Question & AnswerQ&A (EXECUTIVE ORDER NO. 353)
The purpose of EO No. 353 is to promulgate guidelines for the review by government agencies of service agreements between local petroleum concessionaires and foreign oil exploration companies, aiming to attract significant risk capital into petroleum exploration ventures while ensuring compliance with Constitutional and legal requirements.
Service agreements must have the prior approval of the Secretary of Agriculture and Natural Resources.
Applicants must fulfill the qualifications under Article 31 of the Petroleum Act: for individuals, Filipino citizenship, legal age, and capacity to contract; for corporations or partnerships, at least 60% Filipino ownership; and proof of sufficient financial, organizational, and technical resources to undertake operations.
Foreign entities must be registered with the Board of Investments, registered with or licensed by the Securities and Exchange Commission, and be financially and technically qualified to undertake the agreed program of work.
No, a foreign entity may elect to bear part of exploration costs but this should not grant them equity participation. However, the foreign entity may become an equity participant in the Philippine entity holding the concession up to the 40% participation allowed by the Constitution.
Effective management of the concessionaire's activities cannot be transferred or assigned to the foreign entity under the service agreement.
Service agreements must include repayment schemes approved by the Central Bank, a fixed repayment period less than the concession life, and interest rates on repayments not exceeding prevailing international rates, except for pre-production expenses which should follow international practice.
Predrilling exploration work must be completed within two years of contract approval, and if warranted, an exploratory test well must be drilled within one year after predrilling work completion. Failure to fulfill the program may lead to the revocation and nullification of the service agreement.
Filipinos must be given preference in employment for qualified positions, alien employees are limited to specialized technicians and executives with necessary approvals, and foreign employees must train Filipino understudies with semestral progress reports submitted.
Agreements should be interpreted to uphold the Constitution and laws' inviolability and to attract significant domestic and foreign risk capital into oil exploration and development ventures in the Philippines.