Philippine Energy Policy Wiki

EO 80 (s. 2019) — PNOC-EC Farm-In/Farm-Out Agreements for Petroleum Service Contracts

Status
operative
Confidence
high
Effective date
2019-05-28

Full title: Rationalizing the Rules for the Engagement of Third Party Participants Under Petroleum Service Contracts, Repealing for the Purpose Executive Order No. 556 (s. 2006)

Signed: May 28, 2019 | President: Rodrigo Roa Duterte

Context

PD 87 (Oil Exploration and Development Act of 1972) allows service contract holders to assign or transfer rights via farm-in/farm-out contracts upon prior DOE approval. PNOC-EC participates in multiple petroleum service contracts as either operator or non-operating partner.

Farm-in/farm-out is an established industry mechanism to spread exploration risk and financial burden among multiple parties. Facilitating PNOC-EC’s participation is positioned as enhancing the Philippines’ competitiveness as an oil and gas investment destination [EO 80, s. 2019, WHEREAS, 2019-05-28].

EO 556 (s. 2006) previously governed this, but its rules were considered outdated; this EO repeals it.

Key Provisions

§1 — Authorization: PNOC-EC may enter farm-in/farm-out agreements both: (a) allowing third parties to participate in PSCs awarded to PNOC-EC; and (b) allowing PNOC-EC to participate in PSCs awarded to third parties. All third parties must be reputable, technically competent, and financially capable [EO 80, s. 2019, §1, 2019-05-28].

§2 — Selection process: DOE, in consultation with the Governance Commission for GOCCs (GCG), to issue rules specifying the third-party selection process for PNOC-EC. Rules must incorporate transparency and objectivity provisions, including GCG requirements for OGCC contract review [EO 80, s. 2019, §2, 2019-05-28].

Every farm-in/farm-out agreement takes effect only upon DOE approval after finding of compliance with PD 87, this EO, and other applicable laws [EO 80, s. 2019, §2, 2019-05-28].

§3 — Business judgment: PNOC-EC must observe sound business judgment and extraordinary diligence, with paramount consideration to the national interest [EO 80, s. 2019, §3, 2019-05-28].

§4 — Reporting: DOE to submit regular reports to the President on implementation, copy to GCG [EO 80, s. 2019, §4, 2019-05-28].

§6 — Repeal: EO 556 (s. 2006) repealed [EO 80, s. 2019, §6, 2019-05-28].

Policy Notes

  • Modernizes PNOC-EC’s ability to attract co-investors and technical partners in offshore exploration — critical given the capital-intensive nature of deep-water drilling
  • Retains DOE approval as a gatekeeping mechanism: no farm-out by PNOC-EC takes effect without DOE sign-off
  • The GCG consultation requirement reflects the GOCC Governance Act (RA 10149) framework for GOCC commercial transactions
  • See Petroleum Service Contracts (PSCs / SCs) and Philippine National Oil Company (PNOC) for related context

Full text: Cleaned copy