Amendment of PNOC Charter and Powers

Legal basis and charter amendments

Section 1 amends Sections 2, 3, 4, 5, 6, 8, 11, and 12 of Presidential Decree No. 334, as amended, by replacing those sections with the text stated in Presidential Decree No. 927.
Section 5 expressly overrides conflicting legal provisions “Any provision of law to the contrary notwithstanding,” including a specific reference to Section 13 of Act 1459, as amended.

Policy and declared purposes

Section 2 declares the State’s policy to promote industrial and overall economic development through effective and efficient utilization of energy sources, including oil and oil-based resources.
Section 2 states that an organized entity is necessary to assure adequate supply of oil and oil products, as well as power and energy, to all users, enabling unimpeded and efficient growth of the economy.
Section 4 directs PNOC to provide and maintain an adequate and stable supply of oil and petroleum products for domestic requirements.
Section 4 assigns PNOC the purposes of promoting exploration, exploitation, and development of local oil, petroleum, and other energy resources.
Section 4 requires PNOC to foster oil or petroleum and energy-resources exploitation conditions that support balanced and sustainable economic growth.

Definitions: “oil,” “energy resources,” and scope

Section 3 defines “Oil or Petroleum Operations” to include actual exploration, production, refining, tankerage and/or shipping, storage, transport, marketing, and related activities concerning oil and petroleum products.
Section 3 defines “Energy resources exploitation” to include exploration, discovery, development, extraction, utilization, refining, processing, transport, and marketing of all forms of energy resources.
Section 3 defines “Energy resources” as any substance or mineral (or otherwise) that by itself or in combination, or after processing or refining or application of technology, emanates, gives off, generates, or causes emanation or generation of heat or power or energy, including petroleum or oil, coal, marsh gas, methane gas, geothermal sources of heat and power, uranium, and other minerals and fossils deposits.

Creation, identity, term, and principal office

Section 3 creates a body corporate known as the Philippine National Oil Company, referred to as the “Company”.
Section 3 provides that the Company shall undertake and transact corporate business primarily relative to oil or petroleum operations and other energy resources exploitation as defined in the charter as amended.
Section 3 grants the Company capacity to sue and be sued.
Section 3 provides that the principal office of the Company shall be determined by its Board of Directors.
Section 3 allows the Company to establish offices, agencies, subsidiaries, branches, or correspondents in the Philippines or abroad as business operations require.
Section 3 sets the Company’s term at fifty (50) years from issuance of the decree, deemed renewed for an equal period unless sooner dissolved by law.

Purposes: supply, development, and growth

Section 4 empowers the Company to engage in, control, supervise, and regulate the transportation, storage, importation, exportation, refining, supply, sale, and distribution of crude oil, refined petroleum, and petroleum-based products, whether imported or produced by local refineries.
Section 4 directs the Company to promote exploration, exploitation, and development of local oil, petroleum, and other energy resources.
Section 4 requires the Company to foster conditions relating to oil or petroleum operations and other energy resources exploitation conducive to balanced and sustainable economic growth.

Powers and operational authorities

Section 5 authorizes the Company, by itself or otherwise, to undertake exploration, exploitation, and development of all energy resources of the country, including surveys and related activities.
Section 5 authorizes the Company to establish and maintain, in any area within the national territory it deems appropriate, a petroleum and energy base territory and to construct, install, or maintain therein:
- duty-free ports adequate for vessels engaged in offshore oil drilling operations;
- airports sufficient for direct service flights;
- a telecommunications center and ship-to-shore communications facilities;
- electric power and fresh water supply; and
- other acts it deems necessary or advantageous for such operations.
Section 5 authorizes the Company to lease, at reasonable rates, to private domestic entities or persons portions of the petroleum and energy base, including facilities for warehousing, logistical centers, fabrication of offshore drilling components and structures, mechanical repair facilities, spaces for office, habitation, and recreational requirements of personnel engaged in offshore drilling, and immediate dependents.
Section 5 authorizes the Company to enter into contracts, with or without public bidding, with domestic or foreign persons or entities and with governments for varied aspects of oil or petroleum operations and energy resources exploitation, including equipment and raw materials acquisition through purchase, lease, rent, or other deferred payment arrangements, and services connected therewith under terms it deems proper and reasonable.
Section 5 authorizes the Company to borrow money from local and foreign sources as necessary for its operations.
Section 5 authorizes the Company to invest its funds as it deems proper and necessary in activities related to its purposes, including in government- and Company-issued and guaranteed bonds or securities, notwithstanding conflicting laws including Section 13 of Act 1459, as amended.
Section 5 authorizes the Company to organize and incorporate subsidiary corporations for the purpose of carrying out its purposes; it allows the Company to subscribe to the capital stock of such corporations in whole or in part.
Section 5 provides an exemption from registration, licensing, or other requirements under the Securities Act (C.A. No. 88, as amended) and any other law, decree, order, or regulation for securities (including shares issued by subsidiaries and corporations owned and/or controlled by the Company) and for the sale and/or subscription to such securities and shares where the Company has a controlling interest of not less than fifty-one per cent (51%) of the issued and outstanding capital stock of the subsidiaries.
Section 5 authorizes the Company to purchase, hold, alienate, mortgage, pledge, or otherwise dispose of the shares of capital stock, or any bond or security of corporations or associations, and to exercise all rights of ownership, including the right to vote.
Section 5 authorizes the Company to hold lands and acquire rights over mineral lands in excess of areas permitted to private corporations, associations, and persons by statute.
Section 5 authorizes the Company to engage in export and import business of oil, petroleum, other forms and sources of energy, and their derivatives, as well as related activities.
Section 5 authorizes the Company to acquire assets (real or personal) or interests therein and to encumber or otherwise dispose of them as proper and necessary in conducting its business.
Section 5 authorizes the Company, subject to existing regulations, to establish and maintain a communications system by radio, telegraph, or any other manner without the need of a separate franchise.
Section 5 authorizes the Company to determine its organizational structure and the number and salaries of its officers and employees.
Section 5 authorizes the Company to establish and maintain offices, branches, agencies, subsidiaries, correspondents, or other units anywhere as needed and to reorganize or abolish them as proper.
Section 5 authorizes the Company to exercise the right of eminent domain as necessary for the purpose for which it is created.
Section 5 authorizes the Company, subject to payment of the proper amount, to enter private lands for geological or geophysical studies connected with petroleum, mineral, and other energy resources exploration and exploitation.
Section 5 authorizes the Company, subject to payment of just compensation, to acquire easements over public and private lands necessary to carry out work essential to petroleum operations and energy resources exploitation.
Section 5 requires the Company to establish and maintain a technical educational system for sustained development of necessary manpower to manage and operate its affairs and business.
Section 5 authorizes the Company to adopt a code of by-laws to complement the charter.
Section 5 authorizes the Company to adopt and use a corporate seal, which shall be judicially noticed.
Section 5 authorizes the Company to perform other acts and exercise functions necessary for the attainment of the purposes and objectives.
Section 5 authorizes the Company to promulgate rules and regulations to carry out the decree’s purposes.
Section 5 authorizes the Company to perform other functions provided by law.

Board governance and director qualifications

Section 6 provides that the Company is governed by a Board of Directors referred to as the “Board.”
Section 6 sets the Board at nine (9) members to be appointed by the President of the Philippines.
Section 6 sets Board members’ term at three (3) years or until successors are appointed and qualified.
Section 6 provides that vacancies in the Board are filled by the President for the expired term.
Section 6 provides eligibility requirements for Board membership: a member must be a natural born citizen of the Philippines, at least thirty-five (35) years of age, and of established integrity.
Section 6 provides that the Chairman of the Board is the Company’s chief executive officer, and that the Chairman/President is appointed by the President of the Philippines.
Section 6 provides that other Company officers are appointed by the Board.

Chairman and President responsibilities; by-laws

Section 8 requires the Chairman of the Board and the President to exercise powers and perform duties that are provided in the by-laws or vested in them by the Board.

Audit and auditor appointment

Section 11 provides that the Commission on Audit appoints, subject to Board approval, a representative who shall be the Auditor of the Company, together with necessary personnel to assist in performance of duties.
Section 11 provides that the salaries of the Auditor and staff are approved by the Board.
Section 11 provides that auditors of corporations owned or controlled by the Company that are reputable accounting and auditing firms are appointed by their respective boards of directors.

Personnel appointment, compensation, discipline

Section 12 requires the Board, upon recommendation of the President of the Company, to appoint the officers and employees of the Company and its subsidiaries.
Section 12 requires the Board to fix compensation, allowances, and benefits; set working hours; and determine other conditions of employment.
Section 12 authorizes the Board to grant leaves of absence under regulations it promulgates.
Section 12 authorizes the Board to discipline and/or remove personnel for cause.
Section 12 requires the Board to establish and maintain a recruitment and merit system for the Company and its affiliates and subsidiaries.

Effect of the amendments

Section 1 accomplishes the amendments by replacing the enumerated sections of Presidential Decree No. 334, as amended, with updated provisions on policy, corporate identity and scope, purposes, powers, governance, audit, and personnel administration.
Section 2 states that the decree takes effect immediately.