Mañalac departure from PNOC linked to GMA, FG

Miriam Grace Go, (The Philippine Star) - March 10, 2008 - 12:00am

MANILA, Philippines – Eduardo Mañalac, the veteran geologist who brokered the Philippines’ joint marine seismic undertaking (JMSU) with China and Vietnam, can shed light not only on the legally questionable agreement but also on the alleged intervention of First Gentleman Jose Miguel “Mike” Arroyo in government exploration projects.

Mañalac, who signed the bilateral and then tripartite pacts as president and CEO of the Philippine National Oil Co. (PNOC), reportedly has information on the meddling of President Arroyo’s husband and brother in the projects of the government’s exploration corporation.

Sources in the government and the oil exploration industry told that Mañalac was “fired” by President Arroyo not for the bungle in the Spratlys deal, but for “hurting” oil companies that had lines to First Gentleman Mike Arroyo and presidential brother Diosdado “Buboy” Macapagal Jr.

Mañalac refused to be interviewed. In a text message to, he said he’s not in government anymore and would like his privacy respected.

Why did Mañalac leave PNOC?

In 2006, after the first round of seismic survey and data interpretation in the Spratlys was completed, Mañalac quietly left the PNOC.

There are two versions to the story. Either way, however, he is believed to have information on how the President’s husband and brother intervened on behalf of oil exploration companies in the awarding of contracts by PNOC.

One version says that when Mañalac knew that he would soon be transferred from the Department of Energy (DOE) to PNOC, he took back the permits that the government had given to companies that had invested considerably in exploring around Palawan.

Mañalac reportedly told these companies that these areas would be re-bidded out.

Industry sources said that the DOE had reasons to recall the permits of these companies, but their shortcomings could have been re-considered by the government, considering that they had already spent millions of dollars for the pre-exploration activities. These companies were ready to make up and re-bid for the recalled permits.

Mañalac, industry sources said, didn’t bid out the areas and instead got them for PNOC Exploration Corporation, where he was due to be appointed president and CEO.

“Some of these companies knew the First Gentleman and relayed their complaint to him,” one long-time exploration geologist said. “FG had him removed.”

One trillion cubic feet of gas deposits

The other version of the story was that Mr. Arroyo had Mañalac removed from PNOC because the First Gentleman wanted to sell PNOC’s claim on an area to a foreign oil company already operating around Palawan.

Others said it was Buboy Macapagal who had Mañalac removed for the same reason.

We are withholding the name of the oil company allegedly favored by the President’s relatives until we have gotten their side of the issue.

Sources said the PNOC had already established that the coveted area has more than one trillion cubic feet of gas deposits, and is part of the Malampaya stream.

PNOC was allegedly asked to give up that contract to the favored company.

Legal and oil industry sources said it was impossible for President Arroyo not to have known about this. Petroleum explorations involving foreign companies, millions of hectares, and huge investments are approved by the President herself before the DOE secretary and the PNOC grant the contracts.

 ‘Super undersecretary’

Mañalac, now 61, was appointed DOE undersecretary in 2002, right after his seven-year petroleum exploration stint in China.

At the energy department, he supervised only the upstream operations, but he was referred to by employees as “Super Undersecretary” for being more aggressive than then Secretary Vince Perez, and for the impression that he’s influential and well-connected.

While undersecretary, he negotiated with China the details of the joint seismic survey of 142,886 square kilometers in the Spratlys area. This bilateral agreement was annexed with a map that showed that the exploration area was very close to Palawan and partly overlapping the Malampaya site.

In an interview with Newsbreak magazine in November 2005, Mañalac said, “They trust me. I can trust them,” referring to the Chinese government.

Mañalac was an executive of the American firm Phillips Petroleum Company and was stationed in China. He worked with the China National Offshore Oil Corporation (CNOOC), the other signatory in the bilateral agreement, and the China National Petroleum Company.

Discovered oil field in China

He received the highest civilian award from the Chinese government for discovering for Phillips what is now known as Peng-Lai 19-3, the largest offshore oil field in China.

Mañalac was transferred to PNOC, which is attached to the DOE, two days before the bilateral JMSU pact with China was signed on Sept. 1, 2004.

Vietnam protested, however, and signing a tripartite agreement to supersede the bilateral became necessary. The new agreement, with China and Vietnam, was signed on March 14, 2005.

By that time a Cabinet secretary had pointed out that the original location was “too close” to Palawan, so the map was revised to move the exploration site farther toward the southwest.

Still, the new location is about 80 percent within the Philippines’ exclusive economic zone (EEZ). The agreement therefore goes against local and international laws that recognize the EEZ.

GMA under fire

The Arroyo government is under fire for supposedly selling out Philippine territory through the Spratlys exploration deal. The EEZ makes the Philippines closest to the group of islands in the South China Sea that five other countries are laying claim on.

The deal was supposedly forged in exchange for multi-billion loans from China for infrastructure projects in the Philippines. These projects—including the Northrail, the national broadband, and the cyber education—have been attended by alleged anomalies, including kickbacks by the President’s relatives and allies.

In a joint statement issued through Malacanang on Sunday, former Energy Secretary Perez and Mañalac denied that the JMSU agreement violated the Philippine Constitution. “PNOC was extremely careful and consistent in ensuring the constitutionality of the JMSU. PNOC closely coordinated with concerned agencies such as the DOE, DFA and DOJ, to ensure complete staff work.”

They said that the JMSU project was covered by “a commercial agreement between three national oil companies” and was “not a treaty.” The three companies could therefore allow the agreement to expire after three years—or in June 2008.

“The President did not sign the JMSU, nor did the Department of Energy. However, the approval of the respective governments of the three oil companies was required to make the commercial agreement binding. The JMSU explicitly stated that the signing of the commercial agreement shall not undermine the position held by the Philippine Government over the South China Sea. The agreement is designed to be scientific in nature and does not affect any territorial claims of the Philippine government,” the statement said.

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