At least 20 active petroleum service contracts (PSCs) will have to be re-submitted to the government so it can be formally signed by President Ferdinand Marcos Jr., in keeping with the jurisprudence set out in the Supreme Court ruling of the Japan Petroleum Exploration Co. Ltd. (JAPEX) case that was rendered in 2015.
The JAPEX case specifies that all service contracts entered into by the government after the passage of the 1987 Philippine Constitution shall be signed by the President of the Philippines; otherwise, these can be legally rendered as ‘void’.
According to Energy Secretary Raphael P.M. Lotilla, the legal cluster of the Cabinet has come to the conclusion that the incumbent President Marcos may, at his option, approve and sign the service contracts that remain effective and were issued since the 1987 Constitution was entered into force.”
He added the affected PSCs “will be the subject of consultations with the private service contractors on whether they will be amenable to their submission for the President’s approval and signing of the service contract, so we hope to move forward as well on this with the private sector.”
Based on the records of the Department of Energy (DOE), the service contracts affected include SC 6A and SC 6B in offshore Northwest Palawan; SC 14A and B in Northwest Palawan; SC14C which is also in Palawan basin; SC37 which is straddling onshore Cagayan basin; SC40 in Northern Cebu; SC 44 in Central Cebu; SC49 in Southern Cebu; SC50 in Northwest Palawan; SC 52 in Cagayan; SC 51 in the East Visayan basin; SC53 in onshore Mindoro; SC 54 A and B in Northwest Palawan; SC55 in Southwest Palawan; SC 56 in Sulu Sea; SCs 57 and 58 in Northwest Palawan; SC 59 and 63 in Southwest Palawan; and SC 69 in East Visayan basin.
Lotilla emphasized that the validity of the service contracts not personally signed by the President of the country had been wobbled because of the JAPEX case; and this lingers as a legal uncertainty when it comes to investment flow in the upstream petroleum industry.
“I think it’s important to understand that when we are looking at the goal of developing our indigenous energy resources and to provide accessible and affordable energy to our people, as we transition to a low carbon future, there will be a number of issues that have to be addressed,” he said.
The energy chief stressed “one of those are legal uncertainties that have remained unresolved over an extended period of time; and that’s why we are devoting time and energy for these – one is: the Supreme Court’s ruling on the JAPEX case of 2015. That’s already seven years, and the effects retroact to all the service contracts that were signed after the 1987 Constitution, but they were not signed personally by the President of the Philippines.”
So far, there were only two service contracts that had been signed by the President of the Philippines – and these were Service Contract 38 for the Malampaya deep water gas-to-power project that was signed by the late President Corazon Aquino; and Service Contract 76 of Israeli firm Ratio Petroleum which was signed by President Rodrigo Duterte.
When asked if the re-submission of the service contracts for the current President’s signing will not perturb investment regime in the upstream petroleum sector, Lotilla emphasized “no, it’s a case where we want to assist the private sector in order to stabilize precisely the legal framework under which they operate.”
He expounded “for as long as we don’t address this, then there would be legal uncertainty on whether or not their service contracts are valid or not.”
The energy secretary further pointed out that “if you revisit the JAPEX case, the Service Contract 46 was signed by Secretary Vince Perez, my predecessor -- and it was only decided by the Supreme Court in 2015. And in 2015, the Supreme Court said: the service contract was void because it was not the President who signed it herself (this was during the time of former President Gloria Macapagal Arroyo) – so we have to address that legal uncertainty.”