PNOC has no deal yet with Mitra Energy, says Lotilla

Philippine National Oil Co. (PNOC) has not yet entered into any contract with Malaysia-based Mitra Energy Ltd. (MEL) for the Camago-Malampaya Oil Leg (CMOL), Energy Secretary Raphael P.M. Lotilla said yesterday.

"PNOC had not entered into a contract but had started a process of evaluating the proposal of Mitra. The outcome of the evaluation by the PNOC will still be subject to the Department of Energy’s approval. There is no contract to talk about so there is no contract to be revoked or rescinded," Lotilla told reporters.

Lotilla made the clarification after several foreign firms apparently expressed dismay over Malacañang’s move to issue an executive order which is deemed to affect the investors’ appetite in the oil exploration sector.

The energy chief said EO 556 embodies government policy to promote a competitive and transparent process for selecting joint venture partners of PNOC in the development of its oil and gas service contract areas.

Lotilla likewise noted that the EO is prospective in application and covers the Malampaya oil rim as no contract has been awarded yet by PNOC.

According to Lotilla, Malacañang is preparing a clarification on the non-retroactivity of EO 556 entitled "Amending EO 473 and requiring the exploration, development and production of crude oil from the Camago-Malampaya reservoir to be undertaken through bidding."

"Whether the current process undertaken by PNOC over the Malampaya oil conforms to the requirement of a competitive process is a factual issue that will be determined once PNOC gives a formal report," he said.

At present, service contracts issued by the DOE are mostly "farm in" agreements which are entered into on the basis of the financial and technical capabilities of the exploration firms.

In EO 556 issued recently, President Arroyo apparently revoked MEL’s contract, saying that "there shall be no farm-in or farm-out contracts awarded by  any government agency, including contract for the exploration development, and production of crude oil from Camago-Malampaya reservoir."

With the Malacañang decision, PNOC will have to bid out the oil rim project.

It would be recalled that when PNOC started discussions with MEL, local firm Burgundy Global Exploration Corp. requested the Office of Solicitor General for a ruling and opinion to uphold the mandate of the Constitution regarding the granting of rights to Filipino when it comes to national patrimony.

Burgundy claimed that it has the right to match any offer by a foreign company to be a partner in the CMOL project, citing the "Filipino First" doctrine.

Burgundy is an active player in the local oil and gas industry. The company has committed to invest over P4 billion for exploration activities in Palawan. DOE recently awarded Service Contract 61 and 62 to Burgundy for oil and gas explorations in Northeast and Southeast Palawan.