IT is becoming increasingly obvious that the operation of the Malampaya Gas Field in Palawan, the Philippines is being run by a company that is incompetent and unqualified to manage and implement the complex system of processes involved in day-to-day operations of oil and gas exploration and production.
The crisis came to a head last month when gas from Malampaya reached zero output level without any previous alerts sent to long-standing customers.
Hong-Kong-based media outlet BNN exposed the role of Philippine Energy Secretary Raphael Lotilla in awarding the Malampaya gas field service contract to Prime Energy owned by Filipino tycoon Ricky Razon, known to be a good friend of Philippine President Ferdinand Marcos Jr. Not only had Malampaya’s gas supply dwindled severely, itwas found that significant corrosion had occurred in the pipes conducting the gas, with no one the wiser.
Prime Energy Resources is directly responsible for oversight of Malampaya, and cannot deny culpability.
There were serious questions regarding Prime Energy’s technical and financial capabilities when the Department of Energy under Secretary Raphael Lotilla approved Prime as a service contractor for Malampaya in 2021 without properly vetting the company.
Presidential Decree 87 (Section 11e of the Oil Exploration and Development Act of 1972 signed into law by Former President Ferdinand E. Marcos Sr.) clearly states that the transferee (Prime Energy) must be “as qualified as the transferor (Shell) to enter into such a contract with the government.”
Lotilla expanded the scope of the law by creating DOE Circular No. DC2007-04-0003 prescribing the guidelines and procedures for the transfer of rights and obligations in petroleum service contracts.
Section (e) of the circular defines the requirement of “documents evidencing financial, legal, and technical qualification of the prospective transferee” prior to government approval:
1) Financial Qualifications
i. Audited financial statements and annual reports for the last three years; and
ii. Particulars of financial resources available to the prospective transferee.
(It is common knowledge that Prime Energy paid an amount equal to about $380 million to Shell to obtain a 45% participating interest in Malampaya with funds obtained partially from a bank loan and partly from future income from Malampaya. No funds were provided by Prime Energy itself.)
2) Technical Qualifications
i. Technical and industrial qualifications, eligibilities, and work-related experiences of the prospective transferee and its officers and employees
ii. Technical and industrial resources available to the prospective transferee for the exploration, development, and production of petroleum resources.
It is also public knowledge that Prime Energy had no experience whatsoever in oil and gas exploration and production prior to becoming a Malampaya service contractor. Razon claims to have kept Shell’s operational team, Shell Philippines BVX, which actually lost its affiliate position when its mother company Shell left, therefore losing its own technical qualifications. Donnabel Cruz is managing director and general manager of Prime Energy, which holds the key to 20% of the Philippines’ national electricity needs. Cruz was the health and safety manager for Shell Philippines. Safety and health are extremely important issues in any company, but the skill set in that area precludes running a billion-dollar gas field complex with responsibility for supplying our country’s power needs.
A skills gap is defined as resulting from an exodus of not only skilled employees, but also “tribal knowledge,” learned on the job within industries or work plants and rarely captured in any manual or textbook. Traditionally, workers gained these skills via the long route of putting in the time and working closely with the machinery and systems every day. They experienced the invention and the foundational works that made these industries so successful. Without this passing on of skills and experience, industries are losing the knowledge and talent that allow workers to look at a problem, assess it, and then immediately address it by knowing exactly what will or will not work. New workers are placed in the position of having to take the reins of equipment they’ve never put together, never seen in action, and have never dealt with other than perhaps a very basic training session. This is the current sad and dangerous truth of the Philippines’ greatest natural resource, the Malampaya Gas Field.
Secretary Lotilla broke a specific provision of PD87 and ignored the terms of his own DOE Circular by approving Razon’s Prime Energy Resources as a Malampaya service contractor when it was clearly unqualified. To date, no documents evidencing Prime’s qualifications were ever presented. Was President Ferdinand Marcos Jr. aware of this crime? And was he also knowledgeable about the fact that Prime Energy now earns 100 million pesos or $1.79 million a day from Malampaya — money that belongs to the Filipino people and could have been used to alleviate our crushing poverty and the sorry state of our economy?
NATIONAL YOUTH MOVEMENT FOR THE WEST PHILIPPINE SEA
