RACING against time to find newer energy sources when the Malampaya gas field runs out in a decade and amid rising oil prices, the Philippines has finally sealed a $34.35-million oil exploration deal with an Israeli firm to look for petroleum in the East Palawan Basin.
President Duterte signed on Wednesday an initial seven-year Petroleum Service Contract (PSC) for Area 4 (East Palawan Basin) of the Fifth Philippine Energy Contracting Round (PECR 5) with Itay Raphael Tabibzada, president and chief executive officer of Ratio Petroleum Ltd.
This was the first petroleum service contract signed under the Duterte administration, according to Presidential Spokesman and Chief Presidential Legal Counsel Salvador S. Panelo.
“If you remember, the President made statements that our country needs to attain energy security and sustainability at the soonest possible time,” Panelo said. “Our problem is we don’t have oil, so that’s why it’s very difficult for us if we are compared to other countries that have oil. We’ve been dependent on oil-producing countries for oil so we need to boost the exploration and development of our own energy resources.”
Panelo confirmed to the BusinessMirror that the Israeli firm will shoulder the projected minimum total expenditure of $34.35 million for exploring an area of 416,000 hectares across East Palawan Basin for potential oil and gas resources.
The amount will be derived from studies, data gathering and drilling activities.
“So, hopefully, we could look for oil and it will definitely help our country,” he said.
Meanwhile, Energy Secretary Alfonso G. Cusi said in a statement that the awarding of the petroleum service contract to Ratio Petroleum “is a step in the right direction” as the country is currently experiencing how its dependence on importation has left it at the mercy of price movements in the global oil markets.
Cusi said the event bodes well for Philippine-Israel economic relations, as well as the country’s petroleum industry.
According to the Department of Energy, the awarded PSC is a part of PECR5, which was launched in May 2014.
The PECR was established as a transparent and a competitive system of awarding service or operating contracts for prospective petroleum or coal areas within the country.
Established in 1992, Ratio Petroleum has a number of large-scale operations at the Levant Basin in the Eastern Mediterranean Sea, off the coast of Israel, as well as offshore operations in the Republic of Malta and the Cooperative Republic of Guyana.
In December 2013 the last service contract under the fourth PECR was awarded to PXP Energy Corp., operator of PSC No. 75 in North Western Palawan.
The economic managers had earlier recommended the suspension of the next tranche of oil excise taxes by January 2019, since the average Dubai crude oil price based on the Mean of Platts Singapore will more likely exceed the $80-per-barrel threshold in the coming months.
However, Malacañang said there was no decision from the President as of yet.
Panelo pointed out that the conditions will still have to be met before the suspension mechanism can be activated, since that is what the law stipulates.
Section 5 of Revenue Regulation 2-2018, which provides implementing guidelines for petroleum products under the TRAIN law, states that:
“For the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed, shall be suspended when the average Dubai crude based on Mean of Platts Singapore for three months prior to the scheduled increase of the month reaches or exceeds eighty dollars [$80] per barrel.”
The Development Budget Coordination Committee also revised upward its projection this week on the average Dubai crude oil price for this year to $70 to $75 per barrel.
For 2019, the price range is projected to increase to $75 to $85, while in 2020, this is forecast to drop to $70 to $80, and as low as $65 to $75 for 2021 and 2022.