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Senate inquiry on the status of PH upstream oil and gas industry pushed

MAKATI CITY, Philippines – A driver refuels his tricycle at a gas station along Edsa in Guadalupe, 27 June 2018. Senate Committee on Energy chairman Senator Win Gatchalian said the country has only 23 active service contracts for oil and gas exploration, exploitation, and development, a far cry from its ASEAN neighbors. Photo by Mark Cayabyab/OS WIN GATCHALIAN

Senator Win Gatchalian wants to look into the current state of the country’s upstream oil and gas industry in a bid to improve and streamline regulations that will result in the increased investments in oil and gas exploration and development.

Gatchalian, chair of the Senate Committee on Energy, recently filed Senate Resolution No. 46, which directs the appropriate committee to conduct hearings on the issue, as he emphasized the need to review the Philippines’ policies on oil and gas exploration, exploitation, and development, which is currently spread across various laws, presidential proclamations, and executive issuances.

In filing the senate resolution, the lawmaker noted the industry’s continuous stagnation despite the issuance of Presidential Decree No. 87, otherwise known as the Oil Exploration and Development Act of 1972.

“PD No. 87 provides the framework and the incentives for the exploration, exploitation, and development of the country’s oil and gas reserves,” the senator said. “But almost fifty years after the passage of the said Act, only 23 active service contracts have been awarded by the government.”

Furthermore, Gatchalian pointed out that only five wells have been drilled in the Philippines between 2007 and 2017, a far cry from compared to the country’s ASEAN neighbors including the 29 wells in Myanmar, 81 in Malaysia, 594 Thailand, and 903 in Indonesia.

“The number reflects the struggle of the country in attracting sufficient investments in the upstream oil and gas sector, a high-risk and high-capital industry,” he said.

Citing the study conducted by Van Meurs Energy, the lawmaker highlighted the issue of competitiveness of the country’s fiscal regime for upstream oil and gas as reflected in the World Rating of Fiscal Systems for Oil.

Out of 768 fiscal systems with number 1 being the most attractive, the Philippines’s fiscal system for oil and gas exploration and development for onshore ranked 396th; shallow water, 425th; and deep water, 452nd.

“Given this competitiveness rating, we would like to conduct an inquiry on the status of the Philippines’ upstream oil and gas industry, with the end view of improving and streamlining regulations towards increased investments in oil and gas exploration and development,” Gatchalian said.

“There is also a need to review the Philippines’ policies in oil and gas exploration, exploitation, and development in order to identify and address the factors, which have led to the stagnation of the industry, as well as ensure consistency across regulations to jumpstart a ‘Drill, Drill, Drill’ program in the country,” he added.