Gov’t to defer award of petroleum contract under ‘conflict area’
The government, through the Department of Energy (DoE), is all set to award two service contracts to investors with winning offers under Philippine Energy Contracting Round-5 (PECR-5), but it will defer one contract award in petroleum block straddling a so-called ‘conflict area’.
Service Areas 4 and 5 are in East Palawan Basin and had cornered winning offers from Israeli firm Ratio Oil Exploration and Colossal Petroleum, respectively. These blocks are of 416,000 hectares for Area 4 and 576,000 hectares for Area 5.
Nevertheless, the third service contract under Area 7 for 468,000-hectare area is on Recto Bank, one of those enforced with moratorium when it comes to upstream exploration and development activities. The winning bid was also tendered by Colossal Petroleum
Energy Secretary Alfonso G. Cusi apprised media that of the three contracts, two are clearly inside the Philippine territory, so we’re already pushing for the signing (of their contracts),” but he qualified “one is covered by the Nine-Dash Line.”
He stressed that particular service contract “would not be awarded yet, until such time that the DFA (Department of Foreign Affairs) settles the issue with our friend China.”
The Nine-Dash Line sets demarcation of the Chinese government’s territorial claims over the South China Sea or the West Philippine Sea.
When diplomatic strife escalated over the territorial dispute, the Philippine government’s foreign affairs department had to impose interim prohibition on petroleum developments and drilling at domains being held as ‘contentious’.
Cusi assured though that “we’re gaining headway already for its lifting (moratorium), but we are working with the DFA to ensure that our action will not ignite adversarial reactions.”
For the propounded Philippine Energy Contracting Program (PCEP), set off as replacement to the PECR scheme of petroleum blocks’ auction, the energy chief noted that they will also forthrightly state in the terms that certain areas have yet to be “resolved” on the diplomatic sphere of things.
On the tax regime question, Cusi stressed that the 60-40 royalty sharing arrangement – with income tax of the contractor included in the government’s share, shall remain as a policy for the sector.