Monsada says DOF review, Palace OK delay award of petro service contracts and RE deals

by Lenie Lectura – January 11, 2016

from Business Mirror

Delays in the award of new petroleum service contracts and renewable energy (RE) deals still prevail even with the appointment of a new energy secretary.

“We have been encountering problems,” Energy Secretary Zenaida Monsada said.

In 2014 the agency launched Philippine Energy Contracting Round (PECR) 5 with 11 petroleum areas offered. The Department of Energy (DOE) has received four proposals, three of which have been qualified for evaluation.

PECR is a transparent mechanism that allows the government to develop and utilize indigenous petroleum resources under a service contract regime through partnerships with qualified local and international exploration companies.

These contracts have yet to be awarded. One of the reasons cited was that Monsada had no authority to sign those deals as she was just then the agency’s officer in charge. Now that she had been appointed as energy secretary, the award could still not yet take place.

When asked why, Monsada said the deals have to be endorsed by the Department of Finance (DOF) prior to the signing of the contacts. “We coursed it through the DOF for further review. The DOF has to endorse the contracts then forward these to Malacañang for signing also,” she said.

Under the PECR 5, 11 petroleum blocks, with a total of more than 4.7 million hectares (ha) located in West Luzon, Southeast Luzon, West Masbate/Iloilo, East Palawan and Recto Bank, were offered for exploration and development.

The areas for petroleum exploration include Area 1 in Southeast Luzon; 2 and 3 in Masbate-Iloilo; 4 and 5 in Northeast Palawan; 6 in Southeast Palawan; seven in West Palawan; 8 to 11 in West Luzon.

Two of the blocks are located close to the Spratly Islands, of which a portion are claimed by the Philippine government, which are areas under territorial dispute with China.

Ratio Oil Exploration Ltd. of Israel submitted an offer for Area 4, which covers 416,000 ha in waters of east Palawan.

Colossal Petroleum Corp., an affiliate of listed Coal Asia Holdings Inc., submitted bids for Area 5, a 576,000 ha block in waters east of Palawan, and Area 7, a 468,000 ha block within the disputed Reed Bank.

There were no offers received by the DOE for other areas.

According to the DOE, a petroleum service contract has a seven-year exploration period, which could be extended to up to 10 years. If exploration activities are successful, the parties could enter into a 25-year production period.

Currently, there are 29 active petroleum service contracts in the Philippines with Shell Philippines Exploration, Total E&P, Otto Energy, PNOC-EC, Nido Petroleum, Philodrill, Pitkin Petroleum and Galoc Production Company to name a few of DOE operator-partners.

Meantime, the DOE also auctioned off 21 renewable energy contracts under the second open and competitive selection process (OCSP).

The DOE offered four geothermal sites with an aggregate capacity of up to 134 megawatts (MW) and 17 hydropower sites with a capacity of up to 733.4MW.

The agency received in May last year eight offers for two geothermal concession areas that were auctioned off, and 31 offers for 14 hydropower prospects. The awarding was originally set in September 2014.

These geothermal projects are located in Balut Island, Davao Occidental, Amacan in Compostella Valley, Cabalian in Southern Leyte, and Acupan in Benguet.

For hydropower, six are located in Luzon, eight in Visayas, and three in Mindanao.

The DOE said winning bidders will have two years for pre-development for less than 50MW and five years for at least 50MW. The contacts also cover a 25-year development stage.