DOE pushes for new petroleum service contracts

MANILA, Philippines — The Department of Energy (DOE) is pushing for the development of new petroleum service contracts in the country while it is working with concerned parties to move forward with oil exploration activities in the West Philippine Sea.

“As you know, we continue to encourage the exploration and development in all areas of the country. And we hope that there will be further movement on this as well, which are not necessarily tied with the negotiations or ongoing talks between China and the Philippines,” Energy Secretary Raphael Lotilla said.

Lotilla said the government’s commitment to preserve and maintain the investment incentives for service contractors under Presidential Decree 87 has been met with renewed confidence and strong interest by local and foreign investors in the oil and gas sector.

The energy chief expressed optimism that such trend would be sustained as the DOE reaffirmed to prospective investors the openness of the economy to foreign and local investors and assured them of the continued stability of  legal framework, especially in the upstream oil and gas sector.

But as far as joint exploration with China on the West Philippine Sea is concerned, Lotilla said the Department of Foreign Affairs (DFA) is taking the lead in the negotiations.

He said any announcement on the matter would come from the President and the DFA.

“But we continue to work with all concerned regarding the prospects of developing the service contracts in the West Philippine Sea,” Lotilla said.

“I can tell you that we’ve had discussions with the ambassador of the People’s Republic of China on different aspects of cooperation in the energy sector, and that’s not only limited to the West Philippine Sea issues,” he said.

Lotilla said a number of companies from China have engaged with the DOE in the past few months and presented their interest in investing in a number of areas, particularly in renewable energy, like offshore wind, solar, and other technologies.

President Marcos and Chinese President Xi Jinping are set to meet in China for a state visit early next month.

Marcos had earlier admitted that joint exploration talks with China for possible join oil exploration in the West Philippine Sea were facing a roadblock.

He also raised the idea of exploring other ways to ensure the immediate development of oil and gas resources in the contested waters in case the possible government-to-government partnership fails to proceed.

At present, petroleum exploration activities in the West Philippine Sea remains on hold pending issuance of government clearances.

Listed upstream oil and gas company PXP Energy Corp. earlier said it would heed the government’s advice on its next steps for its two petroleum exploration service contracts in the West Philippine Sea.

The company, however, indicated its readiness to resume activities in Service Contract (SC) 75 and SC 72 if allowed to do so.

PXP holds 50 percent interest in SC 75 located in Northwest Palawan.

Forum Energy Ltd, in which PXP holds a direct and indirect interest of 79.13 percent, has a 70 percent participating interest in SC 72, also in Northwest Palawan, through its wholly-owned subsidiary Forum.

PXP has a total economic interest of 54.36 percent in SC 72.

A previous force majeure imposed on SC 75 and SC 72 was lifted by the DOE on October 16, 2020, allowing its contractors to resume exploration activities.

PXP and Forum, however, received last April 6 a directive from the DOE to “put on hold all exploration activities for SC 75 and SC 72 until such time that the Security, Justice and Peace Coordinating Cluster (SJPCC) has issued the necessary clearance to proceed.”

The SJPCC agreed that prior approval of the said cluster is required as a condition precedent to any oil exploration activities in the West Philippine Sea.

PXP Energy and Forum suspended all activities in both SCs in compliance with the directive.