CoA ruling ruffles oil explorers

Oil and gas companies warned the government against the tax opinion of the Commission on Audit on the Malampaya gas field, saying it will bring exploration in the Philippines to a halt.

The CoA ruled in May that the income tax payment of oil and gas service contractors in the Malampaya project amounting to P53.14 billion was not included in the government’s 60 percent royalty share.

“The Petroleum Association of the Philippines wants us to have fiscal stability. So it’s the desire of our service contractors that are here already operating that there’s fiscal stability. Whatever was agreed upon should be followed,” PAP president Sebastian Quiniones told reporters.

Quiniones, who is the managing director of Shell Philippines Exploration B.V., said the industry raised the concerns with the Energy Department.

“We have discussed it with [Energy] Secretary Naydee [Monsada]. We verbalized what we’re aiming for and we’re working with the DoE,” he said.

Otto Energy director Rufino Bomasang said said the CoA ruling would not only have an impact on service contract 38 off northwest Palawan, or the Malampaya project, but also on all other service contracts.

“All the service contracts, they all have that same provision that income tax is paid out of government share. It’s incorporated in the contract. For us, that’s a very serious matter. If that’s upheld by the government, it’s going to bring the upstream petroleum industry in this country to a grinding halt,” Bomasang said.

“Are you saying, we’ve been wrong for the long time? All the lawyers have been wrong?” he asked.

The Energy Department also warned that imposing the P53.14 billion in taxes to the contractors of the Malampaya project would create havoc on the petroleum industry.

The SC 38 contractors are Spex, Chevron Malampaya LLC and state-owned PNOC Exploration Corp.

The Energy Department, in a 30-page position paper, said the CoA decision has “sent a very wrong signal to the existing and future petroleum exploration investors in the country.”

It said petroleum exploration, especially offshore, involves great risk, huge capital and high technical capability and that foreign investors decide where to put their money based on “the certainty and stability of investment riles and regulatory regime of a country.”

It said the CoA decision had totally wreaked havoc on the promise of the government to the investors to honor and respect the sanctity of contracts and agreements.

Topics: oil
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