• SC 55, coal for power in Palawan



    I’ve just seen a report that the Service Contract 55 (SC 55) exploration well planned by a consortium including Otto Energy and Trans-Asia and operated by BHP has hit a snag with permits in Palawan. Apparently, the provincial government has required that BHP submit to them a socioeconomic development plan for Palawan, and this has not been done. Without provincial approval, BHP cannot obtain the critical Strategic Environmental Plan (SEP) clearance from the Palawan Council for Sustainable Development (PCSD), which is a requirement to obtain their permit to drill the well in a way that does not damage the environment of Palawan, albeit the well is offshore and some distance from mainland Palawan. On the assumption that BHP have already secured a drilling rig (an expensive and often hard to get hold of piece of equipment), then this inability to obtain an SEP clearance must be causing them quite some inconvenience.

    BHP said that there is no law which specifically requires them to offer such a socioeconomic plan, but whether there is a specific law or not, surely BHP would be expected to contribute somehow to the further development of Palawan. Some “tit for tat” is expected. The lack of this approval has prompted the Department of Energy to threaten to cancel the service contract for the failure of the consortium to fulfill its obligations.

    Contrast this with the progress of local builders DMCI who have expanded from being house builders into mining and power generation, and are planning to develop coal-fired power plants (to use the coal they mine) on mainland Palawan, a plan which is meeting considerable active resistance from the people of Palawan due to the obvious environmental conflicts created by building coal-fired power plants in ecologically pristine environments. An issue you would think that would command the full focus of the PCSD in its role as environmental guardian of Palawan under the Office of the President of the Philippines, and funded in part by overseas development aid from the European Union who are keen that Palawan’s pristine ecological environment should be preserved.

    The plans of DMCI to develop coal-fired power plants despite their environmentally controversial nature, rather than attracting resistance, are in fact being championed by PCSD regardless of strong disapproval not only by international and local environmentalists, but also in the face of strong disapproval by the local government unit (LGU) in which the first of the two plants is to be sited.

    There appears to be an inconsistency here. Offshore exploration for hydrocarbon resources, which the Philippines desperately needs, is held up because of lack of an approval from the provincial government (and LGU), which prevents PCSD considering the case. The construction of environmentally damaging coal-fired power plants has already been provisionally approved and in record time by PCSD, despite rejection by the proposed host LGU.

    PCSD is an arm of the Office of the President of the Philippines. It must be assumed therefore that its actions reflect the requirements of the President, and thus that it will act in a wholly transparent and objective manner—“daang matuwid”

    The question here is how is it that DMCI can obtain positive support from PCSD in the face of strong LGU objections, when BHP cannot get a hearing by PCSD due to the lack of approval of a social development plan by the LGU (in this case the province). Double standards appear again and in a Philippines business environment, unfortunately irregular practice is the first thing that comes to mind.

    It is quite true that life as a commercial business developer, no matter where the development happens to be in the world, becomes more and more difficult as time goes by. Problems with permitting and approvals are the single most toxic inhibitors to industrial development anywhere in the world. They account for 70 percent to 80 percent of cost and time overruns, project abandonments and are powerful disincentives to develop.

    In the Palawan paradox outlined here, it looks as if these worldwide difficulties can be made to vanish as if by magic, and thus industrial development here could be much easier than it is elsewhere—permits and approvals can be readily obtained in the “Philippines way of doing business.” But despite this apparent ease, industrial development, other than the building of toll roads, houses, condominiums and other similar rent seeking activities, doesn’t happen. Why develop a manufacturing facility with only an 8-percent return even after all that effort and the headaches required to operate a business, when you can just sell land at many times its real worth and use the money to build houses and shopping malls at 30-percent return? There will be a rude awakening soon, when so many houses, condominiums and shopping malls are empty, and land and real estate drops to its real Philippine economic value.

    The Philippine way of doing business is out of step with accepted methods in the developed world. This is a main reason why foreign direct investments, or FDI, do not come here. Regardless of the constitutional and negative list blockers, the ethical business methods used, thanks to either cultural moralities or the threat of legal sanctions by developed nations, investors can never ever prevail over the Philippine way of doing business. I have absolutely no doubt that if it were DMCI drilling in SC55, they would by now have reached their target formation.

    Mike can be contacted at mawootton@gmail.com


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