Last week, oil prices were teetering around the $60/barrel mark, (well, more at $56/barrel really), but after the much-awaited public admission of sorts and the apology, it is now closer to a dangerous level of $61/barrel, up 65 percent from last year!
All price increases are one of the biggest factors, if not the biggest, that drive inflation to dizzying heights. Expect all the local oil companies to raise their pump prices post haste, and expect related businesses to follow suit. Aside from the obvious increases in public transport, other airlines are expected to pass on these increases to their passengers, after Philippine Air Lines started tacking on fuel surcharges to their regular fares, depending on the destination. I understand that it currently charges as much as $22 as fuel surcharge on its US, Australian and Canadian trips. With this latest surge in oil prices, I guess we can expect to pay more for our foreign sojourns. Better buy your airline tickets now for your planned Christmas trip to the US.
While the local business sector lauds the President’s meal of humble pie and display of public remorse on national TV, the general business conditions still stand on shaky grounds, the wait-and-see attitude that cast a similar pall before the turn-over of power in the last days of Erap now upon us again. Coffee shop pundits, though grateful for the steady sovereign ratings of the Philippines through all these, and the hopeful pronouncements of foreign investor services that have not downgraded our ratings are still holding their breath with new and more explosive developments coming our way daily.
What does it take to settle the issue once and for all? With the house in splinters (boy, we have enough to make a matchbox factory!) is it the time to exact your pound of flesh? The stock market is still reeling, with more losers than gainers again, though I heard PLDT is doing better than expected at the New York Stock Exchange where it is currently traded. This seems to be the only positive note in the financial market as we see it as an indication of confidence from foreign investors. They seem, as yet, unperturbed by the local political turmoil. For how long?
Wish I could say the same, though, of other stocks. Most of us see this giant step of reconciliation as the biggest positive development in recent weeks, so we hope this nationally-palpable tension is finally defused.
Even Makati Medical Center, for a long time a symbol of stability and progress, is bleeding profusely so that it had to take a hard look at its current management style. Like ABS-CBN, they are downsizing heavily on their labor forces – three hundred employees now forced to retire from this erstwhile bastion of sound management, with about two hundred more to go? Plus a dire need for blood transfusion to the tune of P300 to P500 million? In ABS-CBN, heard some of my former colleagues who have served the company more than half their lives are also being shown the backdoor via forced retirements.
We have humongous economic headaches to speak of, let’s not aggravate the economic scene with more political muck. Time to move forward to the peso can bounce back, at least to its pre-Garci level of P55.
With all these economic woes, more and more people are looking at Malampaya. So what’s the latest on the Malampaya oil/gas fields?
We’re sitting on a multi-billion dollar bed of promises, a huge bed of precious oil and natural gas, and no one is interested in developing this life-saving mine?
For the uninitiated, Malampaya was discovered in Palawan by Oriental Petroleum, who is in the business of exploration and does not have the resources to develop huge oil fields like this. They eventually sold out to a consortium of service contractors led by Shell and Chevron Texaco who saw the vast potentials of the field. Gas from Malampaya is reportedly good for some 30 to 40 years, and on the basis of this, Shell built a pipeline from Malampaya to Batangas where this natural gas is now being processed.
You and I can just imagine the huge costs involved in extracting this natural gas which is found some three kilometers from water level, in underwater caves, then pipelining them all the way to Batangas, but these big boys have the huge resources to make these all happen. Now, not all fields such as this have both gas and oil to speak of. Malampaya has both, but it is only the natural gas that is being extracted now. The oil fields, reportedly good for some 10 to 15 years, could yield anywhere from 10,000 to 60,000 barrels of oil a day, a figure that Iraq could sneeze at but one that could save the Philippines from starvation. At this rate it is already commercially viable, but apparently the consortium thinks that there are other areas elsewhere in the globe that are more vastly profitable to explore than Malampaya’s oil fields. For now, it is only the natural gas that they are interested in.
For developing Malampaya’s natural gas, the government has given the service contractors enough incentives-they are allowed to earn back their initial investments before they start paying royalty to the government. Fair enough. But why has the consortium chosen to sit on this potentially life-saving field and look elsewhere to develop other more commercially viable fields? Can’t a host-country, especially one as needy as ours, push for a more appreciative and reciprocal stance from service contractors who stand to gain billions from the natural gas alone? With anywhere from 10,000 to 60,000 barrels of oil a day that Malampaya can yield, there is already clear profit. Think of what this can do for the long-term development of our country, but I guess the consortium’s investments evaluation does not have room for social concerns such as giving back to the host-country.
Having their systems and equipment in place, the consortium is in the best position to develop the oil fields – getting a new service contractor to develop the oil fields would be too costly and therefore no longer viable for new service contractors to consider.
We can only look with envy at the bigger boys, those with more commercially viable fields. Little old Philippines can just watch in despair as they get those big oil rigs going and we sit out and let our oil seep out from under us. Yup, all in the name of Profit.
Mabuhay!!! Be proud to be a Filipino.
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