Malampaya tax removal to cost gov’t P12.2B/yr

The government can lose as much as P12.2 billion yearly if it heeds the proposal of power distributor Manila Electric Co. (Meralco) to remove the royalty tax on the Malampaya natural gas project.

Net government revenues from the Malampaya project amounted to P12.2 billion in 2007, up from P8.5 bilion in 2006, latest data from the Department of Energy (DOE)  showed.

As of end-February 2008, net government revenues stood at P1.3 billion.

The Malampaya consortium, which operates the 2,700 mw deep water-to-gas project, consists of Shell Philippines Exploration B.V. (Spex) and Chevron Texaco, each holding a 45-percent stake in the project. Philippine National Oil Co.-Exploration Corp., the government’s exploration arm, holds a 10-percent stake.

Meralco, which has been blamed for high power rates, cited the royalty tax on the Malampaya project as one of the reasons for the high cost of power in the country.

Lopez-owned First Gas Corp., which operates the Sta. Rita and San Lorenzo natural gas plants in Batangas, utilizes the natural gas produced by the Malampaya project.

It earlier said that if royalties to the government would be taken out, its generation costs would drop by at least P1.79 per kilowatt hour.

This, First Gen said, would result in a lowering of the costs to consumers by P1 per kilowatthour in the franchise area of Meralco.

The DOF, however, said that there are other ways to lower the cost of power in the country such as improving the efficiency of electric firms such as Meralco.

Furthermore, the DOF said the revenues from the Malampaya project have already been taken into account by the government for its fiscal program.

The agency noted that from 2004 to 2006, the government share from the Malampaya project amounted to P15.466 million.

This, the DOF said, was used to pay the shortfall obligation of Napocor to the proponents of the Malampaya project under their take-or-pay agreement with the Finance department, Napocor and the Energy department.

Furthermore, the DOF said that the collection of royalty or government share from natural gas and geothermal projects is provided for in the Constitution.

“A natural resource such as gas is exhaustible and as such, has user cost associated with its extraction. Thus, it is only logical that the State be justly compensated for the use of this very valuable resource,” the DOF has said.

The DOF, for its part, said that exploration activities are expensive, making the costs.