DOE mulls moratorium on new service contracts

The Department of Energy (DOE) is mulling a moratorium on new petroleum, geothermal and coal service contract applications beginning March 31 this year, Energy Secretary Vincent Perez said over the weekend.

Perez said the proposed moratorium will enable the government to successfully launch the second Investment Promotion and Contracting Round for the exploration and development of petroleum and geothermal resources this year.

According to Perez, only contract applications that are received before March 31, 2005 will be processed by the DOE.

Perez said the DOE will also conduct the first contracting round for coal exploration and development within the year.

He noted that locally produced coal supplies only about 20 percent of our 10 million-tons-per-year coal requirements. This means that there is still a very good market for additional coal production, especially for power generation and the cement industry.

The energy chief stressed that the recent sharp rise in the price of coal and increased demand for this relatively cheap fuel for power generation has ignited renewed interest from prospective investors.

Perez said the investment promotion program aims to attract more investment money from foreign and local companies for intensified exploration activities in the Philippines for indigenous energy resources.

In March last year, the DOE successfully conducted the First Philippine Contracting Round for petroleum resources wherein the government was able to sign a new service contract with an Australian firm BHP Billiton.

The energy chief said the signing of a petroleum SC over the Sulu Sea between the DOE and the consortium led by BHP Billiton is expected very soon.

The First Geothermal Bidding Round also garnered strong interest from international and local firms with three companies submitting proposals to develop two geothermal sites in the country.

Two firms submitted bids to develop Rangas-Tanawon geothermal site in Sorsogon (southern part of Luzon) and another firm expressed firm interest to undertake an optimization project of the existing North Cotabato geothermal field in Mindanao.

The second petroleum bidding round will offer several prospective areas in offshore West Palawan, Sulu Sea and other selected areas, which are considered to be the best prospects for petroleum exploration in the Philippines.

Perez noted that petroleum exploration is considered a risky but potentially rewarding business. "It takes at least $10 million to drill one deepwater well and several times more than that amount to develop an oilfield for production," he said.

The upstream component of the $4.5-billion Malampaya gas-to-power project was developed in offshore northwest Palawan at a cost of at least $2 billion.