The Energy Department will ask President Benigno Aquino III to help resolve a 2015 Supreme Court ruling that nullified a service contract with a Japanese exploration company, a decision that may threaten the oil and gas industry.
“We will elevate the matter to the president because it involves contracts,” Energy Secretary Zenaida Monsada told reporters.
Industry players warned that the court’s decision nullifying service contract 46 with Japan Petroleum Exploration Co. Ltd. covering Tañon Strait between the islands of Negros and Cebu could affect all foreign service contracts.
Associate Justice Teresita Leonardo de-Castro, who wrote the decision last year, said while the government was allowed to enter into a service contract under the 1987 Constitution, service contract 46 signed on Dec. 21, 2004 by the Energy Department and Japan Petroleum on the exploration of a 2,850-kilometer area offshore Tañon Strait failed to comply with the safeguards of the Constitution.
Section 2, Article XII of the Constitution requires that service contract be authorized by a general law signed by the president and reported to Congress.
The Philippine Petroleum Association of the Upstream Industry said the court decision effectively stopped the exploration, development and exploitation of petroleum resources within Tañon Strait.
The Energy Department’s legal division and Energy Resource Development Bureau are set to come out with a position paper on the impact of the ruling on the industry that will be submitted to the Supreme Court.
PAP chairman Rufino Bomasang and PAP president Sebastian Quiniones Jr. said in a letter to Monsada that the court’s ruling “signifies that all service contracts entered into by the government of the Republic of the Philippines with foreign-owned corporations involving either technical or financial assistance for large –scale exploration, development and utilization of petroleum, but signed only by the secretary of the Department of Energy, not by the President, are null and void for being unconstitutional,”
PAP, composed of foreign and local oil and gas players, said the execution of a service contract with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development and utilization of petroleum, was simply a contractual undertaking by the state and was not “one of those exceptional circumstances that requires the personal action of the president.”
The group said the move would unduly burden the president to engage in the nuances of the specialized field, which should be left to a specialized body like the Energy Department.
Sources said among the service contracts that could be affected by the ruling are gas producing SC 38 or the Malampaya gas project and the oil producing SC 14C or the Galoc oil field, both in northwest Palawan.