Commission on Audit orders review of oil and gas service contracts


The Commission on Audit (COA) has ordered a review of other oil and gas service contracts (SCs) similar to the Malampaya deepwater gas-to-power project, for tax deficiencies.

COA-Department of Energy (DOE) supervising auditor Flovitas Felipe said in a Senate hearing that they have ordered a closer inspection of other SCs with identical positions.

Felipe said this is a way forward within the upstream oil and gas industry and prevents the Malampaya project from being singled out.

The industry has 29 SCs, with 14 under exploration, 10 under development, and only five producing.

Malampaya is among the five producing SCs, while Philodrill Corp. controls SC 14A, 14B, and 14B1; the Galoc Production Company controls SC 14C1.

“Once this (SC) will be producing, the sharing on the tax will be an issue. But considering that we are still on this exploratory stage, developmental stage, this tax issue can be made clear when the final contract is drawn,” Energy secretary Alfonso Cusi said.

The Malampaya project, licensed under SC 38, is operated by a consortium consisting of Shell Philippines Exploration B.V. (SPEX), Chevron Malampaya LLC, and the Philippine National Oil Company (PNOC). SPEX and Chevron hold a 45-percent stake each, while PNOC has 10 percent.

A COA audit found that there was P53.14 billion uncollected taxes from the consortium. The Royal Dutch Shell’s Philippine unit has filed two international arbitration cases. To date, the total uncollected amount from the Malampaya project stands at P151 billion.

Malampaya supplies gas to Lopez Group’s Sta. Rita and San Lorenzo plants, and San Miguel Group’s Ilijan plant. The three power plants have a total combined output of 2, 700 megawatts (MW).