Published
By Myrna M. Velasco
Investments in the
country’s upstream oil and gas sector had been on a rapid declining pace in
recent years due to confluence of factors – in fact plummeting to the level of
US$74.2 million this 2018 from a hefty US$831.248 million five years ago,
according to data from the Department of Energy (DOE).
Prior to the
enforcement of drilling moratorium at conflict areas at the West Philippine Sea
in 2013, Philippine data would show that it has been fetching significant
annual investments of more than US$400 million to US$800 million in oil and gas
exploration ventures.
For the 2013 capital
flow though, it can be factored in that major component of that had been the
fraction of the second round of US$1.0-billion investment that the Malampaya
consortium had coughed up to shore up its rate of gas production.
In 2014, the scale of
investments in the sector had dropped to US$629.617 million; then even lower at
US$609.515 million in 2015.
The succeeding years
had shown the worsening downturn in petroleum exploration investments, with it
precipitously sliding to US$324.743 million in 2016; and even lower at
US$291.983 million last year.
Capital flow in the
sector practically stalled in the last five years – since aside from the
diplomatic strife that smothered exploration and drilling in known
resource-rich petroleum blocks, the government also needed to contend with
controversies relating to the Malampaya tax case.
On top of that, the DOE
wasn’t able to get its hands on remedial fixes on policies that had dampened
investments in the upstream oil and gas sector – such as the Executive Order
(EO) scrapping farm-in and farm-out deals for service contracts held by
state-run subsidiary Philippine National Oil Company-Exploration Corporation.
Further, there’s a
decision of the Supreme Court on a Japanese firm’s service contract which had
set jurisprudence that it is only the President of the Philippines that can
underwrite petroleum service contracts that the country will be entering into
with contractor-investors – and that practically added laborious layers of
bureaucratic processes in the sector.
The DOE acknowledged
that “petroleum exploration is a high risk but high reward investment,” with it
qualifying that “if the company fails to discover and develop any petroleum
field, all expenses incurred for its operation cannot be recovered.”
Despite the huge
amounts being sunk into the sector, the department indicated that the State
still rakes in massive revenue collections – especially in the petroleum blocks
that were able to reach commercial development phases.
“Aside from the big
investments from the upstream sector – mostly from foreign companies, the tax
collected from this sector is also a big contributor to the country’s revenue
collections,” the energy department has stipulated.
In its next quest for
commercial-scale oil and gas discoveries bannered by its offer of 14 petroleum
blocks under the Philippine Conventional Energy Contracting Program, the DOE
has been promising investors of policy fixes that could whet their appetite to
shell out fresh cash in the sector.
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