Striking oil

When the Malampaya reserves were discovered off the waters of Palawan in 1991, and the billion-dollar, natural-gas extraction project commenced in 2002, the Philippine government found a new and considerable source of revenue. As it turns out, it wasn’t only the government that struck oil, so to speak. Operators like the alleged pork barrel scam mastermind, businesswoman Janet Lim-Napoles, found the government’s share of the Malampaya proceeds to be rich pickings indeed.

According to Merlina Suñas, one of the first six witnesses to blow the whistle on the pork barrel scam, at least P900 million in royalties from the Malampaya project intended to help Department of Agrarian Reform beneficiaries in 2009 was diverted to Napoles’ network.

To be sure, when the first details of the alleged diversion saw print, last July, a former member of the Arroyo administration seized on the allegation as proof that the entire pork barrel scam was a mere tale, an “utter fabrication.” The Department of Agrarian Reform had nothing to do with the Malampaya funds at all, he said.

But statements issued since then by officials with access to either the records or the intended beneficiaries prove that the diversion of Malampaya funds did happen. (Other witnesses and more documentary evidence have also surfaced to reinforce the whistle-blowers’ claims about the pork barrel scam itself.)

Eastern Samar Rep. Ben Evardone confirmed that Malampaya funds intended for farmers in his district went instead to nonexistent projects; the mayors in the area told him so. And Agrarian Reform Secretary Virgilio delos Reyes said in a TV interview that the department’s records showed then Undersecretary Narciso Nieto, the officer-in-charge at the time, authorizing the release of some P900 million in Malampaya funds to nongovernment organizations in 2009, including nine linked to Napoles.

That this diversion, involving a department that had nothing to do with the operation of the Malampaya project, happened at all tells us something crucial about the Malampaya funds: They are huge, and easy to abuse.

The problem begins with something fundamental: Nobody really knows exactly how much the government has earned from the Malampaya project.

The service contract that governs the project binds partners Shell Philippines Exploration B.V., Chevron Malampaya LLC, and PNOC Exploration Corp. to remit 60 percent of earnings, after certain deductions, to the national government. However, for the project’s first years, from 2002 to 2011, the Department of Budget and Management and the Department of Energy have widely differing estimates. The DBM figure as of May 2011 was P106 billion; the DOE estimate as of November 2011 was P228.45 billion. The difference in dates is material, of course, but the variance is too wide.

The problem worsens when it comes to expenditures. There is far too much leeway used to allocate the Malampaya funds. For instance, the provincial government of Palawan is still contesting the national government’s share of the earnings, but through a provisional arrangement, it has already received a considerable amount: as much as P2.5 billion, according to Sen. Teofisto Guingona III. According to the widow of broadcast journalist Gerry Ortega, a critic of the way Palawan managed its Malampaya share, the total is even higher, at P3.1 billion, with only P520 million accounted for.

The problem deepens after the funds have been used. In 2010, a Commission on Audit report found that, between 2002 and 2010, close to P24 billion in Malampaya funds had been released to government agencies and the province of Palawan, while a total of P77.2 billion lay “idle.” (Given today’s headlines about ghost projects and ghost project proponents, that may not be such a bad thing—if, that is, the money is still there.)

But, as COA Chair Grace Pulido-Tan has said, the amount released to the government in various ways (the total of P24 billion is almost equivalent to the original 2014 allocation for the congressional pork barrel) has not undergone a consolidated audit.

No wonder operators like Napoles seized on the Malampaya project: It was like finding oil in one’s own backyard.