Oil exploration companies in the Philippines expressed concern over a ruling of the Supreme Court nullifying a contract signed between the government and a Japanese company.
The Philippine Petroleum Association of the Upstream Industry (Oil and Gas) Inc. aired its position against the court decision that effectively stopped the exploration, development and exploitation of petroleum resources within Tañon Strait between the islands of Negros and Cebu.
The PAP sent a letter to Energy Secretary Zenaida Monsada last month after the court favorably acted on the petition of the Resident Marine Mammals of the Protected Seascape Tañon Strait.
PAP chairman Rufino Bomasang and PAP president Sebastian Quiniones Jr. warned the government on the implications of the ruling on oil and gas exploration in the Philippines.
“The PAP is gravely concerned of the potential implications of the Resident Marine case. It signifies that all service contracts entered into by the government of the Republic of the Philippines with foreign-owned corporations involving either technical or financial assistance for large –scale exploration, development and utilization of petroleum, but signed only by the Secretary of the Department of Energy, not by the President, are null and void for being unconstitutional,” the group said.
PAP, composed of foreign and local oil and gas players, said the execution of a service contract with foreign-owned corporations was a contractual undertaking by the state and “is not one of those exceptional circumstances that requires the personal action of the President.”
It said the ruling would unduly burden the President to engage in the nuances of the specialized field, which should be left to a specialized body like the department.
PAP said the contractor who relied on good faith on the representation of the government that the signature of the Energy Secretary was sufficient “should not be prejudiced.”
The group said the service contracts signed by the energy secretary were rendering services and spent millions on their respective projects and the government also benefited from.
“Therefore, such service contracts, which are executed in good faith with foreign corporations and are already being implemented, should not be nullified without being given the chance to be rectified,” PAP said.
Sources said among the service contracts that could be affected by the ruling were service contract 38, or the Malampaya gas project, in northwest Palawan and oil producing service contract 14C, or the Galoc oil field, also in northwest Palawan.
The SC through Associate Justice Teresita Leonardo de-Castro ruled last year the government was allowed to sign a service contract under the 1987 Constitution. But the court said SC No. 46 signed on December 21, 2004 by the Energy Department and Japan Petroleum Exploration Co. Ltd. over a 2,850 kilometer area in offshore Tañon Strait failed to comply with the safeguards of the Constitution.
An item in the Constitution requires that service contracts should be authorized by a general law signed by the President and reported to Congress.
“The Court noted that while there was a general law on exploration… SC-46 was entered into in 2004 only between the Department of Energy and Japex and was signed only by the then-Secretary of Energy and not by the President,” the court said.
It said since Tañon Strait was a National Integrated Protected Areas System or NIPAS area, its exploration and utilization could only be allowed through a law passed by Congress.