By Myrna M. Velasco
Investments in the country’s upstream oil and gas sector had been on a rapid declining pace in recent years due to confluence of factors – in fact plummeting to the level of US$74.2 million this 2018 from a hefty US$831.248 million five years ago, according to data from the Department of Energy (DOE).
Prior to the enforcement of drilling moratorium at conflict areas at the West Philippine Sea in 2013, Philippine data would show that it has been fetching significant annual investments of more than US$400 million to US$800 million in oil and gas exploration ventures.
For the 2013 capital flow though, it can be factored in that major component of that had been the fraction of the second round of US$1.0-billion investment that the Malampaya consortium had coughed up to shore up its rate of gas production.
In 2014, the scale of investments in the sector had dropped to US$629.617 million; then even lower at US$609.515 million in 2015.
The succeeding years had shown the worsening downturn in petroleum exploration investments, with it precipitously sliding to US$324.743 million in 2016; and even lower at US$291.983 million last year.
Capital flow in the sector practically stalled in the last five years – since aside from the diplomatic strife that smothered exploration and drilling in known resource-rich petroleum blocks, the government also needed to contend with controversies relating to the Malampaya tax case.
On top of that, the DOE wasn’t able to get its hands on remedial fixes on policies that had dampened investments in the upstream oil and gas sector – such as the Executive Order (EO) scrapping farm-in and farm-out deals for service contracts held by state-run subsidiary Philippine National Oil Company-Exploration Corporation.
Further, there’s a decision of the Supreme Court on a Japanese firm’s service contract which had set jurisprudence that it is only the President of the Philippines that can underwrite petroleum service contracts that the country will be entering into with contractor-investors – and that practically added laborious layers of bureaucratic processes in the sector.
The DOE acknowledged that “petroleum exploration is a high risk but high reward investment,” with it qualifying that “if the company fails to discover and develop any petroleum field, all expenses incurred for its operation cannot be recovered.”
Despite the huge amounts being sunk into the sector, the department indicated that the State still rakes in massive revenue collections – especially in the petroleum blocks that were able to reach commercial development phases.
“Aside from the big investments from the upstream sector – mostly from foreign companies, the tax collected from this sector is also a big contributor to the country’s revenue collections,” the energy department has stipulated.
In its next quest for commercial-scale oil and gas discoveries bannered by its offer of 14 petroleum blocks under the Philippine Conventional Energy Contracting Program, the DOE has been promising investors of policy fixes that could whet their appetite to shell out fresh cash in the sector.