‘Resolution of government, Shell tax case to boost investments’

MANILA, Philippines — The resolution of the $1.1-billion (P53.14-billion) tax arbitration case between the Philippine government and Shell Philippines Exploration B.V. (SPEX) is expected to boost investments in the country’s oil and gas industry.

Sen. Sherwin Gatchalian, chairman of the Senate committee on energy, yesterday made the assessment after SPEX, operator of the Malampaya gas field in Palawan, won the tax arbitration case before the International Chamber of Commerce (ICC) in Singapore.

He said there is no more legal impediment for investors to undertake oil and natural gas explorations now that the three-year-old case has been resolved.

“The multibillion tax case has been a big specter that discouraged foreign players from conducting petroleum explorations in the Philippines over the past several years and drove away investments in high risk, capital-intensive and technology-intensive sectors,” Gatchalian said in a statement.

“With the case now behind us, it is high time for the government to aggressively pursue a ‘Drill, Drill, Drill’ program so we can tap these oil and gas resources and use them to achieve Philippine energy independence and pave the way for the country to become an energy exporting powerhouse,” he said.

The case stemmed from the Commission on Audit (COA) findings that the Malampaya consortium has to settle “back taxes” that should be separate from the royalties it pays the government.

Allaying gov’t instability policy

Meanwhile, the Petroleum Association of the Philippines (PAP) said the court decision has addressed the issue of instability of government policy on exploration.

“Assuming the government follows the arbitral ruling, it will now allay the perception of government policy instability among prospective investors in petroleum exploration. Such perception largely led to a standstill in petroleum exploration in the last five years,” PAP chairman Rufino Bomasang said.

“I am confident that the ruling would help re-ignite interest in oil and gas exploration in the Philippines,” he said.

To date, the Malampaya project, which powers around 3,200-megawatt (MW) plants and supplies electricity to the Luzon grid, is the country’s largest gas development program.

But the COA issued a decision in 2009 to slap a P53.14-billion tax deficiency on the Malampaya project operated by SPEX, Chevron Malampaya LLC and the Philippine National Oil Co. Exploration Corp.

In an April 6, 2015 decision, COA upheld its 2009 findings that more than P50 billion were uncollected from the consortium.

It ordered the Department of Energy (DOE) to collect the alleged under-collection of royalties or the government’s share from the Malampaya project from 2002 to 2009.

However, the DOE has maintained that the Malampaya consortium has not been remiss in paying government taxes and has sided with the Malampaya operator.

SPEX, lead operator of the Malampaya deepwater gas-to-power project, sued the Philippine government by filing an arbitration case with the ICC in Singapore in late 2015 and another with the International Center for the Settlement of Investment Dispute in July 2016.

After the ICC decision, SPEX said it would be in touch with the DOE. – Danessa Rivera