Vol. XXI, No. 169 [ Business World Online ]
Monday, March 31, 2008 | MANILA, PHILIPPINES
PALAWAN, host of the country’s largest oil and gas find, soon stands to get P2.6 billion in royalties from Malampaya revenues, notwithstanding a court case on local and national government shares.
Two years after forging an interim agreement with the national government, Palawan Governor Mario Joel T. Reyes said the Budget department has started issuing special allotment release orders (SARO) equivalent to about 20% of Malampaya royalties last year. The 2.6 billion is being released in two tranches, with the second tranche of SAROs to be handed by June at the latest, he told reporters last week.
President Gloria M. Arroyo affirmed the agreement via Executive Order (EO) 386, and paved the way for a "pork barrel" arrangement by which officials are allowed to identify projects per district.
"Without prejudice to the pending case in the Supreme Court, both parties have agreed to split the 40%," said Mr. Reyes. "This is a win-win situation for the meantime while the case is dragging."
Palawan, arguing it "houses" the offshore gas and oil field, wants 40% of the government’s revenues from the Malampaya project in a case now pending at the Supreme Court.
But the national government, represented by the Energy department, maintains the natural gas field’s site is beyond the 15-kilometer municipal line.
The Malampaya service contract (SC) earns for the government about $500 million-$600 million annually, representing nearly two-thirds of revenues from the gas field’s operations. The SC, which covers 2002-2022, is operated by Shell Philippines Exploration BV.
Mr. Reyes said the interim agreement and the EO signify the national government’s commitment to the province. In fact, he added, the government plans to use its own share of the disputed 40% to boost the province’s Annual Investment Plan, geared towards firming up the tourism business and specifically focused on airport and road projects.
The Palawan government will divide the money as: P900 million for the provincial government, P816 million for the first congressional district, about P600 million for the second district, and P270 million for the capital Puerto Princesa City.
With the SARO on hand, the Palawan government may already commence bidding processes for any of its projects.
Mr. Reyes added that the provincial government plans to securitize revenues claimed from past and future operations. It aims to convert the Malampaya revenues into collateral which will be used to back up state borrowings via the sale of bonds or debt papers.
The securitization scheme met stiff opposition from the World Bank, the International Monetary Fund and the Asian Development Bank when first announced in 2001. The multilateral lending agencies said it may violate the government’s loan agreements with the two institutions, and perhaps "adversely affect" the government’s capacity to repay loans from these funds.
Energy Secretary Angelo T. Reyes reserved his comment when asked about the proposal recently.
Some P12 billion, the past royalty share that Palawan claims, is currently held in escrow.
"Palawan’s resources are being used, so why shouldn’t we have a share from [revenues]?" asked Mr. Reyes, who also plans to develop the province as a center for alternative fuels.
It is already home to traditional petroleum exploration and production, with a number of oil and gas fields.
The Philippine National Oil Co., via subsidiaries Exploration Corp. and Alternative Fuels Corp., is represented in various projects in the area. — Maria Kristina C. Conti
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