The Department of Energy on Monday hailed as a victory for the oil and gas industry the ruling of the arbitration court in Singapore that finally resolved the $1.1-billion tax dispute filed by Shell Philippines Exploration B.V.
“We have always upheld the position that the tax regime for petroleum service contracts is legal and valid. This victory would go a long way in giving exploration and development activities in the country a much-needed and long overdue boost as investors will now have renewed confidence in our upstream gas industry,” said Energy Secretary Alfonso Cusi.
The Malampaya consortium reportedly received a favorable ruling from the ICC on Spex’s tax dispute with the government filed in 2015 over the Malampaya gas field. Spex is the operator of the Malampaya gas project in northwest Palawan with a 45-percent stake.
The Commission on Audit earlier ruled that the payment of income tax in the Malampaya project by the service contractors should not be included in the government’s 60 percent share of royalties and ordered the payment of over P50 billion from the consortium.
As a result, Spex filed arbitration cases against the government at the International Center for Settlement of Investment Disputes or ICSID of the World Bank and the Singapore arbitration tribunal.
Other members of the Malampaya consortium are Chevron Malampaya LLC, with a 45-percent stake and state-owned PNOC Exploration Corp., holding 10 percent.
The Philippines has lagged behind its Asian neighbors in terms of petroleum exploration and development activities.
The Philippines drilled an average of five wells in a 10-year period compared to double and triple the average of other Southeast Asian countries.
Cusi earlier urged the CoA to honor the sanctity of contracts of the Malampaya gas project in northwest Palawan due to its impact on the foreign investor sentiment.