Shell eyeing arbitration verdict on Malampaya

Published December 20, 2018, 12:00 AM

by manilabulletin_admin

By Myrna M.Velasco

Shell Philippines Exploration B.V. (SPEX) is eyeing a verdict on its P53-billion Malampaya tax case in the next six months – and that will palpably clear the uncertainty on the remaining operational life cycle of the gas field.

Cesar G. Romero President SHELL PHILIPPINES
Shell Philippines President and CEO Cesar G. Romero

“The decision of the ICC (International Chamber of Commerce) in Singapore could be in six months,” Shell Philippines President and CEO Cesar G. Romero has indicated.

Being the service-contract holder of the country’s first major commercial gas field, SPEX along with its partners in the Malampaya consortium (Chevron Malampaya LLC and state-run Philippine National Oil Company-Exploration Corporation) are anticipating a ruling that could inject certainty in the business environment of the Philippine upstream oil and gas industry.

“We are hoping that we could come to a favorable conclusion,” the Philippine chief executive of the Anglo-Dutch multinational oil giant noted.

He said the ICC ruling on the Malampaya tax case will ostensibly “provide clarity on the fiscal regime – which is for P.D. (Presidential Decree) 87 to be upheld – because this will have implication as to what fiscal regime will be applied in the new discoveries.”

Romero qualified that during the ICC hearings in Singapore, one of the key figures that offered testimony on PD 87 had been former Prime Minister Cesar Virata, one of the brain and a key policy framer of that prevailing Oil and Gas Law of the country.

“He (Virata) was there and he actually articulated an interpretation which is the same of that of the (Malampaya) consortium,” the Shell executive said.

Romero emphasized the crux of that interpretation is: “that the 40-percent that we take is already deemed tax paid. But the technical nuance, it is being claimed as tax free, however, our position is: it is tax paid and it is part of the government’s 60-percent share.”

The deviation on the tax treatment’s interpretation had been raised by the Commission on Audit (COA), but this was fiercely contested by the Malampaya consortium as well as key government agencies like Malacanang, Department of Energy and the Department of Finance.

And since the State auditor, being an independent agency, is not within the imprimatur of the Executive Branch, arbitration had been the ultimate recourse pursued by the Malampaya consortium to settle the tax case.

Based on COA’s interpretation, if Malampaya’s tax dues would be updated to 2016, that could reach as much as P146 billion.