Compliance with Qualifications and Application Procedures
- Applications for concessions must prove qualifications under Republic Act No. 387 (Petroleum Act) before service agreements are reviewed
- Qualifications under Article 31 of the Petroleum Act: Individuals must be Filipino citizens, of legal age, and with capacity to contract; Corporations/partnerships must have at least 60% Filipino ownership
- Proof of sufficient financial, organizational, and technical capabilities required
- Foreign entities must be registered with the Board of Investments and the Securities and Exchange Commission; must be financially and technically qualified
- Completion of predrilling exploration work within two years from approval is required
- Applications to be submitted to the Bureau of Mines and comply with applicable laws
- Submission of an efficient and economical program of work for approval by the Secretary of Agriculture and Natural Resources
Conditions on Service Agreements
- Service agreements require prior approval by the Secretary of Agriculture and Natural Resources
- Foreign entities may bear part of exploration costs but this does not grant equity participation unless allowed up to 40% under constitutional provisions
- Effective management under the concession cannot be transferred to the foreign entity
- Review of agreements involving multiple Filipino entities must observe Section 13 of the Corporation Law
Repayment Terms for Service Contractors
- Service agreements must have repayment schemes for advances made by foreign entities
- Repayment terms: approval for foreign exchange payments, fixed repayment period less than concession lifespan
- Interest on amounts advanced shall not exceed prevailing international rates, except for pre-production expenses which align with international practice
- Repayments may be in cash or production allotments, with domestic needs prioritized
Work Obligation Requirements
- Completion of predrilling exploration work within two years is mandatory
- If warranted, drilling of at least one exploratory test well within one year after predrilling
- Government may revoke service agreement approval if work program is not fulfilled, making the agreement null and void
Labor Provisions
- Filipinos given employment preference in qualified roles
- Alien employees allowed only for specialized technical and executive positions with required legal approvals
- Mandatory understudy programs for foreign technical personnel to train Filipino workers
- Concessionaires must submit semestral reports on training progress to the Bureau of Mines and Department of Labor
General Interpretation Guidelines
- Agreements interpreted to uphold constitutional and legal inviolability
- Interpretation also focuses on encouraging significant foreign and domestic investment in oil exploration and development in the Philippines