Friday, October 19, 2018
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‘Energy City’ proponent urges PNOC to honor lease contract

/ 05:12 AM October 23, 2017

A $1.2-billion “Energy City” project proposed by businessman Gregorio Araneta III in Limay, Bataan—one with a liquefied natural gas (LNG) terminal and a power plant with a generation capacity starting at 600 megawatts—is stalled by a debate with the state-owned Philippine National Oil Co. (PNOC) on leasehold terms.

Araneta wants PNOC to honor a leasehold right approved in 2015 by PNOC’s subsidiary PNOC Alternative Fuels Corp (PAFC), for which he had already given a P38.64-million deposit.


PNOC, for its part, stated that it remained open to Araneta’s project, except that the terms would have to be improved to comply with the latest appraisal values, lest the contract be disallowed by the Commission on Audit and leave PNOC’s officers vulnerable to graft charges at the Ombudsman. At the same time, PNOC vice president Ela Barleta said the PAFC’s old deal with Araneta had not been approved by the main PNOC board as required by internal protocol as a government corporation.

Recently, Araneta said that PNOC indicated it wanted to increase the rental rate for the project from P63 to P78 a square meter. He also believed that the contract had been “made whole” and should be honored by the new leadership.


“In this country, LNG power plant should have been done long, long ago, but nobody did it,” Araneta told reporters in a briefing at his office on Friday. “The reason why we want LNG is for energy security and this is renewable energy.”

“LNG (power plant) is like a gas tank where you push the pedal and there will be more power (supply) anytime. Solar or hydro power can’t do that,” he said.

With new officials appointed at the helm of the Department of Energy after the presidential turnover last year, Araneta said he received a letter from PNOC revoking the earlier agreement.

The businessman said the project required only 90 hectares but PNOC had earlier wanted to lease out a bigger parcel on a long-term basis. According to PNOC, the maximum land it could earmark—if they would agree on improved terms—would be 200 hectares.

Araneta said his team would like to close the deal soon. While he is the proponent of the project, by virtue of the development right bought from AG&P group, Araneta said he had put together the best consortium to work on the project, including Mitsui of Japan, Osaka Gas and businessman Manuel V. Pangilinan through Manila Electric Co.

Meralco was willing to be not just an off-taker of the power supply but an investor in the project as well, he said. “I wouldn’t have started this without Meralco,” he added.

Asked to explain PNOC’s side, Barleta said the lease agreement was not approved even by the previous PNOC board. Under the company’s standard procedure, she said double approval was required—first by the subsidiary board and then by the main PNOC board—for deals of this magnitude.


The proposal reached the main board during the previous PNOC leadership but even then, there were provisions “deemed disadvantageous (to the government),” Barleta said. For instance, she said that the old contract placed the responsibility of clearing informal dwellers with the PNOC whereas the previous PNOC board insisted it should be on an “as is where is” basis.

On the rental rate, Barleta said that as a government corporation, PNOC was required to use the minimum appraisal value, otherwise it would be answerable to COA.

The payment made by Araneta’s group, Barleta said, was in consideration of the fact that PNOC did not allow other parties to use the property during the time that the group was conducting studies on it.

“The latest is that their representatives came to us last week, asking if we’re still open for a negotiation for the property. We have always been open. We haven’t closed our doors to them as long as they give us an improved offer. We are waiting for their new proposal,” she said.

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TAGS: Business, energy city, Liquefied Natural Gas (LNG), Philippine National Oil Co. (PNOC)
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