Advocate’s Overview: Malampaya gas project: an anomalous deal
By ARTHUR L. ALLAD-IW
The multi-billion dollar Malampaya gas project is a consortium project, which involves the extraction of natural gas from the bottom of the waters in Palawan. It lies 80 kilometers of northwest Palawan island, where an estimated deposit of 2.7 trillion cubic feet of natural gas was found in the area. Inaugurated in 2001, the project is vital to the energy needs of the country, particularly Luzon, admitted the government.
The Malampaya Gas Project is a consortium project between the government and private oil corporations. Shell controls fourty-five percent stake on the project while the other fourty-five percent is owned by Chevron. Only ten-percent share of the project is controlled by the government through its agency, the Philippine National Oil Corporation.
Though the project has been going on since 2001, irregularities, ranging from its illegality to its being unconstitutional, are being raised. The Tagbanua indigenous peoples of Palawan also raised the issue that the pipelines established in their domain were done without the statutory requirement of their free, prior and informed consent.
In fact, they brought a case to the NCIP regional hearing office which has jurisdiction in their area, with the sole aim to stop the project. An occular inspection is being conducted while this column is being written and I would like to tackle the findings in the next issue.
On June 6 in the House, Bayan Muna Rep. Neri Colmenares delivered a privilege speech on the misuse of the Malampaya funds and the illegality and unconstitutionality of the contract on the project. He points out that it is an “horribly disadvantageous agreement between the government and the two oil companies.”
Colmenares explained that while most countries imposed a 30 to 40 percent share in consortium on the exploitation of their resources; underlining that Malaysia is more strict as it imposed its 60 percent equity in any undertaking with oil firms. But in the Malampaya, foreign-owned Shell and Chevron control ninety-percent of the consortium shares while the Philippine governments, through the PNOC controls merely ten percent of the shares. A very interesting querry: Does this not violate the constitution which mandates for a sixty-percent Filipino and fourty-percent equity?
Rep. Colmenares explained that the government went away from what the constitution mandates. But it adopted a scheme to preempt possible constitutional challenge. He said: “In order to preempt possible constitutional challenge and to assuage public outrage that a consortium, 90 % of whose shares belong to foreigners, is in charged of exploiting our natural resources Service Contract 38 provided that 60 % of the proceeds accrues to the Philippine government with Shell and Chevron getting the remaining 40 %.”
But this was branded by Rep. Colmenares as a gimmick. He said that the so called “recovery cost” is immediately deducted from the proceeds. “Worse, the income tax that should have been charged against the income of both Shell and Chevron is paid from the government’s share, practically taking up more than half of the 60 % government share,” pointed out Colmenares.
Colmenares also explained that the project is viable as it earns an income but the government receives less. He said that according to a research by members of the House, the Malampaya project had a total of US $ 8.9 billion gross proceeds from 2002 to 2009. The government share was just US $ 1.939 billion. The rest of the funds were taken by Shell and Chevron to pay their corporate income tax of US $ 1.153 billion, branch profit remittance tax of US $ 326.8 million, direct contractors share of US $ 2.279 billion and cost recovery of US $ 3.22 billion. So these oil companies rake much of the income of the project. And what is worse, its being paid from the income supposedly for the government.
The above unjust sharing is one of the worst anomalies of the contract. A provision states that whatever expense Shell and Chevron incurs or invests should be repaid as a “recovery cost.” Colmenares called this a sovereign guarantee that practically means that a huge amount of public funds are spent on items which Shell and Chevron claim to have been spent as “recovery cost.
Even in this kind of undertaking, huge profits by oil companies are institutionally assured. We thought all the while that it is only in their sale of oil products that they have institutionalized profits through the oil deregulation law. But even in a project so important for our energy needs, they are assured of such profits. And to think of it, it is done through the government agencies. So is that a government of the people?! (Next issue: the indigenous Tagbanua issues on the Malampaya gas project.) # nordis.net