New EO eases rules on oil contracts

MANILA, Philippines — President Duterte has issued Executive Order 80 that would rationalize the rules for the government’s dealing with third party participants under petroleum service contracts in a bid to allow more groups to explore possible fuel deposits in the country.

Observers believe the move will allow the Philippines to team up with Chinese state-owned China National Offshore Oil Corp.

EO 80 repeals EO 556 issued by former president Gloria Macapagal-Arroyo in 2006.

Duterte invoked Sec. 2, Article XII of the Constitution, which declares that all minerals, petroleum and other mineral oils, and other natural resources are owned by the state, and that the exploration, development, and utilization of these resources shall be under the full control and supervision of the state.

 “It is the aim of the government to achieve energy independence for the Filipino people by, among others, enhancing the country’s competitiveness as an oil and gas investment destination through the adoption of industry practices,” the EO said.

The Philippine National Oil Co. Exploration Corp., being the upstream oil and gas subsidiary of the PNOC, participates in a number of petroleum service contracts, either as operator or non-operating partner.

 Duterte has given permission to the PNOC to “enter into farm-in/farm-out agreements through which third parties can participate in the service contracts awarded by the government to PNOC EC, and PNOC EC can participate in the service contracts awarded by the government to third parties.”

In all cases, Duterte said PNOC EC shall enter into farm-in/farm-out agreements only with reputable, technically competent and financially capable entities.

“The third party selection process to be undertaken by PNOC EC shall conform to best practices widely adopted in the international petroleum industry, as maybe determined by the Department of Energy,” the EO said.

Duterte also directs the DOE to issue the rules and regulations that will specify the selection process to be observed by the PNOC EC –  in consultation with the Governance for Government-Owned or Controlled Corporation.

The DOE and the GCG will closely monitor the compliance with the selection process.  

 PNOC EC was also directed to “observe sound business judgment and exercise extraordinary diligence, with paramount consideration to the national interest in entering into the commercial contracts and arrangements.”