PRESIDENT Rodrigo Duterte has signed an executive order (EO) authorizing third-party suppliers in petroleum service contracts in a bid to position the country as an "oil and gas investment destination."
EO 80, signed by Duterte on May 28, repeals Executive Order 556 which was inked in 2006 to prohibit "farm-in" or "farm-out" contracts.
Under EO 80, "farm-in" or "farm-out" deal is a practice of allowing third party participation in the oil and gas industry to spread the risk inherent in oil and gas exploration, development, and production.
Duterte's EO elaborates that "entity acquiring the participating interest considers the transaction as a 'farm-in,' while the entity transferring such interest considers the transaction as a 'farm-out.'"
"The exploration, development, and utilization of energy resources such as oil and gas are capital-intensive activities, and farm-in/farm-out agreeements, by distributing the risks and financial burden among several industry players, facilitate the undertaking of such activities," EO 80 reads.
"It is the aim of the government to achieve energy independence for the Filipino people by, among others, enhancing the country's competitiveness as an oil and gas investment destination through the adoption of industry practices," it added.
EO 80 permits the state-run energy firm Philippine National Oil Company's (PNOC) oil and gas subsidiary, PNOC Exploration Corporation (PNOC EC), to enter into farm-in or farm-out agreements.
The order provides that entering into farm-in or farm-out deals will allow third parties to participate in the service contracts awarded by the government to PNOC EC, and vice versa.
"In all cases, PNOC EC shall enter into farm-in/farm-out agreements only with reputable, technically competent and financially capable entities," it said.
The EO notes that the third party selection process that willl be undertaken by PNOC EC should conform to best practices widely adopted in the international petroleum industry, as may be determined by the Department of Energy (DOE).
The DOE, in consultation with the Governance Commission for Government-Owned or -Controlled Corporations (GCG), is mandated to issue rules and regulations on the selection process that needs to be observed by teh PNOC EC.
Compliance with the selection process should be closely monitored by both the DOE and CGC.
"Every farm-in/farm-out agreement of PNOC EC shall only take effect upon approval of the DOE," EO 80 stressed.
Palace released a copy of the EO on Thursday, May 30. (SunStar Philippines)