DOE chief lauds investor-friendly ruling on Malampaya

MANILA, Philippines — The Supreme Court’s recent ruling clarifying the scope of the government’s share in the Malampaya natural gas project is expected to attract more investments in the country’s upstream sector.

This was what Energy Secretary Sharon Garin said after the High Tribunal ruled that the income taxes of the project’s contractors are already included in the government’s 60-percent profit share.

“We’re happy that the issue has been resolved … because it gives stability and security to the exploration of our investors. So it will encourage more,” Garin said in an interview over the weekend.

In a 19-page decision, the SC ruled in favor of Shell Exploration B.V., PNOC Exploration Corp. and Chevron Malampaya LLC in their years-long legal battle with the Commission on Audit (COA) over alleged unpaid income taxes.

The High Court reversed the previous decisions by COA, which had argued that the private contractors were liable for failing to remit P53.14 billion in income taxes to the government from 2002 to 2009.

While the contractors remain liable for income taxes, the SC clarified that the government pays it on their behalf as part of its share in the Malampaya project.

With the SC’s landmark decision, charges against the contractors were lifted.

“I’m happy that they already know because before they didn’t know what it was. I think that will bring more investors to the Philippines for exploration,” Garin said.

Based on court records, the government signed a service contract with the three companies in 1990 for the Malampaya project in offshore Palawan.

Under the contract, the contractors must remit 60 percent of the project’s net proceeds to the government.

The Malampaya deep water gas-to-power project is the country’s first and only indigenous gas resource, supplying about 20 percent of Luzon’s electricity needs.