold in seizing natural gas fields within the Philippines’ exclusive economic zone. 

Uy has affirmed that the existing partners, personnel, and infrastructure left by Shell will remain intact, and that the deal was only executed at the parent company level with no major implications to the actual operations of the gas field. However, this still does little to ease the concerns held by the public and business communities.