PCCI to seek opening wide oil search to foreigners

10/13/2008

Calling the Philippines “virgin territory” in the search for oil, the influential Philippine Chamber of Commerce and Industry (PCCI) is set to pass a resolution asking the government to open oil exploration wider to foreign investments.

The tip was given to Philexport News and Features only a day after Nido Petroleum Ltd. of Australia revealed it struck oil in shallow waters off Palawan after drilling only one well.

The suggested resolution is supposed to be signed by the biggest business organization in the country towards the end of the 2008 Philippine Business Conference slated on Oct. 20 to 22.

The PCCI committee on energy released a seven-point draft resolution which the chamber’s leaders are yet to approve. On top of the demands is the immediate repeal of executive order 556 which bans the Philippine National Oil Co. from entering into joint ventures with foreign companies in oil exploration and development.

Joint ventures through farm in and farm out agreements is standard practice in oil exploration worldwide.

Dr. Benjamin Austria, head of the committee on energy further said “ring-fencing” policy on oil search must also be lifted. Ring fencing excludes losses from dry wells drilled by one company from getting recouped when the same company hits oil in another place.

“This discourages investors from drilling more wells in a high risk and very costly business,” he explained. He said less than 700 exploration wells for oil were drilled in the Philippines in the past 100 years.

Clearances to start drilling must also be made fast.

The six other reforms in the energy sector that the Austria committee suggested include:

• The government to compel Psalm to accelerate the 100 percent privatization of NPC and the appointment of IPP administrator within the next 6 months.

• The Executive branch of government, together with Congress, to act aggressively to substantially reduce the prevailing power rate by continuously reviewing and finding the merit in reducing taxes and royalties on fuel used for power generation and reducing and or putting a cap on the VAT applied to fuel and related cost items under distribution, transmission and generation.

• The government thru the Joint Congressional Power Commission, to review closely the unbundled rate of Transco, most specifically those related to ancillary services and others.

• The government thru the NEA and Congress, to mandate reforms in the electric cooperative sub-sector in the country by accelerating their incorporation in order to make them more financially feasible and accessible thereby arresting the plight of provincial local industries specially the SMEs.

• The government and the JCPC to strongly advocate for the urgent review of the policy, approved by the ERC, which, in its present substance, is an indirect scheme of collecting advances from the consumers for the planned and promised upgrading and improvement of the operation and management of the distribution utilities by way of tariff increase instead of them first investing on the programmed upgrading and improvements before claiming for tariff increase.

• The national government, through the Department of Energy, to ensure sufficient and stable energy supply in Palawan, Visayas, and Mindanao by developing Palawan as an independent power grid, providing incentives for energy investments in the Visayas, and reviewing closely the merit of interconnecting the various islands vs. leaving some as fully independent with appropriate incentives.

Philexport News and Features

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