DOE: Ruling on Malampaya, COA to entice investors to explore PHL oil resources

By BusinessMirror - April 30, 2019

https://businessmirror.com.ph/2019/04/30/doe-ruling-on-malampaya-coa-to-entice-investors-to-explore-phl-oil-resources/

THE favorable arbitration ruling on the $1.1-billion tax case between the Malampaya consortium and the Commission on Audit (COA) would entice investors to pursue exploration activities in the country.

“The Department of Energy welcomes this latest development in the International Chamber of Commerce [ICC] arbitration case. We have always upheld the position that the tax regime for petroleum service contracts is legal and valid. This victory would go a long way in giving exploration and development activities in the country a much needed and long overdue boost as investors will now have renewed confidence in our upstream gas industry,” Energy Secretary Alfonso G. Cusi said in a text message on Monday.

The DOE has been urging investors to “explore, explore, explore” to help the country build its power supply.  He said last year, the country was grossly trailing behind its neighbors in terms of petroleum exploration and development activities.

“It is high time we step up. We need to attain energy security and sustainability to minimize our vulnerability to global oil price shocks,” Cusi said during the launch of a new round of energy-contracting exploration program.

The ICC decided in favor of the Malampaya consortium, with a unanimous vote of 3-0. The ICC is a global organization that provides services to resolve disputes in international business, with headquarters in Paris, France. Service Contract 38, which governs the Malampaya project, provides for dispute resolution under the arbitration rules of the ICC.

The Senate Committee on Energy, the proponent of the Drill Drill Drill program, said there is no longer a legal impediment for investors to undertake oil and natural gas exploration now that the arbitration court in Singapore has finally resolved the tax case between Shell Philippines Exploration BV (SPEX) and the government.

“The multi-billion tax case has been a big specter that discouraged foreign players from conducting petroleum explorations in the Philippines over the past several years and drove away investments in high risk, capital-intensive, and technology-intensive sectors. With the case now behind us, it is high time for the government to aggressively pursue a ‘Drill, Drill, Drill’ program, so that we can tap these oil and gas resources and use them to achieve Philippine energy independence and pave the way for the country to become an energy exporting powerhouse,” Sen. Sherwin Gatchalian said.

The Petroleum Association of the Philippines (PAP) also said the ruling will revive the oil and gas exploration industry.

“I hope the government will react positively. This, of course, will be of great help to the exploration industry,” PAP chairman Rufino Bomasang said.

Shell Philippines Exploration B.V. (SPEX), which leads the Malampaya consortium, and the DOE, will meet soon.

“The Malampaya joint venture can confirm that the ICC arbitration tribunal has issued its decision, which we are currently reviewing with our legal counsels. At this stage, we cannot provide details due to the confidentiality of the proceedings, but the joint venture will be engaging the Department of Energy in due course,” Spex said.

Other members of the consortium are Chevron Malampaya LLC, with a 45-percent stake and state-owned PNOC Exploration Corp. with the remaining 10 percent.

The case stemmed from a COA ruling that overruled the petition of the Malampaya consortium that income tax was already imputed in the government’s 60-percent share in the Malampaya royalties. The tax, it argued, was deductible from the government’s share of the Malampaya earnings.

The COA, in its April 6, 2015 decision, upheld its findings that the income taxes of the service contractors could not be assumed by the national government in its 60 percent share in the Malampaya proceeds and thus ordered the consortium to pay the national government P53,140,304,739.86 in taxes.

It stressed that is no provision in the law stating that the income tax of the contractors forms part of the share of the government.

On a per year basis, COA said the under collection amounted to P2,409,817,191.46 in 2003; P2,335,402,961.38 in 2004; P2,832,586,038.93 in 2005; P7,901,265,361.42 in 2006; P11,272,523,434.55 in 2007; P15,826,563,356.86 in 2008; and P10,562,146,395.26 in 2009.

In September 2015, SPEX filed an arbitration case against the National Government with the Singapore International Arbitration Center. In July 2016, SPEX filed another arbitration case in the International Centre for the Settlement of Investment Disputes Arbitration (ICSID) in Washington against the National Government regarding its tax dispute.

AC Energy to start Vietnam wind projects in 2020

April 30, 2019 | 12:08 am  By Victor V. Saulon, Sub-Editor

https://www.bworldonline.com/ac-energy-to-start-vietnam-wind-projects-in-2020/

AC Energy, Inc. expects to break ground early next year on several wind projects in Vietnam with its three existing partners in the regional neighbor in time for the feed-in tariff deadline in November 2021, its top official said.

“It could be as big as 250-300 megawatts (MW), it could be as small as 30 MW. That’s a big range,” Eric T. Francia, president and chief executive officer of Ayala Corp.’s energy company, told reporters in an informal gathering in Vietnam during the weekend to celebrate the completion of a solar project.

“We have over 250-MW, expandable to 350 MW with AMI,” he said, referring to Vietnamese partner AMI Renewables Energy Joint Stock Co.

In 2017, AC Energy formed a platform company with AMI Renewables to build renewable energy plants in Vietnam, including a 352-MW wind project in Vietnam’s Quang Binh province.

“We could also potentially do solar in there, so puwede kaming mag-hybrid (we could go hybrid), but we haven’t really finalized that yet,” Mr. Francia said.

The platform company became AC Energy’s second in Vietnam after it partnered with BIM Group of Vietnam to develop 330 MW of solar power in the country.

In November last year, AC Energy announced its international unit had invested in Singapore-based renewable energy company The Blue Circle Pte. Ltd. through a 25% ownership acquisition as well as co-investment rights in the latter’s projects.

AC Energy and The Blue Circle are to jointly develop, construct, own and operate the latter’s pipeline of around 1,500 MW of wind projects across Southeast Asia, including about 700 MW in Vietnam. Its partner developed and constructed one of the first wind farms in Vietnam.

The company announced back then that the partnership plans to develop around 100 to 200 MW of wind energy projects out of The Blue Circle’s project pipeline in Vietnam.

“We really focused on solar because of the tighter deadline, it’s June 2019. Now we did 410 MW between BIM and AMI — 330 [MW] with BIM [and] 80 [MW] with AMI,” Mr. Francia said, referring to the solar projects AC Energy completed with its Vietnamese partners with a feed-in tariff rate of 9.35 US cents.

“We don’t own all of that 410 [MW],” he said, adding that about half of that capacity is attributable to AC Energy.

“Now the focus shifts to wind because the deadline now is 2021. It takes about a year, a year-and-a-half to build a wind farm, so we have until early 2020 to start construction. Between now and early 2020, basically in the next 12 months, we really need to get the projects to shovel-ready stage,” he said.

Mr. Francia had said that he was seeing a potential 1,000 MW of wind projects attributable to AC Energy in Vietnam. He earlier said that the company was in talks with BIM to partner with the latter’s 300-MW wind project.

He declined to identify which of the wind projects would be completed first.

“We don’t know yet which of the 1,000 MW we’re gonna do. That’s just the potential based on the pipeline that we see. It really depends on getting the permits, getting the financing,” he said. “We have two years.”

Mr. Francia said the feed-in tariff used to be 7.80 US cents for wind, but was adjusted a few months ago to 8.50 US cents to encourage more investments. He said the “meaningful adjustment” in the tariff, which guarantees a fixed electricity rate and a regular revenue stream, made wind projects viable in Vietnam.

“Definitely, we’re very bullish with Vietnam. That’s gonna be one of our major international markets,” he said.

‘Brownouts will hound PHL in next few years’

By Lenie Lectura- April 30, 2019

https://businessmirror.com.ph/2019/04/30/brownouts-will-hound-phl-in-next-few-years/

THE chairman of the country’s largest power-distribution firm warned on Monday that the country would continue to experience power shortage in the next few years unless more capacity is added to the grid.

“The continuing yellow and red alerts being experienced today may eventually lead to serious power- supply shortage in the next few years, unless immediate action is done to resolve the root cause of the problem, by adding more generating capacity and taking decisive action on the much-delayed construction of new power plants,” said Meralco Chairman Manuel Pangilinan.

Meralco’s seven power-supply agreements entered into with various power supplies have yet to be approved by the Energy Regulatory Commission. The approval of the PSAs is crucial because the project proponents could not start construction until the ERC gives its green light.

Atimonan One Energy Inc.’s first 2x 600-megawatt (MW) power plant, which was already certified as an Energy Project of National Significance, awaits ERC approval. It was filed on April 29, 2016.

Meralco PowerGen (MGen) Corp., the power-generation arm of Meralco, noted that if this power project had been approved on time, then at least 600 MW would have been added to the grid this year.

“We have already reached in April the peak demand level that was recorded in May last year. At least 626MW is needed and this is just about the estimate that the DOE keeps on saying. So, the DOE is right in saying that we need new capacity of 600MW every year as demand keeps rising,” noted MGen President Rogelio Singson.

Pangilinan said that while the private sector continues to heed the government’s call in putting up capital-intensive power projects, industry players could not stress enough the support they need from the regulators.

“I could say I was vindicated but it does not change the situation. So, we just address the current situation…I am afraid I’d get criticized for saying this: This is going to be with us for next two to three years,” said Pangilinan.

He urged the government to “get their approval processes done as quickly as they can” so that consumers won’t suffer from power outages and high electricity costs.

“I don’t understand, that’s the money of the private sector…. Let the people who have the means and reasons for building power plants, be it coal or gas, to build the capacity. I really don’t know what they are looking for. Sigurado, mangyayari na naman ito [For sure, this will happen again] next year,” warned Pangilinan.

Pangilinan was referring to the rotational brownouts that hit Luzon this month.

Eighth red alert

For the eighth time this month, the Luzon grid was placed on red alert on Monday. A red alert notice is raised when there is severe power deficiency and zero contingency reserve. When the red alert is issued, power interruptions are expected to happen.

“We are still on red alert today. In fact it’s already the eighth day of manual load dropping that Meralco has been doing since April 10. One of the reasons for the deficiency is there are still three plants in Bataan that are still isolated from the grid,” said Meralco Head of Networks Ronnie Aperocho.

The GN power unit 2 and the two units of the San Miguel plants in Limay are still offline, following the 6.1-magnitude earthquake that hit Luzon last week. These three plants have a combined capacity of 660MW.

“Our forecast is even if these three plants would be able to go back to the grid because of the increasing power demand during the summer months, especially next month, we still see several days of yellow and red alert and will even, in fact, extend until the month of June,” said Aperocho.

The recent spate of yellow and red alerts signal an increase in spot market prices. In fact, the market operator said that the secondary price cap was triggered twice in the April supply month, which implied that there were sustained high prices in the market.

“While we are anticipating lower coal and natural gas prices from IPPs and PSAs, these maybe more than offset by the higher spot prices, which we will see as a higher generation charge this May,” said Meralco Head of Utility Economics Lawrence Fernandez.

The ERC, for its part, has been saying that the only time it can act on the pending PSAs is when the Supreme Court has decided on the case.

“The problem is nasa [with] SC. Wala kami magagawa [There’s nothing we can do]. Hope the SC will be compelled to act on it,” said Pangilinan.