Phl neighbors have better oil search policies - exec

MANILA, Philippines - The government should come up with more attractive contractual policies on petroleum upstream development to put it at par with that of neighboring countries, a top industry official said.

“The need to further improve the Philippine contractual regime has become more imperative because our neighbors in Southeast Asia, particularly Indonesia and Malaysia (both former major oil exporters that have become net oil importers), as well as Vietnam, have already been making their own policies more attractive,” said Rufino Bomasang, chairman of NorAsian Energy Ltd.

A former Energy Undersecretary and president of Philippine National Oil Co. (PNOC), Bomasang now also serves as director of Otto Energy Ltd. and chairman of PhilCarbon Inc.

Bomasang said amid the continuing crisis in the Middle East and the Philippines’ continuing heavy dependence on imported oil, particularly in the transport sector, the quest for indigenous petroleum has once again become a matter of urgent national concern.

He said the proposal to amend Presidential Decree 87 to further improve contractual terms was in fact first proposed by the Petroleum Association of the Philippines (PAP) to the Office of Energy Affairs (OEA) the early 1990s. While the OEA and the DOE have been very supportive of this amendment, Congress and other government agencies have not been supportive and all attempts to amend PD 87 fizzled out.

“The most important proposed amendment to PD 87 is the lifting of ring fencing around service contracts (SCs). This simply means allowing costs incurred within a contract area to be recovered in another contract area,” he said.

The immediate impact of this, he said, is that contractors in producing areas (e.g Malampaya, Galoc) would be enticed to drill more wells, especially in frontier areas.

“For the long-term, even companies without production areas will also be enticed to drill more wells, knowing that their costs can later recovered in future producing areas,” he said.

Apart from the need for policy revisions, there is also a need for administrative reforms. Bomasang said this can be done soonest as it does not require legislative proposal.

He underscored the need for the government to expedite the processing of documents usually submitted by service contractors for approval, especially those that involve other government agencies (e.g. Customs, Immigration, Quarantine).

Among these documents is the Tax Exemption Certificate (TEC). The most common complaint among service contractors, he said, is that it takes an inordinately long time (several weeks and sometimes months) for TECs to be processed.

Similarly, he said service contractors have likewise complained about inordinate delays in the approval of farm-in documents.

He said there is also a need to harmonize often different requirements set by different government agencies regulating the petroleum industry.

“This includes, among others, differences in effluent standards and classification of drill ships and other specialized offshore equipment used by the industry,” he noted.