Cusi asks ASEAN neighbors to join oil exploration at West Philippine Sea

Published November 20, 2020, 1:00 PM

by Myrna M. Velasco

With the West Philippine Sea already legally opened by the government for oil and gas exploration, Energy Secretary Alfonso G. Cusi has intensified his call on neighbor-countries in the Southeast Asian region to join in the ‘upstream exploration ventures’ in Philippine waters.

In his address at the 38th ASEAN Ministers on Energy Meeting (AMEM), the Philippine energy chief persuaded ASEAN national oil companies (NOCs) to explore collaborative oil and gas exploration development, so the region could build up utilization of its indigenous energy resources.

He similarly advanced calls on the ASEAN Council on Petroleum (ASCOPE) “to revisit the existing sharing agreements on oil and gas exploration and production;” and when feasible, that body must recommend similar or modified agreements that the ASEAN countries could possibly adopt or enforce.

Cusi said the Philippines is counting on ASEAN peers when it comes to strengthening “regional collaboration and cooperation on energy resource exploration, development and production.”

Last month, the Department of Energy (DOE) announced the lifting of the moratorium on petroleum exploration and development at disputed territories within the West Philippine Sea; and Cusi himself indicated that holders of service contracts can already proceed with their work programs and drillings even without the concurrence of China.

“This development would augur well for our economic recovery in the midst of the Covid-19 pandemic, given that the resumption of work would infuse our economy with fresh investments and help generate high skill employment opportunities,” Cusi stressed.

He thus sounded off to his co-Ministers at ASEAN that “with all of us sharing the common aspiration of attaining energy security for our respective countries, we must examine the advantages belonging to this multilateral association in order to fast-track its realization.”

The policy declaration of the Philippine government on the moratorium lifting of oil and gas exploration has yet to yield tangible results, especially in the targeted substantial flow of capital or investments in the upstream petroleum sector.

Pragmatically, the Philippines’ oil and gas finds are nascent versus ASEAN neighbors, because the country’s resources are not just of ‘low prospectivity’ — but there are also myriad of regulatory hurdles impeding investment flows.

Presidential Decree 87 or the Philippine Oil and Gas Law is the governing policy for ventures in the upstream petroleum sector; and it also prescribes the 60:40 royalty sharing arrangement between the State and the service contractor – with the government cornering the higher share.

Nevertheless, there is still a pending case in the Supreme Court badly needing resolution so the prospective investors could have a clear sense on the treatment of income tax when it comes to the royalty share accorded to the service contractor.

The service contract of the country’s biggest gas discovery – the Malampaya field – will expire in 2024, but until now, there is no definitive resource find yet that will replace the void that will be left by Malampaya.