THERE is no stopping now the Philippine National Oil Co.-Exploration Corp. (PNOC-EC) from pushing through with its pending farm-in deal with China National Offshore Oil Corp. (CNOOC) for the Chinese firm’s entry into Service Contract (SC) 57 in Calamian northwest Palawan.
This after President Duterte signed Executive Order 80 on May 28. The new EO will finally allow PNOC-EC to enter into farm-in/farm-out agreements through which third parties can participate in the SC awarded by the government to PNOC-EC.
“In all cases, PNOC-EC shall enter into farm-in/farm-out agreements with reputable, technically competent and financially capable entities,” read the newly signed EO, a copy of which was released to reporters on Thursday.
Upon the recommendation of the Department of Energy (DOE), the new EO also repealed EO 556 (Series of 2006), which prohibited the farm-in farm-out of contracts awarded by any government agency, including the contract for exploration, development, production of crude oil from the Camago-Malampaya Reservoir. The government shifted to a stringent bidding procedure in forging partnerships with interested parties.
Under the farm-in/farm-out policy, third-party participation is allowed to spread the risks inherent in oil and gas exploration, development and production. The entity acquiring the participating interest considers the transaction as a “farm-in,” while the entity transferring such interest considers the transaction as a “farm-out.”
For the selection process of PNOC-EC to conform to the best practices, the DOE, in consultation with Governance Commission for government-owned or -controlled corporations (GCG), will issue rules and regulations specifying the selection process to be observed by the PNOC-EC, according to the new EO.
Every farm-in/farm-out agreement with PNOC-EC shall only be in effect upon the approval of the DOE.
The DOE shall also submit regular reports to the President on the implementation of EO 80, and copy furnished the GCG.
On September 15, 2005, the DOE awarded SC 57 to PNOC-EC to conduct petroleum exploration and development in Calamian. PNOC-EC has already entered into a farm-in agreement with CNOOC and Jadestone Energy Inc., a deal which was already submitted to Malacañang, when EO 556 was issued in 2006.
CNOOC was reported to hold more than half of the shares at 51 percent, followed by PNOC-EC at 28 percent, then Jadestone at 21 percent, according to the farm-in agreement.
Prior to the visit of Chinese President Xi Jinping in November 2017, Energy Secretary Alfonso G. Cusi said in a Palace briefing that SC 57 is already up for the President’s signature and that PNOC-EC can only continue the agreement or accept the CNOOC proposal until the issuance of the new EO amending EO 556.
It was also reported last year that the government needed to act on another pending farm-in deal, this time with Spanish energy giant Repsol SA in SC 59, or the West Balabac petroleum block in southwest Palawan.
Last November, the Philippines and China signed an agreement on cooperation on oil and gas development in the West Philippine Sea, along with at least 28 other accords, after denials that an oil-exploration deal is in the works in time for the Chinese president’s visit.
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