The plan of state-run Philippine National Oil Company (PNOC) to establish the country’s strategic petroleum reserve (SPR) or oil stockpiling has been ditched after the Senate junked the proposed budget for this project.

Senate Committee on Energy Vice Chairman Sherwin Gatchalian indicated that the overall budget allocation for PNOC for 2023 would be P1.095 billion only as against the agency's original proposal of P3.595 billion as it plans to start work on the SPR project proposal. The 2023 PNOC budget was also lower than the P1.317 billion budget in 2022.

Had PNOC’s original budget been fully approved, the government-owned firm is targeting to engage next year its transaction advisor for a feasibility study for the planned SPR. The feasibility study is expected to come up with the cost of the SPR project.

Early on, Energy Secretary Raphael Lotilla also prompted PNOC to be “mindful of the financial sustainability of operating the reserves; as well as the concept of PNOC carrying the SPR inventory,” and for it to judiciously weigh the competitive facet that this plan will bring about in the deregulated downstream oil sector.

Additionally, the state-run firm’s re-entry into fuel distribution, primarily for the marginalized segments as packaged into its proposed targeted fuel relief program (TFRP), did not sit well with the lawmakers.

On the substantial reduction of the PNOC budget, Vice Chairman Sherwin Gatchalian indicated that the overall budget allocation for PNOC for 2023 has been reduced by P2.5 billion from the original proposal of P3.595 billion.

The solon emphasized that “the fuel relief program is a duplication of the government’s Pantawid Pasada program and that the SPR program is yet to hurdle feasibility issues and could take billions of pesos to implement.”

In the lawmaker’s view, instead of diversifying its business undertakings, PNOC should instead “refocus its mandate into providing stable and secure supply of oil, including the exploration of oil and gas.”

Meantime, a proposed bill Senate Bill No. 380 being sponsored by Gatchalian seeks to usher in the business shift of PNOC to exploration and production (E&P) ventures in the upstream oil and gas sector, so the state-run company can match the stronghold of peers in the region, such as that of the Petronas of Malaysia; PTT of Thailand; Pertamina of Indonesia, and PetroVietnam.

Gatchalian emphasized that “the original mandate of PNOC is to provide a stable and secure supply of oil, including exploring oil and gas."

However, he noted that "some of the projects being implemented now by PNOC are not aligned with its original mandate, such as the fuel relief program,” emphasizing that since these targeted ventures lack feasibility studies, they are deemed not helpful in the government’s goal of pursuing long-term energy security.

Under the pending Senate Bill, PNOC will be given “exclusive mandate to undertake oil and gas exploration and development programs.” The overall aim of that prescription is “to reduce the country’s dependence on oil imports amid high level of petroleum prices, driving inflation rate at record levels and dampening economic growth.”