The Department of Energy (DOE) released a draft circular proposing special allowances for petroleum service contractors to stimulate oil and gas exploration in the Philippines. The department highlighted the need for improved fiscal terms to attract more investments in this high-risk, low-reward sector.
“By providing special allowances that maximize benefits for the country while offering reasonable returns to private companies, we aim to make the Philippine service contract regime more attractive to investments and boost oil and gas exploration,” the draft circular stated.
Under the proposed circular, petroleum service contractors would be eligible for special allowances deducted from gross proceeds. However, the government’s share would never fall below 60 percent of the difference between gross income and operating expenses. Reimbursement of operating expenses would be capped at 70 percent of gross proceeds in any year.
The DOE also proposed a special allowance for the cost recovery of exploration expenses from existing service contracts with production. This allowance would be limited to 7.5 percent of gross proceeds for the first commercial development of a new geologic play in the basin.
To encourage gas development in remote or frontier areas, the agency proposed a special allowance for projects located more than 200 kilometers from the identified delivery market.
DOE Undersecretary Alessandro Sales emphasized the importance of revitalizing exploration, which has stagnated for over a decade. “We have identified and addressed several gaps that have hindered exploration, primarily through policy changes,” he said.
The draft circular is expected to be open for public consultation before the end of September. The DOE will finalize details on the allowances and provide updates to stakeholders.
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