"We cannot proceed with the negotiations until we find a legal compromise for the oil to be taken out. There are already three interested parties willing to drill, and there are two more. They are willing to take it out but there seems to be a provision that prevents interested parties to come in. That is what we are working on now before any talks with the interested parties begin," said Department of Energy (DOE) undersecretary Peter Abaya.
The DOE hopes to work out a compromise agreement with the Malampaya consortium which currently holds Service Contract 38 allowing it to explore oil and gas deposits in northern Palawan.
The consortium members include major stakeholders Shell Philippines BV, which holds 45-percent stake in the project, Chevron Texaco with 45 percent and the PNOC- Exploration Corp. with 10 percent.
The Malampaya oil rim is a 56-meter thick oil zone below the 600-meter thick gas cap currently being operated by the Malampaya consortium.
The oil rim, which is seen to generate at least $2 billion in revenues, was initially discovered with the drilling of well Malampaya-1 in 1991 but was considered at the onset as a separate development from the much larger natural gas reserves comprising the bulk of the Malampaya petroleum resources.
The consortium last month announced it was dropping the project because it is not commercially viable, prompting PNOC-EC to woo other investors that have the financial muscle and technical capability to undertake the project.
"While that task is being carried out we cannot move on because the consortium refuses to take out the oil. We need to find someone that will do the work. The consortium needs to be reminded that the oil resource is owned by the Philippine government and not consortium-owned. The consortium is a service contractor and is that why they have a service contract, which does not transfer ownership. Thus, the Republic of the Philippines owns that oil and it is the national interest to take that out," said Abaya.
One of the crucial talking points between the government and the Malampaya consortium is the issue of indemnity clause. Under the existing contract, any party that wants to assume the development of the oil rim is required to pay the consortium P1 billion in indemnity.
"The indemnity clause is something that is very disturbing, and is something we believe that the lawyers of the DOE and the consortium can review and hopefully amend. If there is talk of an indemnity clause then it should be reviewed. If there’s none then let’s proceed. If there’s no indemnity clause then I don’t see any reason why we can’t proceed. But the guarantee there is that DOE is working to get out that oil with or without the existence of that indemnity clause," explained Abaya.
Previously, PNOC president Eduardo Mañalac said the government is studying several options to encourage other investors to take over the project.