Low oil prices likely to dampen PH petroleum contracting round

by Myrna Velasco – January 23, 2016 (updated)

from Manila Bulletin

The Department of Energy (DOE) is taking it slow this time on any planned petroleum contracting round given the plummeting prices of oil in the world market.

Energy Undersecretary Donato Marcos had indicated that there is no firm action set by the department this time into launching another bidding round of oil and gas service contracts.

He stressed that even investors “have been taking a wait-and-see stance” on how world oil prices will shape in the coming months or years – and that is where the DOE has also been taking its cue from.

The department’s priority at this point, he said, is on securing the approval of the Department of Finance (DOF) on the pending petroleum contracts that are already overdue for award to the winning bidders.

Energy Secretary Zenaida Y. Monsada has previously told reporters that they will be securing the go-signal of the finance department for the contracts before they can recommend to Malacanang the award of new petroleum contracts.

“We have been encountering problems. What we did, we channeled it through the DOF so they can look at all the conditions,” she said.

Monsada has explained further that there is a provision in the contract that DOF endorsement on the award shall be secured.

She qualified that “Malacanang will be signing the (petroleum) contracts…but DOF approval is needed.”

The energy chief noted that at least four contracts will be awarded – based on the outcome of the 5th Philippine Energy Contracting Round.

Given the bureaucratic layers of approvals required for the contract award, the target of the energy department has already been slipping.

The lengthy process of securing approvals is not the only dilemma of government when it comes to upstream petroleum contracting round, but also the protracted diplomatic tussle that the Philippines is engaged in versus China.

The DOE was originally targeting swarm of bidders on PECR-5, but the auction result was less-than-desired because of concerns raised by prospective investors.

The tax regime in the upstream petroleum sector has also been igniting fresh round of issues given the interpretations set forth by the Commission on Audit (COA) on the income tax payments of the Malampaya field contractors.