PNOC-EC pushing to scrap EO on bidding for service contract partners


The Philippine National Oil Co. Exploration Corp. (PNOC-EC) is pushing for Executive Order (EO) 556 to be scrapped as it is said to be a “major stumbling block” in the upstream industry.

PNOC-EC President and CEO Pedro Aquino Jr. said in a Senate hearing that scrapping EO 556 will help the oil and gas industry of the country move forward.

The EO mandates government corporations to conduct public biddings in looking for Service Contract (SC) partners.

“All exploration is a very expensive business, highly risky. And it would be absurd for us to ask would-be investors or partners to undergo public bidding. Because if we’re able to sell the area and they are confident to come in…for us to tell them to undergo a public bidding is really very, very absurd,” he said.

PNOC-EC is looking for partners for eight SCs under a 10-year work program. However, Aquino disclosed that due to the low success rate in the industry, they will only offer a 10-percent share in the SCs.

“We want to share the risk because even the big companies like Shell, they resort to farm-out to spread the risk. But in our case, we cannot do that simply because of this EO, nobody wants to undergo a bidding process just to participate,” he said.

“Out of 100 is just 10 percent. And investors are willing to buy that 10 percent. But if I make life for them difficult, they might as well take their money and invest it somewhere,” Aquino added.

The Philippines only has 700 wells drilled so far, compared to the 200 to 400 wells drilled in Indonesia per year, data from the Petroleum Association of the Philippines (PAP) showed.

Senate Committee on Energy chairman Sherwin Gatchalian said the EO is still the best option to find partners in the industry.

“I think I would like to support this EO 556 because it’s transparent and it’s prescribed by government procedures. But in my perspective, if the SC, like I said, profitable, then I don’t think it will matter because they will still bid,” he said.