State-owned PNOC Exploration Corp. urged the government to repeal Executive Order 556 requiring the company to conduct a bidding on oil and gas exploration ventures, saying it has been unable to find partners because of the ruling.
PNOC Exploration president Pedro Aquino said during a recent Senate hearing EO 556 mandated government corporations engaged in the upstream and downstream oil industries to conduct public bidding in farm-in or farm-out agreements.
“This has been our major stumbling block simply because oil exploration is a very expensive business, high risk and it would be absurd for us to ask would-be investors or partners to undergo public hearing,” Aquino said.
He said PNOC Exploration was “finding it difficult to comply” with the EO since the ruling was issued in 2006.
Aquino said the company followed the ruling and bid out service contract 37 in Isabela but there was no investor interest.
“We have about eight service contracts. We want to share the risk because even the big companies like Shell, they resort to farm-out to spread the risk… Nobody wants to undergo public bidding just to participate,” he said.
Aquino said the prospect of finding oil and gas in the Philippines was very low and that investors wanted to take in more partners to spread the risk.
He said the standard procedure prior to the issuance of the EO was simply to talk to the company and have the board and the Energy Department approve the transaction.
The official said like any other contractors, PNOC time-bound to the department under its work program.
“If we don’t comply (with our work program timelines), DoE will cancel our service contract,” Aquino said.
Energy Department spokesman Felix William Fuentebella said the agency was looking into the concerns of PNOC Exploration, such as the proposed lifting of the EO, Governance Commission for Government-Owned and Controlled Corporations and Procurement Reform Act.
PNOC Exploration in 2013 sought exemption from some requirements provided in the National Economic and Development Authority’s revised joint venture guidelines and the lifting of EO 556.
The said government provisions, according to PNOC Exploration, “unduly restricts the company’s ability to undertake its exploration and production projects in timely and effective manner… given the highly capitalized ventures in the exploration business… the detailed feasibility required in exploration and production projects.”
EO 556 prohibited “farm-in” or “farm-out” contracts awarded by any government agency, including the contract for the exploration, development and production of crude oil from the Camago-Malampaya gas reservoir.