Senate urges DOE to account for Malampaya royalties

The Department of Energy (DOE) is being asked by Senate to come up with an appropriate accounting of the royalties being paid by the Malampaya consortium, informed sources said.

During a budget hearing last Oct. 3, it was learned that Sen. Franklin Drilon, Senate committee on finance chairman, asked the DOE why of the P600-million royalties paid by the Shell Philippines Exploration B.V. (SPEX)-led consortium, only P300 million has been accounted for and liquidated.

It was gathered that the Malampaya royalties form part of a special DOE account, which now amounts to P4 billion.

The DOE, it was learned, could draw from this account with prior approval from the Department of Budget and Management (DBM).

Since the bonafide recipients of the Malampaya royalties are still being determined, these royalty fees are being deposited in this account.

It would be recalled that the Palawan government has a pending claim on the Malampaya royalties.

But up to now, there is still no ruling whether Malampaya is under the jurisdiction of Palawan to enable it to benefit from the said royalty fees.

The sources said that Drilon is apparently concerned that the fund may be used for "wrong purposes" as election time is in the offing.

According to sources, Sen. Eduardo Angara, has a proposal on how to handle the Malampaya royalties which will be patterned on the current practice in Norway.

"Angara is proposing for a Norwegian way to manage the Palawan claim. Since Norway has a finite oil reservoir, they created a trust fund that they could tap once the oil reserves run dry," the sources said.

Sources said Angara wants to be assured that these royalties will be used for the welfare of the people.

The low end of the targeted total royalties to be accrued by the National Government from the Malampaya project is $9 billion while the high-end could reach up to $13 billion over the period of 20 years.

The cost recovery program agreed by the project proponent and the government allows SPEX-led consortium to recover 70 percent of the cost incurred in the project.

After the project proponents recouped their costs, the government and the consortium will divide the remaining 30-percent revenues generated from the project. About 60 percent of 30-percent balance will go the consortium and the remaining 40 percent to the National Government.

Once fully recovered, the formula would shift. The whole 60 percent goes to the government and 40 percent would go to the consortium.

The royalties to be paid by the consortium developing the Malampaya project is benchmarked on the prices of international crude.

The earnings from the $4.5-billion Malampaya project, known to be the single-biggest investment in the country so far, could also help the National Government narrow down its budget deficit.