DOE eyes ‘window of opportunity’ scheme in oil search program

The Department of Energy (DOE) will push for the so-called "window of opportunity program" this year to further attract foreign and local investors in petroleum exploration and development.

Government documents show that the three-year program, which will run from June 2000 to June 2003, will use the Malampaya gas project as its showcase.

Valued at $4.5 billion, the Malampaya Deepwater Gas-to-Power project represents the largest and most significant foreign investment in the Philippines. The Malampaya project is expected to supply natural gas and a clean fuel that will provide 2,700 megawatts (MW) for a period of 20 years starting 2002. The project took off in May 1998 after the signing of the agreements for the supply and sale of the Malampaya natural gas to three combined cycle power plants.

The said project completed drilling of the five gas development wells in November 2000 and completed laying of the 504-km-long-24-inch pipeline in November 2000.

The window of opportunity program of DOE will also focus on areas near the Malampaya infrastructure and path of the future trans-ASEAN gas pipeline.

Aside from the Malampaya deepwater project, the DOE cited the Malampaya Oil Rim Development as one of its major ongoing projects under the program. The said project started drilling the Malampaya-10 oil well in December 2000 and will conduct an extended well test in July 2001 for 150 days with an expected production of two to 3.4 million barrels of oil.

In the middle of last year, the DOE opened this window which gives new incentives in the upstream oil industry (both exploration and development) for existing petroleum service contract holders and new applicants.

New incentives in the upstream oil industry (exploration and development) are now available to both existing petroleum service contract holders and new applicants, according to the DOE.

Under DOE circular 2000-05-009 entitled "Establishment of a corridor of focus as part of the Window of Opportunity for Philippine Petroleum Exploration". The program is designed to encourage local and foreign exploration companies to explore and develop indigenous power sources like oil and gas.

DOE launched the program amidst the continuing upward movement of crude oil in the international market, magnifying the need to speed up the exploration and development of new oil fields as well as the other forms of energy sources.

Meanwhile, the energy department said there are already a number of favorable incentives under Presidential Decree (PD) 87 and 1857. Among these are: the carry-forward cross-cost recovery which allow an exploration company to charge costs of drilling wells that turned out "dry" on the wells that had positive results.

This is an incentive unique to the Philippines and it allows exploration companies which are mostly foreign owned to easily recover their costs. The global ratio for success in the exploration sector is one productive well for every 33 wells drilled.

Exploration companies are also allowed a cost recovery of more than 77.5 percent from the gross earnings with the rest of the earnings being divided between the national, local, municipal and barangay government units. Other incentives offered by the government are: 10-years exploration period and another 40-years for development and production; repatriation of investments and profits; a 40 percent net service fee for contractor; exemptions from income tax obligations for a certain period; and, exemptions from taxes and duties on capital equipment directly related to exploration and development activities. – Donnabelle Gatdula