MANILA, Philippines — The Supreme Court has ruled that the income taxes of the Malampaya Natural Gas Project’s private contractors are included in the government’s 60-percent share in profits.
In a 19-page decision, the SC ruled in favor of Shell Exploration B.V. (SPEX), PNOC Exploration Corp. and Chevron Malampaya LLC in their dispute with the Commission on Audit (COA) over alleged unpaid income taxes.
“The Court is on all fours with COA to zealously ensure that the government is never placed at a disadvantage and that it rightfully receives what is due it in all its transactions,” the SC stated.
“Nevertheless, remaining bound by the Constitution and the laws of the land, the government cannot be allowed to renege on its obligation, especially when such has been distinctly outlined in the contract it freely entered into and agreed to,” it said.
The case stemmed from COA’s finding that over P53 billion in income taxes were deducted from the government’s share in the Malampaya project, arguing that the contractors were liable for these taxes.
The contractors, however, challenged COA’s ruling before the High Tribunal.
The SC overruled COA and held that under Presidential Decree 87 or the Oil Exploration and Development Act, the government’s share of net proceeds from petroleum operations includes income taxes of contractors.
The High Court said the contractors remain liable for income tax but noted that the government pays it on their behalf.
It likewise emphasized that the law aims to encourage private investments in petroleum exploration.
In 2022, tycoon Enrique Razon Jr.’s Prime Infrastructure Capital Inc. assumed control of the Malampaya gas field after acquiring the 45-percent operating stake held by SPEX.
After the transaction, SPEX was renamed Prime Energy Resources Development B.V.
Located offshore Palawan, the Malampaya deep water gas-to-power project is the country’s first and only indigenous gas resource. It supplies about 20 percent of Luzon’s electricity needs.
The Prime Energy-led consortium earlier secured a 15-year extension for Service Contract 38, allowing it to continue operating the natural gas project until February 2039.
In June, the $893-million drilling operations to extend the life of the Malampaya field started following the arrival of the Noble Viking drillship.
The project involves drilling two new deepwater wells, Camago-3 and Malampaya East-1, along with Bagong Pag-asa-1, a new exploration field.
The Energy department expects drilling activities to be completed this year, with new gas supply targeted for delivery by late 2026.
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