Philippines, China set up joint exploration in Palawan field

MANILA, Philippines — Exploration in an oil and gas prospect offshore northwest Palawan between the Philippines and China is now awaiting the signature of President Duterte, Energy Secretary Alfonso Cusi said yesterday.

Service contract (SC) 57 in offshore Calamian northwest of Palawan is a joint venture among state-run PNOC Exploration Corp. (PNOC-EC), Mitra Energy Ltd. (MEL) – now Jadestone Energy Inc. – and China National Offshore Oil Co. (CNOOC), China’s state-owned oil producer.

The Department of Energy (DOE) has endorsed SC 57 to President Duterte for signing to start pursuing exploration in the area, Cusi said after the opening ceremony of the 35th ASEAN Ministers on Energy Meeting (AMEM) yesterday.

“We have already finished the documentation, the contract and we presented it already to the Office of the President. SC 57 is within the Philippine territory,” he said.

Cusi said the project has been pending since 2008 because of tax inclusion and other issues.

SC 57 has been awarded to  PNOC-EC by the DOE on Sept. 15, 2005 to conduct petroleum exploration and development over a 720,000-hectare area in the Calamian area.

The exploration area lies north of the country’s oil fields such as the Malampaya, Nido, Cadlao and Matinloc, and is located within the northwest Palawan block where most of the country’s oil production comes from.

In 2006, PNOC-EC entered into a farm-in agreement with CNOOC and Jadestone. CNOOC holds the biggest share at 51 percent, Jadestone with 21 percent and PNOC-EC with the remaining 28 percent.

This was already submitted for approval to Malacañang but was hampered due to the issuance of Executive Order (EO) 556 later that year. This has also virtually halted efforts to reinvigorate the country’s upstream oil industry.

Sec. 1 of the EO states that there shall be no “farm in” or “farm out” contracts awarded by any government agency, including the Philippine National Oil Co. (PNOC), including the contract for the exploration, development and production of crude oil from the Camago-Malampaya reservoir.

At the same time, Sec. 7 states “any and all negotiations or arrangements entered into by any government agency, including the PNOC which violate this Executive Order, shall be immediately discontinued or cancelled.”

With the EO, the Petroleum Association of the Philippines (PAP) said there is no stability of contracts with the government and agreements can be canceled just by the issuance of EOs.

More recently, PNOC-EC president and CEO Pedro Aquino Jr. said the EO has been a “major stumbling block” of the state-owned firm in the upstream industry.

Other concerns in the upstream industry is the Commission on Audit (COA) ruling in 2015, which upheld its 2009 findings that P53.14 billion in taxes were uncollected from the Malampaya project operated by Shell Philippines Exploration B.V., Chevron Malampaya LLC and the PNOC-EC.

COA said the shortfall should be on top of the 60 percent revenue that should be remitted to government as required.

In the same year, the Supreme Court declared SC 46 between the government and Japan Petroleum Exploration Co. Ltd. (JAPEX) as unconstitutional.

In its ruling, the high court said the oil exploration in Tañon Strait as covered by SC 46 has violated the 1987 Constitution as it should be signed by the President, authorized by a general law or reported to Congress; Republic Act 7586 or the National Integrated Protected Areas System (NIPAS) Act of 1992; and Presidential Decree 1586, which established an environmental impact statement system.