Background of Service Contract No. 38 (SC 38)
- In December 1990, the DOE, representing the Republic, entered into SC 38.
- SC 38 involved a consortium of Shell Exploration B.V., Shell Philippines LLC, Chevron Malampaya LLC, and PNOC-Exploration Corporation.
- The contract covers exploration, development, and production of petroleum offshore northwest of Palawan.
- On April 30, 1998, the DOE and SC 38 Contractor declared commercial quantities of petroleum in Camago-Malampaya and San Martin reservoirs.
Status and Challenges of Camago-Malampaya Reservoir
- The reservoir contains both natural gas and oil resources.
- The SC 38 Contractor declined to develop the oil leg due to its non-commercial viability based on their evaluation.
- There is urgency to explore and produce oil before natural gas production undermines extraction possibilities.
- Global increase in oil prices underscores the importance of developing domestic oil reserves.
Directive to the Department of Energy (DOE) - Section 1
- DOE is tasked as the lead agency to immediately pursue exploration, development, and production of crude or black oil from Camago-Malampaya.
- Activities must respect existing rights of SC 38 Contractor.
- National interest is paramount in all undertakings.
Collaboration with PNOC and Definition of Service Terms - Section 2
- DOE shall undertake activities through the Philippine National Oil Company (PNOC) or its subsidiaries.
- DOE and PNOC are to commence discussions immediately to define service terms.
- They may consult the SC 38 Contractor to optimize joint operations in natural gas and oil production.
Third Party Participation - Section 3
- PNOC or its subsidiary may engage third parties if necessary.
- Such engagement is subject to existing rights, applicable laws, government rules, and DOE approval.
Reporting Requirements - Section 4
- DOE must submit regular progress reports to the President on implementation efforts.
Repealing Clause - Section 5
- Any inconsistent executive issuances, rules, or regulations are repealed, amended, or modified accordingly.
Separability Clause - Section 6
- If any provision is declared unconstitutional or invalid, other provisions remain effective.
Effectivity - Section 7
- The Executive Order takes effect immediately upon publication in the Official Gazette or a newspaper of general circulation.