Why don’t foreign investors come to the Philippines in droves in spite of the fact that we have skilled and relatively cheap labor? Because it is difficult to do business in the Philippines due to corruption, red tape, clogged roads that delay the delivery of goods, and very expensive electricity—the most expensive in Asia after Japan. This last, in turn, is due to the expensive oil that we import to run our power generating plants. The hydroelectric and geothermal plants that are cheap and clean are no longer sufficient for the needs of our growing population and expanding economy.
Yet we are sitting on top of a pool of oil in Palawan. Why don’t we pump it out and use that? Right now, only Shell is pumping out a limited amount of oil—which it sells to us at the same price as imported oil despite the fact that we own that oil—and natural gas which is used by two power plants to generate electricity.
Alas, the administration has “officially” abandoned the extraction of oil from the Malampaya rim. That was the latest position of the administration based on the statement of an undersecretary of the Department of Energy (DOE) who said it is postponing indefinitely the bidding for the service contract related to the development of the oil rim in Palawan.
As former Leyte Gov. Jericho Petilla assumes the top DOE post, let us hope that the administration will take a more serious look at how much potential revenues, and savings in oil bills, we are losing with that decision.
It is ironic that the Philippines is moving heaven and earth, including risking a shooting war with China, in an apparent bid to help private contractors extract oil in the disputed Recto Bank in the West Philippine Sea. This is not to say that the government should not pursue its bid to tap the rich mineral resources in that area in spite of the conflict with China. What we are saying is that there is a proven pool of oil sitting idly inside uncontested Philippine territory and outside of any area where there are counterclaims from our neighbors.
The US Energy Information Administration, which noted that China has had no objections to the Philippines developing the Malampaya field, estimates that in 2008, there were 150 million barrels of oil there. Its view is that the recoverable volume may have dwindled, but at least 25 to 40 million barrels of oil can still be extracted from the field—that is, if our government moves quickly.
Crude oil in Asia hovers at around $100 per barrel. That means there is a buried treasure of black gold in Malampaya valued at $4 billion. That is oil we can extract anytime without having to go to war with a giant neighbor.
But it looks like there are two other “giants” we may have to contend with before Filipinos can benefit from that $4 billion worth of oil in Malampaya.
The first “giant” is the silent but clear opposition from international business interests operating the natural gas facility in Malampaya. Filipinos may have been left to believe for too long that the only energy resource available in Malampaya is natural gas. False.
The business interests operating the natural gas facility have long boasted that there are some 3.7 trillion cubic feet of proven natural gas reserves in Malampaya. But they have been silent on the presence of large oil deposits underneath the gas. Pumping out the oil would entail additional capital expense for them that would dilute their huge profits from the current natural gas production. So they have refused to develop the oil resources, to the disadvantage of the Filipino people who would have a share in this oil.
The other “giant” is the apparent refusal of this administration to pursue any idea, no matter how bright, if such an idea was first conceived during the previous administration. A newspaper report has also mentioned that the previous administration planned on extracting the oil but that the Philippine National Oil Co. apparently caved in under pressure and awarded the service contract to an unqualified group that was not able to deliver on the contract.
So as not to let that vast pool of oil go to waste, the government must bid out the service contract to develop the oil deposit to a qualified and legitimate oil production company. It cannot afford any more delay and should tell the current operator of the natural gas project to study and evaluate the economic feasibility of the oil deposit because it is this same operator that has adamantly refused to do its job by its contract and has deprived the government its just share in the value of the oil. The government is obliged to tap and develop that precious oil reserve for the Filipino people.
When Petilla’s appointment as the new energy secretary was announced, drum-beaters said he could stand up to any business interest because he is not indebted to them. The clamor to extract that oil from the Malampaya oil rim provides an excellent opportunity for Petilla to prove what drum-beaters say.
That oil deposit in the Malampaya oil rim will not be there forever. It is dwindling while we do nothing.