DOE to launch energy contracting round in June

MANILA, Philippines - The Department of Energy (DOE) will launch another Philippine Energy Contracting Round (PECR) in June, a top energy official said.

Energy Undersecretary Jay Layug said the launch of the PECR will also be in line with the filing of the Exploration Bill.

“We have finalized the draft exploration bill which we will submit to Congress in the next two weeks. We will also do our PECR sometime in June. We will do a roadshow of areas available for bids in May,” he said.

He said the DOE would also file an appeal with the Commission on Audit (COA) to resolve the issue on exploration.

“We already filed our memorandum of appeal with COA. We are hoping for a favorable decision,” he said.

Layug said the proposed law aims to rationalize provisions under the Oil and Gas Exploration Act of 1972 or Presidential Decree 87, which was legislated during the Marcos administration.

According to Layug, there is a need to revise the existing law on exploration as this has not been attuned with the times.

“PD 87 is an antiquated law. It should be better, at all, in the sense that it will be a win-win situation for both the investors and government,” he said.

The DOE official said they are now trying to figure out the best model to use on revenue and/or production sharing, which could “enhance” current policies without impairing existing service contracts.

“We hope to submit it by next month,” Layug said.

Energy Secretary Jose Rene Almendras earlier announced the suspension of bidding for petroleum contracts until the DOE is able to address the COA’s concerns on taxes.

The DOE earlier lined up 12 to 15 oil and gas sites for auction this month in its bid to jumpstart the stalled bidding for petroleum contracts.

Recently, COA’s concerns on government’s revenue sharing agreement with petroleum contractors have stalled the bidding for upstream oil and gas projects.

COA, in particular, questioned why the Malampaya consortium led by Shell Philippines Exploration B.V. was allowed to deduct their corporate income tax, which amounted to roughly P53 billion from 2003 to 2009, from government’s 60-percent share in the gas field’s revenues.

PD 87 allows service contractors to deduct all operating and capital expense of up to 70 percent of their gross income. The remaining 30 percent is divided between the contractor (40 percent) and the government (60 percent). Once the oil firms recover their cost, the revenue sharing is shifted in favor of the government.