An admiral and some tycoons

One would think that by now, businessmen have gotten used to the presence of military men in government agencies.

The tough-talking President Duterte, after all, has stood by his decision, putting military men as heads of key government offices. They’re supposed to weed out corruption, cut red tape and fix the bureaucracy. Why them? Because they’re supposed to be as tough as an army should be.

But in the energy sector, some businessmen couldn’t help but heave a sigh of frustration.

The subject of their ire? The multi-awarded retired admiral Reuben Lista, the 18th commandant of the Philippine Coast Guard.

Lista, who has served as officer in the Philippine Navy, Armed Forces of the Philip Guard, is the president of the Philippine National Oil Co. (PNOC).

PNOC is the government corporation created to ensure the continued exploration, exploitation and development of all energy resources in the country.

As president of PNOC, Lista seems as tough as Duterte may have imagined him to be. But for businessmen dealing with the state firm, the admiral is a thorn on their side, turning around long standing contracts and deals.

Lista said these businessmen – being the businessmen that they are – would always protect their own interests.

Whether or not Lista’s hardline stance on certain issues would translate to a better PNOC remains to be seen.

What is clear is that for now, some businessmen are not happy. 

Lista isn’t bothered. He said this simply means he is doing his job.

Petron

Tycoon Ramon Ang, for instance has just filed a case against PNOC for violating the lease agreements with Petron.

This after PNOC moved to nullify Petron’s binding property lease renewal clauses ahead of their expiration. 

Ang’s Petron, the country’s biggest oil refiner, has existing lease agreements with PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations.

The agreement provides for an “automatic renewal” of the contract with the state firm over an aggregate land area of 200 hectares in Bataan. 

But Lista now wants this changed to get better rates.

When I asked my sources at the energy beat — which I’ve had the privilege of covering on and off since the time of Wharton guy Vince Perez, the former energy chief — what the fuss is all about, I sensed some confusion, too.

Petron’s contract, they said, has always been renewed automatically.

But now, said my sources, the PNOC chief is acting like a landlord who decided to suddenly change things, and this is confusing businessmen, they said.

Asked if he is indeed acting like a merciless landlord, Lista simply laughed off the remark.

He said he wouldn’t even dignify such allegations and declined to talk about the case filed by Petron because of the sub judice rule. 

But even a former president of PNOC confirmed that Petron’s lease is indeed renewed automatically.

The leased properties were originally owned by Petron until the refiner had to give up its land to PNOC in 1993 to comply with the requirements of its privatization.

However, SMC officials noted that such transfer of properties was enabled through lease agreements that guaranteed Petron’s long-term and continuous use of the land. 

Indeed, Petron said the conveyance with lease-back transaction between Petron and PNOC involves a reciprocal obligation.

Energy City

I wouldn’t be surprised if Gregorio Araneta Inc., the holding company of businessman Greggy Araneta III, would also seek legal remedies against the admiral.

Araneta’s GAI proposed to build Energy City, an ambitious LNG hub in Bataan.

According to the blueprint, the LNG facility would be developed in phases, starting with an initial phase that would have a capacity of 600 megawatts and an investment of roughly $1.2 billion.

However, the project is facing delay because the PNOC is seeking higher lease rates and is also looking to bid out the project and invite other partners in contrast to what GAI and the government earlier agreed on.

“That Energy City was already good to go but things changed,” a former PNOC president told me.

I haven’t asked Mr. Araneta if he would seek legal remedies but with the huge amount of investment he has spent in putting the project together, I wouldn’t be surprised if this happens.

He simply said that any delays in the project would negatively impact on the country’s energy security.  

“It took so much time to put this project up and all this time and all the effort has been there. And if they are going to bid it out now, they will delay the project, which will affect energy stability,” he said when I, together with some journalists, visited him in his elegant office recently.

How the issues surrounding PNOC would be resolved is still anybody’s guess. 

Lista said he knows what’s he doing and that he has the interests of more people in mind, not just some businessmen.

Will the admiral indeed bring the PNOC boat to shore or just rock it all the more? Let’s wait and see.