DoE seeks easing of rules on gov’t oil exploration deals

The Department of Energy is seeking the issuance of an executive order that will overturn the controversial EO 556, which bars any government agency from entering into an agreement or contract with another entity for the exploration, development and production of oil.

Energy Undersecretary Jose M. Layug Jr. said Executive Order 556, which was signed by former President Gloria Macapagal Arroyo in June 2006, had become a “stumbling block” for PNOC Exploration Corp.” in its efforts to tap partners in its projects.

While amendments to EO 556 are being pursued, PNOC-EC should be allowed to take in a partner on condition that it is legally, technically and financially qualified, he said.

Layug said the proposed amendment to EO 556 would allow PNOC-EC to enter into more service contracts.

EO 556 earlier ordered state-run Philippine National Oil Co., the parent firm of PNOC-EC, to hold a “strict bidding procedure” for the contract involving the exploration, development, and production of crude oil from the Camago-Malampaya reservoir instead of resorting to “farm-in” or “farm-out” contracts.

This order effectively terminated Malaysia-based Mitra Energy Ltd.’s right to take part in the development of oil deposits in the Camago-Malampaya field off western Palawan, two months after PNOC-EC signed the farm-in contract with Mitra.

Arroyo’s issuance of this EO was received negatively by the local and international business communities, as this signaled instability in the policy environment in the country.