Ex-PNOC head defends signing ‘unconstitutional’ PH, China, Vietnam exploration deal

A former president of the Philippine National Oil Company (PNOC) defended his decision to sign the Joint Marine Seismic Undertaking (JMSU), which the Philippines entered into with China and Vietnam in 2005 but was later declared unconstitutional by the Supreme Court.

At a forum organized by the National Youth Movement on the West Philippine Sea, Eduardo Mañalac, who was president of the PNOC (from 2004 to 2006) during the Arroyo administration, said that, when he signed the JMSU on behalf of the government, it was in accordance with government orders and directives in relation to a policy of energy independence.

In January, the Supreme Court ruled that the 2005 JMSU was unconstitutional because it allowed wholly-owned foreign corporations to explore the country’s natural resources.

The JMSU is an agreement by the PNOC, the China National Offshore Oil Corp., and the Vietnam Oil Gas Corp. on oil exploration in 142,886 square kilometers of the South China Sea.

"The tripartite agreement for the Joint Marine Seismic Undertaking is a three-year cooperative agreement between CNOOC, Vietnam, and PNOC to jointly gather seismic data in certain areas of the South China Sea,” Mañalac said.

“It is connected with the government's effort to acquire or reach energy independence for the people,” he added.

The former PNOC chief said that the JMSU was “not my idea,” adding that “it is the idea of the government as part of its energy independence strategy.”

“With our high dependence on imported petroleum and rising oil prices in 2004. The government then… launched an ambitious five-point energy independence program," he explained.

The former PNOC president said the agenda of the JMSU was to develop the Philippines' indigenous petroleum resources, promote renewable power, increase the use of alternative fuels, form strategic regional alliances, and strengthen energy conservation programs.

"The JMSU was part of our five-point energy independence agenda to find new and indigenous petroleum reserves,” Mañalac said.

The Supreme Court’s decision stemmed from the petition filed in May 2008 by then Bayan Muna Party-List representatives Satur Ocampo and Teodoro Casiño assailing the constitutionality of the undertaking.

The petitioners argued that the JSMU was illegal as it allowed foreign corporations to undertake a large-scale exploration of petroleum resources, violating a provision under the 1987 Constitution that reserves the exploration, development, and utilization of natural resources to Filipinos or corporations that are 60% owned by Filipinos.

For its part, the respondents argued that Section 2, Article XII of the Constitution was inapplicable as it covered the utilization of natural resources while the JSMU only involved pre-exploration activities.

The JMSU allowed seismic work on a 142,886-square-kilometer area in the West Philippine Sea.

Nonetheless, Mañalac said the PNOC, under his leadership, had been “extremely careful and consistent in ensuring the constitutionality of the JSMU.”

“PNOC closely coordinated with concerned agencies such as the DOE (Department of Energy), DFA (Department of Foreign Affairs), and DOJ (Department of Justice) to ensure complete staff work,” he said.

“The JMSU is a commercial and operative agreement between three national oil companies to jointly acquire seismic data. No oil exploration drilling, no production activities were covered by the agreement… JMSU is not a treaty and if in three years of the JMSU, no new definitive agreements are agreed on, the JSMU expires. And it expired on June 8, 2008," Mañalac said.

In a press briefer, the high court said that it was clear that the JMSU was executed to determine if petroleum existed in the area.

The SC cited a clause of the JMSU which stated the parties’ “expressed desire to engage in a joint research of petroleum resource potential of a certain area of the South China Sea as a pre-exploration activity.”

Mañalac said the JMSU did not undermine the Philippines’ rights in its exclusive economic zone in the West Philippine Sea.

"It is very clear that the agreement is designed to be scientific in nature and does not affect any territorial claims of any country either by the Philippines, China, and Vietnam,” he said.

Malampaya stake

During the forum, Mañalac also admitted eventually supporting the proposed sale of half of the PNOC-Exploration Corp.’s 10% stake in the Malampaya Consortium to a South Korean firm way back in 2005.

"The instruction to sell the 50%, meaning the 5%, of the 10% of PNOC-[EC] came from the government, came from the DOF (Department of Finance), supported by the Executive, by the President,” he said.

“The reason given to sell the PNOC-EC share at the time was that, if you remember, PNOC paid a hundred plus million for the 10% (stake). And so inutang ‘yun daw (It was loaned). So what the government was saying was we have to pay that. We have to raise the money," he said.

"So they gave me instructions to sell half of it. Of course, I was against it but you have to follow, you argue against it but at the end of the day, you try to obey the instructions as best as you can," he added.

Mañalac said that the sale was not consummated as “I guess the NEDA (National Economic and Development Authority) was able to convince the administration to keep the whole of the 10%.”

"That's my recollection," he said.

The Malampaya gas field is a critical energy asset for the Philippines as it supplies around 20% of Luzon’s power requirements. — DVM, GMA Integrated News