Deregulation of Downstream Oil Industry

Applies to all persons/entities engaged in domestic downstream oil activities, including direct importers for own use.
Key definitions include:
- Basel Convention: International accord on hazardous waste trade.
- Board: Energy Regulatory Board.
- DOE: Department of Energy.
- Downstream Oil Industry: activities involving crude oil and petroleum products including importing, refining, marketing, etc.
- Petroleum Products: refined products containing at least 50% petroleum by weight.
- Others: Dealer, Hauler, LPG Distributor, New Industry Participants, SIP (Singapore Import Parity), Wholesale Posted Price (WPP), etc.

Any person/entity may import, purchase, lease, operate refineries, and market crude oil or petroleum products under their trade name.
Prior notice to DOE required for monitoring.
Must secure certificates for quality, health, safety, and environmental clearances.
Reporting of import/export to DOE mandatory.
Importations to comply with Basel Convention.

Uniform tariff duty of 3% on imported crude and refined petroleum products.
President may reduce tariff as warranted.
Tariff rate automatically adjusts based on WTO and AFTA commitments starting January 1, 2004.
NPC exempted from taxes/duties on petroleum products used for power.

DTI and DOE to promote fair trade and prevent cartels, monopolies, unfair competition.
Permits cooperative practices benefiting public interest (e.g., joint tanker use, oil spill control).
DOE monitors relationships between companies, dealers, haulers, and LPG distributors.
DOE shall arbitrate disputes involving dealer mark-ups, freight rates, LPG margins protecting public and preventing ruinous competition.
DOE arbitration award subject to judicial review.

DOE, DFA, and DTI to formulate program promoting new entries, including international info campaign.
DOE to provide "Philippine Downstream Oil Industry Investment Guide" covering industry intro, requirements, benefits, incentives, procedures.

New investments registered with DOE and BOI in refining, storage, marketing, distribution entitled to BOI incentives under Omnibus Investment Code.
Incentives include income tax holiday, labor expense deductions, tax exemptions on equipment and spare parts, contractor tax exemption, real property tax exemption, etc.
Incentives valid for five years from BOI registration.
Marketing includes gasoline stations.

DOE promotes active participation of private sector and cooperatives in retail gasoline and LPG through training and joint ventures.
Cooperation with TLRC and TESDA for management and skills training.
Establishment of gasoline station training and loan fund initially funded by PAGCOR (P300 million).
Fund allocation: 2% training program, 1% admin, 94% lending, 3% per Section 26.
Loans are short-to-medium term with low interest, awarded to qualified trainees.

Prohibits cartelization: agreements to fix prices, restrict output, divide markets.
Prohibits predatory pricing: selling below average variable cost to destroy competition.
Penalties: Imprisonment 3-7 years, fines P1M to P2M.

Refusal to comply with reporting, use of clean technology, DOE orders, or fuel additive registration is prohibited.
Penalties: Imprisonment for 2 years, fines P250,000 to P500,000.

Monitor daily international crude prices, domestic pricing, and petroleum product quality.
Collaborate with BPS, DENR, DOST, and stakeholders to set fuel quality and additive standards.
Monitor refining/manufacturing processes for clean, safe technology.
Require monthly reporting from industry participants on inventories and transactions.
Investigate unreasonable price increases via DOE-DOJ Task Force.
Temporarily take over operations during national emergencies.

Investigate industry practices and require reports or written answers.
Investigate violations on direction of President or Congress.
Recommend suspension or revocation of business permits.
Maintain confidentiality of trade secrets, except sharing with law enforcement under confidence.
Monitor compliance with court orders.

Deregulation implemented in two phases: Transition, then Full Deregulation.
President may use Reserve Control Account (up to P2.9 billion) to buffer consumer impact on price rises during Transition Phase.
Automatic Oil Pricing Mechanism (APM) established; Board sets and adjusts Wholesale Posted Price based on Singapore Posting or SIP.
Margin and transportation rates maintained initially then adjusted by formula.
Board publishes pricing formulas and adjustments in newspapers.

Full deregulation begins 5 months after effectivity, modifiable by President upon DOE and DOF recommendation.
LPG, regular gasoline, kerosene remain under transition rules for 5 months.
Upon full deregulation, various previous oil price laws are repealed.

Energy Regulatory Board empowered to fix and regulate piped gas prices after notice and hearing.

Outstanding claims against Oil Price Stabilization Fund (OPSF) considered government accounts payable, with reimbursement certificates honored.
Oil refining companies must publicly offer at least 10% of common stock within 3 years, with ownership limits to broaden base.
DOE to coordinate the issuance of implementing rules within 60 days.
Violations penalized with imprisonment 3 months to 1 year and fines P50,000 to P300,000.
Public information campaign mandated to educate on deregulation.
Funding for implementation sourced from DOE appropriations and PAGCOR contributions.
Separability clause ensures invalidity of any provision does not affect others.
All inconsistent laws or regulations repealed or modified.
Act takes effect upon publication in two newspapers of general circulation.