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    Philippines Extends Oil, Gas Bidding Deadline


The deadline has been extended to August 19 from May 21.

by: Myrna M. Velasco

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Natural Gas & LNG News, Asia/Oceania, Security of Supply, Corporate, Exploration & Production, Investments, Political, Ministries, Licensing rounds, Contracts and tenders, Territorial dispute, News By Country, Philippines

Philippines Extends Oil, Gas Bidding Deadline

Philippines’ Department of Energy (DOE) has announced a 90-day extension on the submission of tenders for its offer of 14 predetermined petroleum service areas, according to country’s assistant energy secretary Caron Aicitel E. Lascano.

“We’ve received requests for extension from several companies. The 90-day extension will give them ample time to prepare documentary requirements,” Lascano said. The deadline has been extended to August 19 from May 21.

The energy official said that “the recent partial award has captured the interest of potential investors,”  -- that was in reference to the legal victory recently scored by the consortium-operator of the Malampaya commercial gas field relating to the tax dispute it had with the Philippine Commission on Audit.

The International Chamber of Commerce (ICC) in Singapore favourably decided last month on peso 146.8bn ($2.8bn) partial award to the Malampaya consortium (led by Shell Philippines Exploration) -- following arbitration proceedings that settled the income taxes being pursued by the state auditor against it due to differing interpretation of some provisions of Service Contract 38 (or the petroleum service contract that governed the commercial development of the multi-billion Malampaya gas field project).

Energy secretary Alfonso G. Cusi said that “with the Malampaya issue now resolved, we are hoping that the favorable decision will build up the confidence of the investors.”

As a matter of fact, the model petroleum service contract (PSC) issued by the DOE to prospective investors in the Philippine Conventional Energy Contracting Program (PCECP), re-affirmed the provisions of Presidential Decree (PD) 87 or the Philippine Oil and Gas Law that the “income tax of the service contractor shall be charged from the 60% royalty share of the Philippine government,” which is essentially aligned with the Malampaya tax case ruling.

In recent years, as Cusi has reiterated that “the hesitancy and reluctance of investors and petroleum companies to do exploration activities had been due to the decisions made by the COA in relation to SC 38, in which the COA affirmed its findings and ordered the Malampaya consortium to settle P146.8 billion in taxes that were charged against the government’s share in the said project.”

Interested investors

Lascano disclosed that 17 local and foreign firms have requested for issuance of area clearances for the pre-determined areas being offered by the government. That is on top of more than 10 firms that have been eyeing blocks in the conflict-laden West Philippine Sea basins.

The PDAs or pre-determined blocks straddle reservoirs along East Palawan, Cagayan, West Luzon, Sulu Sea, Cotabato and Agusan-Davao basins. And the Philippine energy chief emphasised “none of them are in areas of conflict, so the South China Sea diplomatic issue will not be a problem for prospective investors in these blocks.”

The service areas on offer are combination of onshore and offshore covering a total of 73,576.66 km2 of both shallow and deep-water exploration drilling prospects.

To date, the DOE is counting on sustained interests as initially expressed by Israeli firms like Ratio Oil and Delek, Spanish Repsol, British Desert Rose Petroleum and a host of Asian and Filipino investors.

For the pre-determined areas, investment-offers will include a data package with a requisite application fee of non-refundable peso 200,000. The application period is for 180 days.

Well-entrenched upstream petroleum players in the Philippines – like French Total and Anglo-Dutch Shell are showing reinforced interest in nominated areas that are within the labeled conflict areas in the West Philippine Sea. For Shell in particular, it is eyeing four blocks proximate to the Malampaya field in Palawan basin.

In these areas for nomination, investor-applicants can submit their preferred petroleum block to the DOE; and the nominating party shall be undertaking the publication of such at its own expense. The application fee is also at peso 200,000, but it will be subject to a 60-day challenge period -- wherein the challenger will be posting a fee of peso 1mn.

For the ‘diplomatically strained areas’, however, the energy officials cautioned that applications or nominated blocks will not be processed until such time that the Philippine government can strike out a deal with the Chinese government on mutually acceptable “joint exploration framework” for the blocks. This is targeted sorted out within this year.