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By Euan Paulo C. Ańonuevo, Reporter
A POLITICAL witch hunt for graft-tainted deals
involving China in the wake of the botched National Broadband
Network contract risks complicating the Philippines’ quest for oil
self-reliance.
President Arroyo’s critics have trained their
sights on the Joint Marine Seismic Undertaking (JMSU), an agreement
forged among the Philippines, China and Vietnam in 2005 to transform
the contested Spratly Islands into an area of cooperation and
development.
Parties to the agreement, which will end this
year, are state-run firms Philippine National Oil Co. (PNOC), China
National Offshore Oil Corp. (CNOOC), and Petro Vietnam. The accord,
which involves data gathering in the contested area, entails no
exploration, drilling and production activities.
Vincent Perez, who as Mrs. Arroyo’s then
energy secretary, oversaw negotiations for the accord, said the
justice department among other agencies went over the tripartite
agreement before the Philippines signed it.
The President’s critics however claim the deal
compromises national sovereignty.
The JSMU forms part of the Philippines’
five-point energy independence agenda to find and develop new
indigenous petroleum reserves in response to a surge in oil prices
in 2004, according to Perez, whom the President recently tapped to
advise the government on energy matters.
JSMU has become a potential flashpoint
To be sure, the JSMU, also designed as a
compromise to avert hostilities in contested territory, in turn has
become a potential flashpoint with a private-investor group.
Since May last year, UK-listed Forum Energy Plc.
has sought approval of its application to upgrade its oil
exploration contract into a full service contract, to no avail. The
company is one of a growing number of foreign groups that have
participated in the Philippine Energy Contracting Round (PECR), a
mechanism whereby the government bids out areas with potential fuel
reserves for exploration and possible drilling and production.
Forum Energy’s Geophysical Survey and
Exploration Contract (GSEC) No. 101 covers the Sampaguita oil and
gas block in the Reed Bank basin, a potentially world-class gas
discovery off the Palawan coast. The company’s contract with the
government includes a pre-negotiated option to convert it into a
full-production area.
Conversion requires Malacańang approval as the
law stipulates that foreign investments in the upstream oil and gas
industry have to seek the government’s imprimatur. The Arroyo
administration however has yet to decide on Forum Energy’s
application, as CNOOC petitioned the inclusion of the area covered
by GSEC 101 in the tripartite deal.
“We are still waiting for Department of Energy
approval under Philippine petroleum laws,” Jose Raymund L. Apostol,
Forum Energy Philippines Corp. president, said.
As it is, Forum Energy’s venture is only one of many that have yet
to move forward given delays in the government’s energy
independence program. After the JSMU was signed, the government
stopped issuing service contracts even to parties that already won
bids at successive contracting rounds.
Delays undermining oil, gas prospects
Industry sources said that delays in the
awarding of petroleum service contracts are seriously undermining
the prospects of the country’s upstream oil and gas industry.
In the first PECR in 2005, the energy department
signed petroleum service contracts for oil and gas exploration in
offshore Sulu Sea with Australia ‘s BHP Billiton Petroleum Pty
Ltd., Amerada Hess Ltd., Unocal Sulu Ltd. and Sandakan Oil II.
In the second contracting round held in the same
year, the government signed service contracts with Nido, Philippine
National Oil Co.-Exploration Corp., Burgundy Global Exploration
Corp., Ranhill Berhad and Phil-Mal Petroenergy Corp. in shallow to
deep waters within onshore Palawan and the Sulu Sea basins.
The third contracting round held in 2006 saw
nine petroleum areas offered, but no one among the participating
companies was awarded a contract.
A fourth contracting round scheduled for late
December last year was delayed after the energy department asked for
more time to “study” the proposals and bids.
When The Manila Times asked him about the status
of the most recent contracting round, Energy Secretary Angelo T.
Reyes said, “the government has recently received a number of
proposals for exploration and development projects in the local
upstream industry,” but provided no detail.
In a subsequent statement, the energy department
said it has endorsed seven proposals for various offshore and
onshore projects in the country culled from the 2006 contracting
round. Total investments from these companies’ proposals is
expected to run to about $75 million, which includes costs for
various comprehensive geological and geophysical work required
before drilling takes place, as well as the cost of drilling and the
setting up of exploration wells.
The prospective oil and gas exploration projects and their
proponents include Miocene Mining and Energy Corp. for the Cagayan
Block (Area 1), Polyard Petroleum International Co. Ltd. for the
Central Luzon Basin (Area 2), Pitkin Petroleum Ltd. for the
Mindoro-Cuyo Basin Block 2 (Area 4), Burgundy for East Palawan
Blocks 1 and 2 (Areas 5 and 6), Norasian Energy Ltd. for the Visayan
Basin (Area 8), and Helios Petroleum and Gas Corp. for the
Agusan-Davao Basin (Area 9).
Contracts important at soonest possible time
Eduardo F. Hernandez, Petroleum Association of
the Philippines president, raised concerns over the “slow pace of
processing and approval of exploration contract applications and
farm in agreements” especially for foreign companies.
“Now that the price of crude is at an
all-time-high and there is a serious interest from both local and
foreign players, it is important for the government to enter into
[service contracts] at the soonest possible time,” he said during
the recent Philippine Energy Summit.
The industry official urged setting a timetable
for contract awards, allowing the Executive Secretary to approve
foreign investments, and declaring petroleum a strategic commodity
to expedite permits, among others.
So what’s at stake? In less than four years,
the number of participants in the country’s oil and gas
exploration sector grew by about three-folds with the entry of 30
new companies.
Among the companies scouring the Philippines for
oil and gas are Chevron Corp., the Shell Group, Vitol Group and
ExxonMobil Corp., Petronas, Japan Petroleum Exploration Corp.,
Kuwait Petroleum Corp., and CNOOC.
Estimates point to approximately 18,600 square
kilometers of two-dimensional seismic data was acquired last year
from just 11,300 square kilometers in 2006. On top of that are 4,097
square kilometers of three-dimensional seismic data from just 640
square km in the previous year.
One potential source ready to pump oil by this
year is the Galoc Oil Field. Located in offshore Northwest Palawan,
the field was discovered in 1981 but was deemed commercially
unviable because of the low price of crude back then.
Now operated by the Galoc Production Co., the
field is expected to churn out oil by the first- quarter of the year
and to double the country’s 23,000 barrels of oil per day of
production, which is equivalent to only about 7 percent of
Philippine demand.
Other discovered oil resources being actively
considered for development include Calauit under Service Contract
No. 50, Nido 1X1 straddling the area covered by Service Contract
Nos. 14 and 54, Octon under Service Contract No. 6A, and West
Linapacan under Service Contract No. 14C.
Dave Whitby, Nido Petroleum Ltd. managing
director, called this a “renaissance” in the country’s
upstream industry brought about by a Supreme Court ruling in 2004
that allowed full foreign ownership in the mining sector.
“Government support is vital for us because
the issue of land tenure had stymied the entry of foreign investors
and questioned the constitutionality of service contracts,” he
said.
In the past two decades less than 20 wells were
drilled in the country. In contrast, wells drilled in Indonesia
numbered over 1,000, in Malaysia about 900, and in Vietnam around
150.
Industry sources said the increasing acreage
being surveyed by local and foreign companies would help spur
drilling activities and in turn the possibility of finding black
gold in the Philippines. With worldwide drilling odds put at 16 to
1, the country would have to surpass its measly output of less than
20 wells to make this possibility a reality.
The government is banking on the entry of more
investors to spur petroleum exploration and development activities
as the country imports almost all of its oil requirements for
transport fuel and part of its power needs, thus making it
susceptible to skyrocketing crude prices.
The controversy over the JSMU therefore further
complicates an already difficult situation. The timing of the uproar
is also way off the mark, as oil-importing countries all over the
world have accelerated their respective search for alternative
sources of fuel in the face of skyrocketing prices of crude.
Industry sources said dragging the JSMU into a
protracted campaign to unseat Mrs. Arroyo would do little to improve
the country’s chances of overcoming this recent bout of record oil
prices.
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