Late last year, the Department of Energy greenlighted the transfer of the operations of the Malampaya gas project to Prime Infrastructure Capital Inc.
As we know, Malampaya is a major source of fuel for big power plants that supply the Luzon grid with adequate electricity supply.
The transfer was a timely development as it recognized the urgent need to keep the gas field running safely while drawing nearer the end of its shelf life. Malampaya has so far generated at least $10 billion in government revenues.
But the government deal with a private firm has not been without its critics.
Among them is Eduardo Mañalac, former energy undersecretary and Philippine National Oil Co. president under the Arroyo administration.
So why is he against extending Service Contract 38 governing Malampaya operations?
During his stint as energy undersecretary and PNOC chief, Mañalac managed to contribute to efforts to stabilize the supply of energy in the Philippines.
He was involved in negotiations to sell five percent of the government stake in PNOC Exploration Corp. (PNOC-EC), a unit under Mañalac as PNOC chief, to a South Korean company.
The deal was not finalized after the National Economic and Development Authority, under then Socioeconomic Planning Secretary Romulo Neri, opposed it and recommended to Arroyo that government keep its stake in PNOC-EC intact.
Mañalac gave three reasons why he supported the aborted sale.
First, he said, it was an imposition by the DOE and the Executive Department then headed by Arroyo.
Second, it was a bid to recoup a 100 million-peso loan spent on acquiring 10 percent stake in the state-owned company.
And third, he supported the sale against his will.
In other words, Mañalac was saying he was a good soldier.
By heeding instructions that he now claims to be opposed to, Mañalac pleased higher authority and kept his job.
That he chose to toe the line in this case, belatedly announcing it was against his will, is quite revealing of what he held dear to him.
The second transaction in which Mañalac played a key role was a tripartite deal with China and Vietnam called Joint Marine Seismic Undertaking or JMSU in 2005.
The agreement would have allowed China’s state-owned oil company CNOOC and Vietnam’s PetroVietnam to conduct scientific studies for the presence of oil or gas deposits on a 142,886 square kilometer area in the West Philippine Sea inside the Philippines’ exclusive economic zone (EEZ).
Mañalac explained the JMSU came at a time of “high dependence on imported petroleum and rising oil prices in 2004.”
It was, he said, part of the Arroyo administration’s ambitious five-point plan to achieve energy independence.
But as in the case of the aborted sale of five percent of PNOC-EC to a South Korean company, Mañalac disavowed ownership of the idea to cut the JMSU deal with China and Vietnam.
“It is not my idea. It is the idea of the government as part of its energy independence strategy,” Mañalac said. In other words, again, he was just being a good soldier.
He, however, brokered the JMSU despite the deal not being his “idea.” His signature as PNOC chief is on the transaction.
JMSU, he insisted, did not allow exploration but “data-gathering.”
The deal isn’t a treaty but simply a “commercial and operative agreement between three national oil companies to jointly acquire seismic data.”
JMSU was signed after extensive consultations with the Department of Foreign Affairs and Department of Justice to make sure it did not violate the Philippine Constitution which bans the involvement of foreign entities or individuals in energy development. But it failed the ultimate test of constitutionality in the Supreme Court which declared JMSU invalid for violating the Constitution.
Mañalac insisted JMSU was simply scientific in nature and “does not affect any territorial claims of any country either by the Philippines, China and Vietnam.”
The JMSU coverage is inside the Philippine Exclusive Economic Zone (EEZ).
Now, Mañalac has come out in the open against the extension of SC 38 to operate Malampaya.
He believes Prime Infra does not have the technical qualification to operate Malampaya as it has no previous experience in natural gas extraction and supply.
But the truth is that Malampaya had been successfully operated by an all-Filipino team of experts for at least two decades and which has been retained by the new consortium and reinforced with more Filipino experts.
The DOE, replying to Mañalac’s position, said the technical qualification question had been answered in the first six months of the new consortium’s work, and found it highly capable of operating the facility.
Is it possible for Mañalac to change his mind regarding his opposition to the extension of SC 38 under the new Malampaya consortium despite the DOE explanation that the facility is in good hands?
Maybe, if upon deep reflection, he realizes it can actually serve the national interest as it will reduce the country’s dependence on oil imports and ensure a more stable supply of cleaner energy from an indigenous source.