SC rule dampens interest in RP’s oil drilling sector

A trimmed-down list of only four companies participated in the bidding for the first Philippine Petroleum Contracting Round (PCR-1) due to concerns over the Supreme Court (SC)’s decision on Mining Act, a ranking energy official said.

"There were only four firms that participated in the actual bidding for PCR-1. Many of those that have signified interest to join the bidding round suddently had cold feet because of the decision of the High Tribunal," Energy Undersecretary Eduardo Mañalac said.

But Mañalac said they are optimistic in meeting the scheduled release of the results of the bidding before the end of this month. Based on the schedule, the Department of Energy will announce the winning bidders for the PCR-1 by end-May.

"Before the end of this month, we will know what companies got the petroleum blocks," he said.

The negative impact on the PCR-1 came despite the DOE’s persistent pronouncement that the recent decision of the Supreme Court declaring as unconstitutional and void the provisions of the Philippine Mining Act of 1995 (R.A. 7942) will not affect the PCR-I which the DOE administers.

"After review and evaluation of existing petroleum service contracts and the model contract for future projects including potential Philippine Contracting Rounds-1 (PCR-1) awards, the DOE would like to affirm that petroleum service contracts issued in pursuance of the Oil Exploration and Development Act of 1972 remain valid," Energy Secretary Vincent S. Perez said.

Perez said the oil drilling contracts substantially address the Supreme Court’s concerns, considering that these contracts contain provisions which amply protect and safeguard the interest and welfare of the nation and the Filipino people.

During the close of the PCR-1 round last March, the DOE announced that it had convinced about 16 companies to join the bidding.

The DOE opened in August last year the bidding for 46 new exploration blocks located near the Malampaya gas field in offshore Palawan and other oil and gas discoveries and producing fields in Southwest and East Palawan, Sulu Sea and Reed Bank.

After PCR-1, the DOE also plans to hold the first Geothermal Bid Round at the onset of the second quarter of 2004 to promote the development of geothermal power development in the country.

The DOE launched the PCR-1, a new bidding scheme that gives superior contractual and fiscal incentives, in August 2003.

Under the fiscal terms for PCR-1, a contractor can recover the exploration and development costs from 70 percent of gross proceeds and get a maximum of 40-percent net proceeds while the government share is equivalent to 60 percent. Likewise, the contractor shall be exempted from paying the national taxes except income tax, which shall be paid out of the government share.