Senator Sherwin Gatchalian has backed the Energy Department’s position to respect the sanctity of the Malampaya service contract in northwest Palawan.
Gatchalian, head of the Senate committee on energy, agreed with Energy Secretary Alfonso Cusi, who supported the decision of the previous administration in insisting that the 60 percent corporate income tax of the Malampaya project formed part of the government share.
“Definitely, that is a more prudent position considering that since time immemorial, this type of arrangement is embedded on most of our service contracts… It just so happen that Malampaya is the most profitable,” Gatchalian said.
The Commission on Audit issued a notice to collect around P151 billion from the Malampaya consortium from 2002 to the end of June 2016. CoA claimed that the corporate income tax should not form part of the government’s share in the Malampaya project.
Gatchalian said all petroleum service contracts had the same features.
“For continuity purposes as well as respect to international contracting, I think that is more prudent. If we change that, many investors will not come in because we change the rules. Especially exploration, where gestation is 10 years,” he said.
He said exploration was a high risk and highly capitalized industry “so we need foreign investors to explore.”
“With this single tax issue, the country’s future energy stability is in peril. We have a problem here. If we want to achieve energy security and stability, we need to discover more oil and gas,” Gatchalian said earlier.
Cusi said his department had committed to maintain and strengthen the predictability, certainty and consistency of investment rules of the Philippines.
“The DoE has strongly affirmed its position… before the Commission of Audit that the income tax of the Malampaya contractor shall form part of the 60 percent of government share,” Cusi said.
He stressed that “the foremost consideration in the mind of foreign investors in deciding where to invest is the predictability, certainty and consistency of investment rules and regulatory regime of a country.”
“It is therefore, of fundamental importance that we observe the sanctity of contract in our commercial transactions,” Cusi said.
The CoA decision, according to him, eroded the country’s investment standing compared with other countries. He said this could be reversed if “CoA reconsiders and reverses its decision.”
The Malampaya consortium is composed of Shell Philippines Exploration B.V. (45 percent), Chevron Malampaya LLC (45 percent) and PNOC Exploration Corp. (10 percent).8:25 PM 10/4/2016