PORTION of the oil and gas reserves in Reed Bank could be exploited by China, in case the Philippines fails to fulfill its obligation to pay $62-million loan with Beijing for the Chico River Pump Irrigation Project, Malacañang admitted Wednesday, March 27.
Presidential Spokesperson Salvador Panelo now floated such possibility, as he agreed with Supreme Court Senior Associate Justice Antonio Carpio that a 1972 law, or Presidential Decree 87, had already converted the oil and gas in the Reed Bank into patrimonial property.
"Presidential Decree No. 87, as correctly stated by Justice Carpio, converted the gas and oil found in Reed Bank into patrimonial assets and may thus be alienated," the Palace official said in a statement issued Wednesday night, March 27.
Patrimonial assets refer to properties owned by the Philippines in its private capacity and not for public use, public service or intended for development of national wealth.
Panelo, however, stressed that it was unlikely for China to "satisfy any outstanding balance of the loan from the gas and oil in Reed Bank," since it was "improbable, if not impossible" for the Philippines to fail in paying its loan.
"What that means is that there will be an extraction of gas and oil, a sale of the same and then a portion of the profit therefrom, which will be in the form of money, will be used to pay and satisfy the balance," he added.
Panelo's statement came a day after he said that Duterte would not declare oil-rich Reed Bank as a patrimonial asset of the Philippines.
His previous remark was meant to allay fears that Reed Bank would be seized by China, in case the Philippines is unable to pay the $62 million loan deal with Beijing.
Carpio, however, lectured Panelo, saying that Presidential Decree 87, otherwise known as the Oil Exploration and Development Act of 1972, had already authorized the Energy department's granting of a service contract to Forum Energy, an oilfield products firm, to exploit the gas deposits in Reed Bank.
Section 8 of the law states that, "The (service) contract may authorize the contractor to take and dispose of and market either domestically or for export all petroleum produced under the contract subject to supplying the domestic requirements of the Republic of the Philippines on a pro-rata basis."
"This law proclaims the oil and gas covered by a service contract as a subject to sale to the market -- which makes such oil and gas patrimonial," the senior magistrate said.
Panelo, in his latest statement, clarified that he never said that there was no existing law and service contract entered into for gas and oil exploration in Reed Bank.
But he stressed that the conversion of oil and gas deposits in Reed Bank even makes the Chico River Pump Irrigation Project loan agreement "aboveboard," as "it does not diminish the State's or government's territory but it deals with its assets dedicated for business or commercial use."
"What I said was Reed Bank itself -- not the gas and oil there, which SAJ Carpio cited -- is an inalienable property, which cannot be given, sold or be subjected as a contractual prestation," he said.
"Assuming we have defaulted for just a small amount of the loan, China cannot seize all the gas and oil there but only the equivalent of the unpaid loan. It cannot go beyond the outstanding balance," Panelo addded.
Panelo then said Carpio's criticism and discussions on the loan agreement were "trivial, circuitous and pointless."
He emphasized that the amount of loan is just "low," saying the inflexible annual interest rate is merely two percent.
He also re-assured that the Philippines would never default on its loan with China, as the payment for the country’s debt is automatically included in the government’s national budget
"We can’t stop from noticing that Justice Carpio is finding loopholes when there is none, effectively although unwittingly, coaching the Chinese on what to do in case of a default, such as seizing Philippine gas fields," Panelo said.
"Much has been said and speculated on the terms and conditions of the loan agreements entered into by this administration. Unfortunately, these rantings and speculations have overshadowed the economic benefits of the projects that these loans shall fund," he added.
Panelo said that while it is true that the Philippines may refrain from entering into any loans, such strategy "courts the risk of stagnating the growth of the country."
He said the development of the country depends on the implementation of infrastructure projects geared toward the development of new ones or the increase of capability or capacity of those that already exist.
"Overall, our national development plan for providing a more comfortable life for the Filipino people is anchored on spurring national development, as well as inclusive regional development. We note that the Philippines is lagging in terms of infrastructure development," he said.
"Our economic managers have ensured that there are safeguards in case an arbitral award is made in favor of China. This includes but not limited to enforcement through our local courts which will scrutinize if there was manifest partiality in the arbitration proceedings or if there was fraud or collusion, or if enforcing the award would be contrary to public policy," he added.
Panelo guaranteed that the country's economic managers consider the appropriate cost and benefit analysis of all sources of funds, whether through external or domestic loans, or through internal budgeting.
"Let us set aside politics and give our farmers in Northern Luzon a better life which they truly deserve. Perhaps our critics should have instead done their part to contribute when they had every opportunity to do so, specially when they were holding the reins of the government," he said. (SunStar Philippines)