Malampaya consortium secures P146.8-B award in arbitration case

By Myrna M. Velasco – April 29, 2019, 10:00 PM
from Manila Bulletin

The members of the Service Contract (SC) 38 consortium in the multi-billion Malampaya deep-water gas to power project secured “partial award” of P146.8 billion in the income tax arbitration case that was decided recently by the International Chamber of Commerce (ICC) in Singapore.

The Malampaya gas field uses an innovative and sustainable deepwater technology for recovering natural gas from the deepwater reservoir in northwest Palawan. (Image from shell.com.ph | Manila Bulletin)

The Malampaya gas field uses an innovative and sustainable deepwater technology for recovering natural gas from the deepwater reservoir in northwest Palawan. (Image from shell.com.ph | Manila Bulletin)

The ICC, however, “is reviewing the fourth notice of charge amounting to P9.6 billion,” according to a source privy to the matter – and that amount was based on the demand served by the Commission of Audit (COA) to the Malampaya consortium for year 2017.

Hence, the source added, the victory scored by the Malampaya consortium in the arbitration proceedings is still considered “partial award” pending the resolution of the fourth notice of charge.

The consortium’s legal triumph initially covered three notices of charge: The first one covered the 2001 to 2010 demanded by the State auditor which was more than P53 billion (roughly US$1.1 billion) that also became the basis of the filing of the arbitration case at the ICC.

The second and third notices of charge, it was culled, amounted to: P77 billion and this was served to the Malampaya consortium in 2015; then additional claim of P16 billion in 2016.

With all the four notices of charge set out to the Malampaya consortium, the total amount being claimed by COA that the SC 38 contractor would supposedly pay stood at P156.6 billion.

The source further explained that the case pertains to the amounts claimed by COA as “under-collection in the royalty share of the government in the Malampaya gas field venture,” arising from the differing interpretation as to the treatment of the income tax payment that shall be levied on the project contractor.

The State auditor argued that the income tax payment of the SC consortium led by Shell Philippines Exploration B.V. should not have been lumped into the government share; but the Malampaya project contractor insisted that the Philippine government must honor what was prescribed under the contract.

In a statement to the media, SPEX indicated “the Malampaya can confirm that the ICC arbitration tribunal has issued its decision, which we are currently reviewing with our legal counsels.”

Shell added “at this stage, we cannot provide details due to the confidentiality of the proceedings,” nevertheless, it emphasized that the Malampaya joint venture “will be engaging the Department of Energy (DOE) in due course.”

The resolution of the Malampaya case on tax treatment policy is one less headache for the government as it opens the country’s doors anew for investment-enticements on petroleum oil and gas exploration and developments.

The targeted submission for what the DOE packaged as pre-determined areas (PDAs) under the Philippine Conventional Energy Contracting Program (PCECP) will be in May this year, hence, the timing of the ICC ruling stands as a highly favorable development

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