Cusi expects investors to join PCECP auction

MANILA, Philippines — Energy Secretary Alfonso Cusi expects renewed confidence from investors to participate in the Philippine Conventional Energy Contracting Program (PCECP) — which has a deadline for submissions this month — following the resolution of the P53.14-billion tax arbitration case between the Philippine government and Shell Philippines Exploration B.V. (SPEX).

Cusi said the International Chamber of Commerce (ICC) came out with a decision aligned to the agency’s thinking that the Malampaya consortium — consisting of SPEX, Chevron Malampaya LLC and the Philippine National Oil Co. Exploration Corp. (PNOC-EC) — has not been remiss in paying government taxes.

“From the very beginning when I assumed office, we already made our position that it includes taxes already. That is also the position of my predecessors,” he said.

The Commission on Audit (COA) tax case against the Malampaya consortium has dampened investor interest in putting in money in the country’s oil and gas industry.

But last week, the ICC decided in favor of the Malampaya consortium, with a unanimous vote of 3-0. Headquartered in Paris, France, the ICC is a global organization that provides services to resolve disputes in international business.

The energy chief said the resolution of the tax arbitration case favoring SPEX, the lead operator of the Malampaya project, would boost the confidence of investors to participate in the country’s search for the next Malampaya under the government’s oil and gas contracting program.

“The investors are there. The decision will build up the confidence of investors that are already there and are similarly situated with Malampaya,” Cusi said.

“Looking forward, those issued with service contracts will already have a peace of mind and all the others that have been invited since November under the PCECP,” he said.

The PCECP, launched in November last year, offers 14 pre-determined areas with a deadline on May 22, and the option for investors to propose their own exploration area, making oil and gas exploration a dynamic investment prospect for players in the energy sector.

Prior the ICC decision, the DOE said foreign firms are keen on investing in the country’s oil and gas industry.

These include Israeli firm Ratio Petroleum Ltd., Delek Group, Rexxon Group and ExxonMobil.

SPEX, the local unit of energy giant Royal Dutch Shell, has also expressed intent to extend the Malampaya project and explore more potential areas around the country’s only gas-producing project.

Service Contract 38, the contract for the Malampaya gas field in northwest Palawan, will expire in 2024, but this can be applied for extension with the DOE.

Cusi said SPEX should re-submit an application for extension, which will be subject to a study by the DOE.

Operating since 2001, the Malampaya gas project supplies fuel to around 40 percent of gas-fired plants in Luzon namely the Ilijan, Sta. Rita plant, San Lorenzo, San Gabriel and Avion plants – which supply 3,211 megawatts to the Luzon grid.

The DOE has been pushing for oil and gas exploration and development in the country and launched the PCECP in November last year as part of an intensified thrust to develop the petroleum exploration industry for global competitiveness.

Presently, there are only 23 active Petroleum Service Contracts in the country, with the Malampaya Deep Water Gas-to-Power Project as the most successful stemming from the previous Philippine Energy Contracting Round.