The Department of Energy and state-run Philippine National Oil Company-Exploration Corporation (PNOC-EC) have collaboratively called for greater inflow of investments in the country’s upstream petroleum sector if the Philippines would really have to cement its energy security pathway.
Nevertheless, for this goal to really advance, both government entities sounded off the need for resolution of legal challenges hamstringing investments in the sector – and that shall include a definitive decision on a pending case at the Supreme Court relating to the legal question raised by the Commission on Audit (CoA) on the income tax treatment of the royalty share of the contractor in the Malampaya gas field project.
As noted by Energy Undersecretary Felix William B. Fuentebella, the government has been making the upstream oil and gas industry enticing to investors, but he emphasized that it is the judiciary that will be the ultimate arbiter when it comes to the legal questions linked to policies on oil and gas exploration ventures in the country.
“We have to re-emphasize that everything goes together: legal, executive and judicial. We are pushing for the expansion of exploration areas. We are making it more attractive. At the end of the day, the judiciary will be the judge,” the energy official stressed.
PNOC-EC President and CEO Rozzano D. Briguez similarly stated that “there are legal challenges regarding the legal processes that we have,” and while he noted that the company has its sights on a good prospect, “what is preventing us are legal aspects with our laws and regulations.”
The major void that the country will need to fill up when it comes to its energy security agenda will be the resource gap that Malamapaya’s contract lapse in 2024 will spawn – because despite assessments that the field may still have residual gas production, the extension of the field’s Service Contract 38 had not been acted yet by the government.
The license extension application is still pending at the DOE and evaluations of document-submissions are still carried out at the level of the department’s technical working group.
That commercially producing gas field is the biggest single source of fuel for 3,211 megawatts of gas-fed capacity in the country today – and it's a strategic role that Malampaya has been performing since the start of its commercial production in 2001.
Within that two-decade stretch of commercial production, Malampaya so far yielded roughly US$12 billion revenues to the Philippine coffers – via remittance to the Bureau of the Treasury, as well as taxes paid with the national government.
That was on top of the royalty share cornered also by state-run PNOC-EC as minority shareholder in the Malampaya consortium – and its earnings from the project had likewise been the major source of dividends it has been remitting to the national treasury.