DOE warns Colossal Petroleum Corp. over drilling failure

MANILA, Philippines — The Department of Energy (DOE) is mulling disqualifying local company Colossal Petroleum Corp. if it fails to pursue exploration and development in oil and gas service contracts it qualified in the agency’s previous bidding process.

Two areas offered under the Fifth Philippine Energy Contracting Round (PECR 5) are still pending awarding because of lingering concerns in the oil and gas sectors which include the Commission on Audit’s (COA) tax issue, Energy Secretary Alfonso Cusi said on the sidelines of a forum.

He was referring to the concerns of the sudden change in policy following the COA decision in 2009 which slapped a P53.14-billion tax deficiency from the Malampaya project operated by Shell Philippines Exploration B.V. (SPEX), Chevron Malampaya LLC and the Philippine National Oil Co. Exploration Corp. (PNOC-EC).

Colosssal Petroleum submitted bids for the two areas, namely 576,000-hectare Area 5 in East Palawan and the 468,000-hectare Area 7 in Recto Bank.

“The DOE is talking to them and if they will not pursue the exploration of the areas, we have no choice but to terminate. We cannot leave it hanging,” Cusi said.

Colossal, unlike Israel-based Ratio Petroleum Ltd. which also qualified for a petroleum service contract (PSC), is lukewarm to exploring the two areas because of the pending COA case, the energy chief said.

“Ratio said they would  abide by the Supreme Court ruling,” Cusi said.

Ratio Petroleum submitted bids under PECR 5 and qualified for Area 4, a 416,000-hectare area in East Palawan and was recently awarded after President Duterte and Cusi signed the PSC last week.

A PSC has a seven-year exploration period, which can be extended up to 10 years.

With the signed PSC, Ratio Petroleum will now be able to explore Area 4 for potential oil and gas resources with a projected minimum total expenditure of $34.35 million to be derived from studies, data gathering and drilling activities.

As for Colossal, the DOE will be giving the local company an ultimatum to decide whether it will proceed to explore the areas, Energy Undersecretary Donato Marcos said.

PECR 5 offered 11 PSCs but only three areas garnered qualified bids.

These areas will be re-offered under the Philippine Conventional Energy Contracting Program (PCECP), the revamped PECR process that will be launched in November.

The DOE is busy promoting investments in the 14 pre-determined areas (PDAs) for potential petroleum exploration and development activities locally and abroad.

The PDAs include one area in the Cagayan Basin, three in Eastern Palawan, three in Sulu, two in Agusan-Davao, one in Cotabato, and four in Western Luzon.