More incentives mulled for oil, gas exploration

Energy Secretary Mario V. Tiaquoi said yesterday that the government is reviewing incentives designed to encourage oil and gas exploration.

According to Tiaoqui, there are already a number of favorable incentives under Presidential Decree (PD) 87 and 1857. Among these are the carry-forward, cross-cost recovery which allows an exploration company to charge costs of drilling wells that turned out "dry" on the wells that had positive results.

"This is an incentive unique to the Philippines and it allows exploration companies which are mostly foreign to easily recover their costs," Rudolph Dimen, external relations officer of the Philippine National Oil Co. (PNOC) said. The global ratio for success in the exploration sector is one production well for 33 well drilled.

As an added incentive, exploration companies are allowed a cost recovery of more than 77.5 percent from the gross earnings with the rest of the earnings being divided between the national, local, municipal and barangay government units.

Other incentives offered by the government are: 10-year exploration period and another 40 years for development and production; repatriation of investments and profits; a 40 percent net service fee for contractor; exemptions from income tax obligations for a certain period; and, exemptions from taxes and duties on capital equipments directly related to exploration and development activities.

Government is working on legislation, which will decrease or rationalize royalties or tariffs on the exploration and development of indigenous energy sources.