By Myrna M. Velasco

The Philippines has set into motion collaborative talks with Indonesia on prospective benchmarking of incentives for investments in the upstream petroleum sector.

This was a matter that Philippine Energy Secretary Alfonso G. Cusi had raised with Indonesian Deputy Minister of Energy and Resources Arcandra Tahar in their bilateral meeting in Singapore last week.

“With Indonesia, I’m comparing our policies as against their policies for oil and gas investments… so we had bilateral discussion,” the energy chief said.

He added that it might be worth for the country to look at their investment frameworks and their incentives regime “because they have been in the business for longer time than us and they have many exploration activities with a lot of contractors, so there are things that we can learn from them.”

At the same time, Cusi noted that Indonesia has “big resources and discoveries, so it’s best to see how they develop their policies and for us to collaborate on information how they enticed investments in their petroleum exploration activities.”

Cusi acknowledged that compared to Indonesia “we’re still new and we can’t even compare ourselves with them yet – just looking at the number of wells they have been drilling yearly and the scale of their discoveries.”

The energy chief emphasized that based on his discussion with the Indonesian official, their royalty sharing arrangement is almost parallel to what the Philippines has, “but they have bonuses and cost recoveries that proved attractive to contractors, so we’re trying to study these and perhaps compare it with our policies and practices.”

The enabling edict for the Philippines – to attract investments in oil and gas exploration as well as commercial developments – is Presidential Decree 87 or the Oil and Gas Law.

The biggest hydrocarbon discovery in the country to-date had been the multi-billion Malampaya gas field project – and the succeeding ones had been the oil fields like Galoc in Palawan and Alegria in Cebu.

Beyond these discoveries, however, the country still lags behind neighbors in Southeast Asia when it comes to bringing hydrocarbon investments to fruition – and this has been impacting immensely on its aspiration for long-term energy security.

The country is again putting itself on the market for its next round of petroleum contracting, but it has been its incentive regime that’s being placed under the stringent scrutiny of investors.