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SO it’s
“Filipino First” that’s the controlling policy, not
“full public bidding.”
After
nullifying—with the excuse that it wanted a “full public
bidding”—a de facto agreement with a foreign firm to
develop the Camago-Malampaya Oil Leg (CMOL), which would
have helped the country source oil from the existing
natural gas and oil reservoir in Palawan back in 2006
and earned it millions of dollars in oil-import savings,
the government is now set to simply award the same deal
to a local company that had invoked the Constitution’s
“Filipino First” policy.
Along
with several service contracts it will award today
(Wednesday), the Department of Energy (DOE) will also
seal an agreement binding Burgundy Global Exploration
Corp. (BGEC) and Philippine National Oil Co.-Exploration
Corp. (PNOC-EC) to develop the CMOL, raising eyebrows
among knowledgeable sources in the government and the
petroleum industry.
The
awarding of the contract confounds them because in
August 2006, PNOC-EC had tapped the Malaysian-based
Mitra Energy Ltd. to develop the CMOL in a bid to
generate more domestic petroleum sources and thus cut
the country’s oil-import bill. President Arroyo,
however, suddenly issued EO 556 directing then-PNOC-EC
head Edgardo Mañalac to quash the agreement with Mitra
Energy on the eve of signing, because she wanted full
public bidding on all petroleum development deals.
Sources
of BusinessMirror had said then that it was not the
“full bidding” demand that was behind EO 556, but a
complaint by BGEC, which said it should have been picked
as partner by PNOC-EC because of the “Filipino First”
policy. But EO 556, which amended EO 473, made no
mention of “Filipino First,” only stressing the need for
full public bidding for all petroleum service deals.
Mañalac
had explained in vain to Malacañang that under
international petroleum industry practice, a call for
proposals and subsequent negotiations on technical
aspects could be resorted to—in lieu of full public
bidding— in order to get the most competent contractor.
The reason for this: extracting oil from the area is a
technically difficult operation where errors could be
dangerous and cost billions in damage to the already
existing and lucrative natural gas site run by a foreign
consortium in partnership with the Philippine
government.
With EO
556 firmly in place, however, Mañalac eventually
resigned, and the CMOL project was shelved, even as
experts warned a new round of talks, after a full public
bidding, would delay the operation by at least eight
months, with all the economic losses to boot. Initially,
they estimated at least $200 million in oil import
savings had the job pushed through then.
Today,
two years after, apparently without the full public
bidding invoked to edge out Mitra Energy, the DOE said
Energy Secretary Angelo Reyes will award the
participation agreement to BGEC and PNOC-EC to jointly
develop the CMOL.
A DOE
official, speaking on condition of anonymity, said the
same proposals gathered in Mañalac’s time were reviewed
and the terms of reference were negotiated.
For
every year of delay in harvesting the oil from the CMOL,
PNOC had estimated a diminution of 7 million to 8
million barrels of oil a year in ultimate recovery.
Developing the CMOL involved the drilling and extraction
of about 25-40 million barrels in estimated oil reserves
underneath the Malampaya natural gas resource.
“With
the delay and first oil production to come in past
middle or third quarter of 2008, we’re looking at around
4-million barrels of oil that will be ultimately lost
amounting to $200 million in government savings, based
on the PNOC’s estimates,” Mañalac had said then.
Meanwhile, a source told BusinessMirror that it would be
contradictory to the President’s directive in EO 556 to
simply award the CMOL’s development to another firm (BGEC).
“Should
the DOE go ahead and give its nod to PNOC to engage in
talks with Burgundy, that would definitely be contrary
to President Arroyo’s directive under Executive Order
556 that the exploration, development and production of
crude oil from the Camago-Malampaya Oil leg (CMOL)
should be done through a public bidding,” the industry
source told BusinessMirror in a phone interview.
The
source argued that oil and gas exploration contracts do
not necessarily follow the Filipino First policy, as the
oil and gas resource is still owned by the Philippine
government on behalf of the Philippines.
“If that
[Filipino First policy as controlling policy] is the
case, [then] local oil and gas exploration companies
should have been given first crack on oil and gas blocks
such as the Malampaya gas-to-power project, among
others,” the source said in a phone interview.
In
another development, the DOE will also award a
geothermal service contract to Aragorn Power and Energy
Corp. (APEC) and Guidance Management Corp. (GMC); and
sign contracts with Blade Petroleum Philippines Ltd. (BPPL)
and Venture Oil.
DOE said
the companies will explore and develop contract areas
offered during the Philippine Energy Contracting Round (PECR).
Secretary Reyes said the PECR is being conducted to
fast-track the development of the country’s indigenous
energy resources.
“The
benefits are clear. As we increase our ability to source
energy supply locally, we reduce dependence on imports
and ensure our energy security. Through the PECR, we are
encouraging the private sector to participate in the
government’s energy independence program,” Reyes added.
The
geothermal service contract, located in the province of
Kalinga, has the potential to produce 60 MW. APEC and
GMC will conduct exploration activities in the
26,250-hectare contract area with a total budget of $3.7
million in the first five years.
Reyes
said he will also sign the extension of the petroleum
service contract of BPPL and Venture Oil in the Cadlao
Block of SC 6.
To date,
according to the DOE, there are 33 active petroleum
service contracts in the country. |
