How PSEi member stocks performed — May 18, 2018
Here’s a quick glance at how PSEi stocks fared on Friday, May 18, 2018.
DoTr opens bidding for Malolos-Tutuban rail line
THE Department of Transportation (DoTr) said it has opened the bidding for the construction contract for the North-South Commuter Railway (NSCR) project.
The DoTr is bidding out the civil works and building components of the project. It has two contract packages: the first covers elevated structures, seven stations and a depot; the second includes elevated structures and three stations.
Eligible bidders must have a Japanese prime contractor, with no nationality restrictions on sub-contractors.
The Department of Finance signed a loan agreement with Japan International Cooperation Agency (JICA) in 2015 amounting to 241.991 billion yen, which will fund infrastructure projects under the government’s “Build, Build, Build” program. Portions of this loan will be directed to the $2.88-billion NSCR project.
Bidding documents for each of the packages are available at the Procurement Service office for the non-refundable price of P50,000. A pre-bid conference is also scheduled on June 1. The bidding will close on Aug. 16 for both contracts.
NSCR, also called Philippine National Railways (PNR) North 1, is a 37.9-kilometer line from Malolos, Bulacan to Tutuban, Manila. The project hopes to initiate a commuter rail service connecting Region 3 to Metro Manila.
The DoTr started the phase 1 of the project in January. This involves the clearing of roads that will be affected by the construction of NSCR.
According to the “Build, Build, Build” website, the project hopes to cut travel time from Malolos to Tutuban to 35 minutes from one hour and 30 minutes. When it opens in December 2021, NSCR hopes to serve more than 300,000 passengers daily.
The NSCR will be connected to PNR North 2 , a line that runs to Clark International Airport and New Clark City; while the PNR South Commuter line extends to Los Baños, Laguna. — Denise A. Valdez
Former DoF officials support second package of tax reform
FORMER officials of the Department of Finance (DoF) have expressed their support for the second tax reform package ahead of public hearings set to start this week.
Former Secretaries and Undersecretaries of the DoF issued a statement on Friday that the government should “urgently pursue” the proposal to cut corporate income tax rates and modernize the fiscal incentives regime.
“We continue to share the country’s goal of becoming a prosperous, predominantly middle-class society. Achieving this will require an equitable tax system and robust public investment, which the first package of reforms began to address,” they said in their statement.
“Alongside strong and strategic public spending, tax policy must enable a fair, competitive, and growing business sector. Standard rates must be reasonable, to encourage compliance, broaden the tax base, unburden small and medium enterprises, and create strong domestic value chains. At the same time, fiscal incentives must be treated as a public investment: the economic benefits must outweigh the costs in foregone revenue, and the tax incentive regime must align with the country’s socioeconomic priorities,” they added.
The first public hearing for the second tax reform program is scheduled for Tuesday, about four months since the DoF submitted to the House of Representatives its proposal, and two months since ways and means committee chairperson Dakila Carlo E. Cua (Quirino), together with Representatives Aurelio D. Gonzales, Jr. (Pampanga 3rd district), and Raneo E. Abu (Batangas 2nd district filed their own versions on March 21.
House Bill No. 7458 mainly seeks an annual 1 percentage point cut in the corporate income tax (CIT) rate from the current 30% to 20%, while the Finance department’s proposal features a 1 percentage point cut until the rate hits 25%, conditional upon collecting 0.15% of gross domestic product, or about P26 billion, from the streamlining of incentives.
Both proposals seek to put the tax holidays granted by various investment promotion agencies into a “single menu” under the supervision of the Fiscal Incentives Review Board co-chaired by the Finance and Trade departments, and replace the current perpetual 5% tax on gross income earned to a time-bound 15% tax on net taxable income, while removing those that do not qualify under the government’s medium-term Strategic Investment Priorities Plan.
Mr. Cua said last week that his committee will seek proof from affected stakeholders on which incentives yield benefits the economy to warrant its possible retention.
Moreover, the former DoF officials said that the current fiscal incentives regime was made “complex and costly made by years of neglect and abuse.”
They also said that the proposal would “spur countryside development and public investment,” noting the provision of granting a one-year relocation tax holiday for firms moving out of Metro Manila and selected areas in Central Luzon and Calabarzon, and “superior incentives for lagging regions.”
They added that the reform proposal would free local government units from “a system that allowed registered enterprises to pay preferential rates in lieu of all taxes, including local taxes.”
The officials also said that they support the inclusion of expanding the scope of the Tax Incentives Management and Transparency Act for better monitoring of tax perks.
“We therefore express our strong support for Package 2 and urge members of Congress to ensure its timely passage, the statement read in conclusion.
The statement of support was signed by former Finance Secretaries Margarito B. Teves, Roberto F. de Ocampo, Alberto G. Romulo, Salvador M. Enriquez, Jose T. Pardo, Jose Isidro N. Camacho, Cesar V. Purisima, and Undersecretaries Romeo L. Bernardo, Lily K. Gruba, and Cornelio C. Gison.
The DoF seeks to have the corporate income and incentives package — the second of five proposals — implemented by 2019. This would be the follow-up reform to the Tax Reform for Acceleration and Inclusion (TRAIN) law or Republic Act 10963 that became effective in January.
“We hope that the House and later on the Senate will pass this certainly within this year because starting January, that’s already campaign season,” Finance Secretary Carlos G. Dominguez III told reporters on Friday. — Elijah Joseph C. Tubayan
DICT sees ‘3rd player’ selection by Aug. at earliest
THE Department of Information and Communications Technology (DICT) said that the earliest time for selecting the third entrant in the telecommunications industry, the so-called “third player,” is the end of August.
“End of August,” DICT Acting Secretary Eliseo M. Rio, Jr. said when asked by reporters about the earliest time for naming the third player, on the sidelines of the BusinessWorld Economic Forum on May 18.
Mr. Rio said that the final terms of reference may be released by the end of June. The department is still fine-tuning the selection criteria which will include financial and technical requirements.
Among those being finalized is the final set of frequencies to be awarded to the third player.
Mr. Rio said that frequencies of Bayan Telecommunications, Inc. (Bayantel) may be available by the time of the bidding for the third player since there is an agreement to settle the issue out of court.
“There’s an agreement that it can be settled, out of court, before the bidding starts. These frequencies will become available,” Mr. Rio said.
The 10 MHz of third generation (3G) frequency, however, will not be entirely awarded to the third player, as the National Telecommunications Commission (NTC) will be studying an equitable method of distribution.
Mr. Rio said that doing so may be anti-competitive since Globe Telecom, Inc. only has 10 MHz of the 3G frequencies. PLDT, Inc. has 25 MHz, while 5 MHz is already reserved for the third player.
“NTC will decide how to distribute it equitably. If we give all to the third player, PLDT will have 25, the third player will have 15, and Globe only has 10… Globe’s traffic in 3G is greater than PLDT,” Mr. Rio said.
Around 300 MHz of frequency assignable to the third player. The DICT said this is sufficient for the third player to compete with incumbents PLDT and Globe.
Data from the NTC estimates that 30.32% of all available radio frequencies is allocated to PLDT while Globe holds around 24.9%. Some 39.35% is unassigned or are under litigation, and there is a remaining 5.41%.
Among the existing requirements for the third player are: paid-in capital of at least P10 billion; experience in providing, delivering, and operating telecommunications services in the last five years; a congressional franchise not related to either PLDT or Globe; and no uncontested liabilities with the NTC as of Jan. 31, 2018.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Patrizia Paola C. Marcelo
TRAIN 2 will harm airline industry — PHL AirAsia
AIRLINES are worried about the negative impact of the second package of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which they say will effectively remove their tax incentives once it is approved.
“I hope they don’t go through with their TRAIN 2 plans, which will remove our tax incentives. It will make the domestic airlines — not only us, but all the others: PAL (Philippine Airlines), Cebu Pac (Cebu Pacific) — less competitive with our peers in the international market,” Philippines AirAsia President and Chief Executive Officer (CEO) Dexter M. Comendador told reporters in an interview in Pampanga.
He said the passage of TRAIN 2 means everything will be taxed, from spare parts to fuel. Mr. Comendador noted that maintenance, spare parts and fuel are the biggest expenses of carriers, and taxing them will impose huge costs on the airline industry.
“You’re killing the industry that was liberalized by President Ramos. Why do it now, when the market for aviation is growing,” he added.
AirAsia is a unit of Malaysia’s AirAsia Group, founded by CEO Anthony Francis Fernandes. It started operations in the Philippines in 2012. Mr. Fernandes, who is better known by the name Tony, said in a separate interview in Pampanga that AirAsia is doing very well in the Philippines right now, noting it is their “best kept secret.”
Mr. Comendador said Mr. Fernandes is bullish on the Philippines. The airline currently dominates the market in Malaysia and Thailand, and is boosting its resources in the country to perform better.
The company is hoping to conduct its initial public offering by the end of 2018, after it overcomes a negative equity balance.
The bill for TRAIN 2 was filed with the House of Representatives in March, and is up for discussion in the third regular session in July, after the State of the Nation address of President Rodrigo R. Duterte.
The bill intends to cut corporate income tax rates from 30% to 25%, while also rationalizing investor incentives.
Mr. Comendador said the Air Carriers Association of the Philippines (ACAP) is working on a position paper to submit to the government by next month.
The Department of Finance has said it is looking to implement TRAIN 2 by January 2019. The first package of TRAIN was implemented January of this year, which hiked taxes for tobacco, fuel and sugar, among others. — Denise A. Valdez
Australia’s Outsourcing Angel hiring in Davao City
DAVAO CITY — Australia’s Outsourcing Angel, a division of Red and Black Solutions Pty Ltd., is planning to hire virtual assistants (VAs) in Davao City, focusing on candidates with a marketing background.
Linh Podetti, owner and creator of the social enterprise, said the company currently has 60 VAs in the Philippines and hopes to expand this network of online workers.
“In the Philippines, your English is very good, it is easier to make an impact to you,” Ms. Podetti said in an interview last week, noting that she also has VAs based in Nepal, India, Pakistan, and Indonesia.
Outsourcing Angel provides outsourcing solutions to business owners who need help with digital marketing, administrative work, customer services, and Web development tasks.
“We have VAs that are Web and graphic designers, social media marketers, anything you can do online, but most businesses need marketing help,” she said.
The company also organizes seminars and workshops for becoming a VA, finding online work, and online business opportunities.
“We do initiatives like creating seminars, teaching people who never heard about VA or who want to become a VA because we believe that a VA gets to work from home, get to make good money for the family, and they can spend more time with the family, unlike (full-time) BPO (business process outsourcing) jobs,” she said.
Outsourcing Angel is also collaborating with Virlanie Foundation, Inc., a Philippine nongovernment organization helping street children, for learning programs offered to underprivileged youth.
This training includes basic computer skills, MS Office, art and design, and communications/writing, alongside values education.
“Our goal is not just to create jobs to people in the Philippines, but also help them to earn as VAs,” Ms. Podetti said. — Maya M. Padillo
GOCC subsidies rise over 130% in 1st quarter
SUBSIDIES granted to state corporations more than doubled in the first quarter, according to Bureau of the Treasury (BTr) data, with the bulk of the subsidies going to the Philippine Health Insurance Corp. (PhilHealth)
Overall subsidies remitted by the national government to government-owned and -controlled corporations (GOCCs) in the first three months of the year totaled P45.29 billion, up 130.29% from a year earlier.
PhilHealth received a total of P15.21 billion during the first quarter, about a third of the overall subsidies, followed by the Land Bank of the Philippines at P12.33 billion.
The National Irrigation Administration, meanwhile, was the third-largest recipient of government subsidies at P8.34 billion.
The National Home Mortgage Finance Corp. was the only GOCC that did not receive a subsidy during the period.
Subsidies are given to GOCCs to cover operational expenses that are not supported by their revenue to fund specific projects or programs.
The bulk of the first-quarter support to government firms was given in March, totaling P35.24 billion, up 319.17% from a year earlier, and up 286.15% from April.
PhilHealth and LandBank were the largest recipients that month at P15.09 billion and P12.33 billion, respectively.
The government is budgeting P188.93 billion for subsidies to GOCCs this year, up 44.12% from the actual funds issued in 2017.
Subsidies in the first quarter are equivalent to 23.97% of the 2018 subsidy budget. — Elijah Joseph C. Tubayan
What’s your digital tax strategy?
In recent years, tax authorities around the world have been embracing digital methods of tax administration. Through new legislation, regulations and other initiatives focusing on digitalization, tax authorities are able to collect more and more tax-relevant data in digital format, gain more visibility over taxpayer compliance, streamline their tax audits, increase tax collections, and improve the taxpayer filing experience.
Digital tax administration is not new to the Philippines. For over 15 years now, certain taxpayer groups have been using the electronic filing and payment system (EFPS) and, more recently, the eBIRForms return preparation software and online filing facility. Covered taxpayers are also required to submit their Summary Lists of Sales, Purchases and Importations, as well as periodic alphabetical lists (or “alphalists”) of payees subjected to withholding taxes — periodic, summary-type data that is being analyzed by the BIR through the Reconciliation of Listings for Enforcement (or RELIEF) Validation System.
However, the upcoming e-Invoicing and eSales reporting requirements (as introduced by the TRAIN Package 1) presents a significant advancement for the BIR in terms of digitalizing tax administration. With point-of-sale data, and (possibly) payment/purchase data in digital format, the BIR will soon be able to capture much more valuable transactional-level tax Big Data. This may enable the bureau to perform much more complex (perhaps, even real-time) analytics, improve selection of taxpayers for audit, rationalize tax findings (e.g., tax findings arising from discrepancies in transactional level data), and streamline (and potentially even automate) the entire tax audit/examination process.
Traditional tax functions are often compliance-driven and reactive. Filing of returns and related reports are often motivated by the desire to avoid penalties for late or non-submission. Similarly, modifications to strategic and operational aspects of the tax function are often made in response to the most recent tax controversy exercise or regulatory changes. Tax risks are typically analyzed and addressed at the time of preparation of the returns — or sometimes even post-filing, in preparation for or in response to a Letter of Authority for tax audit.
As tax authorities employ more and more digital data collection methods, increasing the amount of data collected, and accelerating the frequency at which data is being collected, taxpayers may soon find that a reactive approach to tax compliance may no longer be sufficient, albeit relevant. Taxpayers must learn to take a more strategic approach to managing their tax risks.
In developing a digital tax strategy, businesses may want to consider the following key elements:
Digital Tax Effectiveness — a business must consider how it can continue to effectively manage tax risks in the face of evolving technologies in its business environment. Disruption and innovation are creating new businesses or changing how taxpayers operate their businesses. Artificial Intelligence (AI)-based services rendered over the Internet, for example, challenge traditional tax concepts such as situs or object of taxation, creating a new set of tax risks that taxpayers will need to identify, understand and manage.
Tax Technology — taxpayers should also consider how best to leverage technology to improve the tax function. Many businesses undergo functional, business or enterprise-wide transformation exercises — and are investing heavily in digital tools and technologies like big data/data analytics and automation for operations, human resource management, customer experience or after-sales support, financial analysis or management reporting, governance and monitoring, just to name a few. Yet, the tax function tends to remain under-invested in these technologies, continuing to rely heavily on spreadsheets and manual processes. The future of tax compliance necessitates that the tax function should be able to shift its resources from mere compliance-driven routine processes like return preparation and submission, and transition into other business activities where tax technical expertise is more valuable to the rest of the organization.
Tax Big Data — as tax authorities collect more and more data in standardized, digital format, a business will have no choice but to comply — and will therefore already have on hand the same digitalized data, together with the tons of other data and metadata generated by processes within the IT environment through which the data required by tax authorities was created. With the volume of data already available, and considering the costs that went into producing those data, a business should find ways to leverage analytics to extract value-adding, tax-relevant insights from the abundance of data. Beyond just determining “what” the tax risks are, tax big data, if properly harnessed, can also potentially provide insights such as “why” the risks are so, identify systemic versus isolated issues, or be consolidated to improve governance and monitoring.
Digital Tax Administration — taxpayers must be prepared for regulatory changes and the increasing transparency requirements of a tax authority using digital means for tax administration. Taxpayers must therefore be “ready” for a digital tax audit, which may be inevitable. This is more than the usual office or desk audit performed by the tax authorities. As tax authorities increase their ability to collect more data at more frequent intervals and at a much more accelerated pace, a taxpayer must be confident in the quality of data being submitted, as well as in its own ability to retrieve and provide the data required by the authorities in a digital tax audit.
As tax authorities embrace digital, taxpayers will, at the minimum, have to comply. Taxpayers must be able to keep up with evolutions in digital tax administration, from increasing digital reporting requirements to dealing with a digital tax audit. Preparing for a digital tax administration, however, will entail costs to the taxpayer. In order to maximize the value of investing in tax technology, taxpayers must also consider an effective digital tax strategy — a strategy that is able to address the tax risks of the evolving business environment, maximize the capabilities of the available tools and underlying digital data, and provide confidence in the quality, accuracy and completeness of data submitted to the tax authorities. In order for a business to properly evolve its tax function, it must therefore proactively develop a digital tax strategy that is customized and best suited to the organization.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Lee Celso R. Vivas is a Tax Partner of SGV & Co.
Rain or Shine in top spot after win vs GlobalPort
By Michael Angelo S. Murillo
Senior Reporter
THE Rain or Shine Elasto Painters kept their spot on the top of the Philippine Basketball Association (PBA) Commissioner’s Cup standings after beating the GlobalPort Batang Pier, 96-90, in a highly competitive and emotionally charged match yesterday at the Smart Araneta Coliseum.
Challenged greatly by the Batang Pier throughout the contest, the E-Painters collectively showed their grit and determination to get the better of the former and improve to a league-leading 5-1 record as the midseason tournament hits the halfway point.
The match got off to a frenetic start with both teams firing from all cylinders.
GlobalPort held a 16-9 advantage midway into the opening quarter with import Malcolm White and Sean Anthony spearheading the thrust.
Rain or Shine narrowed the gap, 26-27, after five minutes before the Batang Pier settled for a 30-26 lead by the end of the first quarter.
In the second canto the E-Painters would open things with a 7-3 run to level the count at 33-all at the 7:07 mark.
They would build on the momentum, led by James Yap and import Reggie Johnson, taking a six-point cushion after, 39-33, with 5:15 remaining on the clock.
But the Batang Pier would regain their footing, answering with a 9-2 run to seize the lead anew, 42-41 heading into the final two minutes.
A triple by Mr. Anthony made it 45-41 for GlobalPort but Rain or Shine would finish the period with a 4-0 surge to tie the knot at 45-all by the halftime break.
Rain or Shine picked up where it left off in the second quarter, sprinting to a 59-49 advantage in the first seven minutes of the third period as Beau Belga and Ed Daquioag joined in the scoring fray.
It was an ascent that the E-Painters would make good use of as they kept their opponents at bay and continued to hold sway, 67-62, heading into the payoff quarter.
Globalport raised its level of play to start the final canto, going on to level the score at 74-all with 6:50 to go.
The game was momentarily halted after as Rain or Shine guard Chris Tiu went to the floor bleeding from a wayward elbow from Mr. White.
When the match resumed, the two teams continued with their back-and-forth.
The count stood at 79-78 with Rain or Shine on top with five minutes remaining in the ball game.
Five straight points from Mr. Johnson helped the E-Painters to an 84-79 lead at the 3:49 juncture of the contest.
Play was once again stopped with 3:20 remaining on the clock after a near-fracas involving multiple players from both teams that resulted in GlobalPort’s Kelly Nabong and Rain or Shine’s Maverick Ahanmisi being thrown out for fighting fouls meted on them.
The nip-and-tuck affair continued as the game wound up, with GlobalPort coming within four points, 94-90, with 20 ticks to go, but the E-Painters would not seize command and moved on to close out the game.
Mr. Johnson paced Rain or Shine with 18 points and 16 rebounds with Mr. Yap finishing with 14 points.
Mr. Ahanmisi and Raymond Almazan added 13 and 12 points, respectively, while Mr. Tiu with 10 points.
Mr. White, meanwhile, led GlobalPort with 21 points with Stanley Pringle adding 15 of his own.
“After what happened to me I really wanted to win the game. I think that is the best revenge after what that person (White) did to me. Happy that my teammates had my back. And this is a good start for us at 5-1,” Mr. Tiu said after their victory.
Following Sunday’s double-header, the PBA takes a nine-day break to give way to the three-leg PBA All-Star festivities. Regular action resumes on May 30.
Duterte: No assurance US on our side
THE PHILIPPINES has no assurance that the United States of America will remain by its side if war breaks out in the disputed South China Sea region, President Rodrigo R. Duterte said.
Mr. Duterte made his remarks during the ceremonial opening of an onshore oil project in Alegria, Cebu, on Saturday, May 19.
“You know, that’s my lamentation. We are in the West Philippine Sea, but we have a problem,” he said.
“We are caught in a limbo. We don’t have the assurance that America will remain by our side if a war breaks out,” he added.
The Asia Maritime Transparency Initiative (AMTI) said last Friday, May 18, that the Pezople’s Liberation Army Air Force (PLAAF) of China has “landed bombers, including the top-of-the-line H-6K, on an outpost in the South China Sea for the first time.”
“Nearly all of the Philippines falls within the radius of the bombers, including Manila and all five Philippine military bases earmarked for development under the U.S.-Philippines Enhanced Defense Cooperation Agreement,” the AMTI said on its Web site.
“China has built large hangars at all three of its ‘Big 3’ outposts in the Spratlys (Subi, Mischief, and Fiery Cross Reefs) that can accommodate bombers like the H-6 series (as well as large transport, patrol, and refueling aircraft),” the AMTI said.
Mr. Duterte told his audience in Cebu: “Don’t believe that I didn’t do anything about the issue, that I just let it be. I told him [Chinese President Xi Jinping] this straight. I said, ‘I’m going there to dig my oil.’”
“And then he (Chinese president Xi Jinping) said, ‘We have just become friends and we have just begun to get to know each other. Let’s not ruin the relationship that we have.’”
“He’s Chinese. That’s how they are. You know, my grandfather was a Chinese based in Cebu. From here,” the President added.
He also said China has planes, “not stationed in Spratlys but in Chinese provinces facing… the South China Sea.”
“And with their hypersonic, they can reach Manila within seven to 10 minutes. If we will go to a full-blown war, where would Philippines end up in?” the President added.
In his speech last February, Mr. Duterte said China’s military bases in the South China Sea were built to defend itself against any attack by the United States.
“The Chinese bases are not intended for us. The contending ideological powers of the world or the geopolitics has greatly changed. [The bases] are really intended against those who the Chinese think would destroy them, and that is America,” Mr. Duterte said at the 20th Founding Anniversary Celebration of the Chinese Filipino-Business Club on Feb. 19.
Senators also expressed concern over recent developments in the disputed waters.
“I am not in favor China’s actions. If they are truly a friend, why are they continuing to occupying Philippine territory? Somehow we need to stand up and protect our territorial integrity through a diplomatic protest or whatever means,” Senator Joseph Victor G. Ejercito said in a radio interview.
This developed amid talks between the Philippines and the United States Pacific Command (US PaCom) led by its chief Admiral Harry B. Harris, Jr. in Honolulu, Hawaii to discuss “critical regional and international issues,” the Department of Foreign Affairs (DFA) said on Sunday.
The Philippine delegation included Executive Secretary Salvador C. Medialdea, Foreign Affairs Secretary Alan Peter S. Cayetano, Defense Secretary Delfin N. Lorenzana, Interior and Local Government Officer-in-Charge Eduardo M. Año, Philippine Ambassador to the United States Jose Manuel G. Romualdez, and Permanent Representative to the United Nations Teodoro L. Locsin, Jr.
Senator Risa N. Hontiveros-Baraquel in a statement on Sunday said: “As a country with a Constitution that renounces war as an instrument of national policy and the use of nuclear weapons, the Philippines must sponsor a resolution before the UN condemning China’s threat of nuclear war against the Philippines and demand that it comply with the ruling of the United Nations Convention on the Law of the Sea (UNCLOS) arbitral tribunal.”
“The Senate should form a strong stand… We must condemn this creeping invasion of our territory and sovereignty,” Senate Minority Leader Franklin M. Drilon said in a radio interview Sunday.
For his part, Magdalo Representative Gary C. Alejano said: “This is a global concern. Right now, the Philippine government is acting selfishly, and foolishly, by dismissing the installation of military-grade weapons as something not to be concerned about.” — Arjay L. Balinbin, with Camille A. Aguinaldo and Charmaine A. Tadalan
Chinese company launches onshore oil project in Cebu
By Victor V. Saulon, Sub-Editor
PRESIDENT DUTERTE warned residents of Alegria, Cebu, to brace for the influx of local migrants as a Chinese company launched on Saturday the commercial operation of the first onshore oil discovery in the country.
“Prepare for a massive migration,” he told the townfolk who witnessed the event, which was hosted by China International Mining Petroleum Co. Ltd. (CIMP), the entity behind the project that expects to drill at least 3 million barrels of oil up in the mountains of Alegria in the next 19 years.
CIMP, a company 51% owned by Hong Kong-listed Polyard Petroleum International Group Ltd., has invested $30.80 million in Service Contract (SC) 49 in the oilfield, said the Department of Energy (DoE).
Mr. Duterte described the project as a “magnet that draws people together.”
“But since they are Filipinos, you should accommodate them and partake of the bounties of what God has given us in the bowels of the earth,” he said.
The bounty is an initial extraction of 200 barrels a day and eventually 1,000 barrels daily from the oilfield, said Edgar Benedict C. Cutiongco, CIMP assistant country manager.
“We sell it locally. We have industrial buyers,” he told reporters. “But at this point, kasi nga sinisimulan pa lang namin (because we’re just starting the project), we’re looking at the best possible option in our sales. So hindi pa kami nakaka-establish ng relationship (we have not yet established a relationship).”
The DoE monitors six exploration wells drilled by CIMP and its partners. CIMP acquired 80% participating interest in SC 49 in southern Cebu and became its operator from July 1, 2009. Skywealth Group Holdings Ltd. holds a 16% interest, with Phil-Mal Energy International, Inc. holding the rest.
Drilling of the first well started in October while drilling for the sixth was completed in March 2018.
The community or the barangays that host the oil field stand to corner 14% of the “profit oil” of Alegria, Mr. Cutiongco said.
Profit oil is the remaining gains from production after the participating partners have been compensated for their investments and operating expenses. The law requires 60% of profit to go to the government, and 40% to the investors. The government share is divided as 60% for the national coffers, 18% for the municipality, 8% to the provincial government and the rest to the barangays.
DoE Secretary Alfonso G. Cusi said: “What CIMP is doing here at Alegria is very good for the community especially with the joint declaration of commerciality of the two wells that they are developing.”
“The quantity of production is still not that big but that will be ready enough to power some of the cement factory, some canning factory and that would help us also save dollars,” he added.
Mr. Cutiongco said Alegria’s potential is not limited to oil as the field also has extractable gas.
For now, he said the thrust of the investing partners is the drilling of the areas with oil, with the gas areas to follow with the needed investment. He added that the commercial operation of SC 49 would be followed by a “sub-project.”
“We are planning to put a small gas-fired plant to produce electricity,” he said, adding that CIMP will start with a 6-megawatt (MW) power plant, or a two unit facility each with 3-MW capacity.
The Alegria oilfield covers a land area of 197,000 hectares, with about 42,749 hectares allotted to the production area.