THE energy sector had a wild ride this year, marked by success of the renewable energy and petroleum exploration sectors, and marred by controversies on fuel overpricing, cartelization and government intervention.
Energy Secretary Angelo T. Reyes himself described 2009 as a “most eventful year, a most exciting year bordering on the turbulent.”
“Have you seen the energy sector this hyperactive before?” Reyes said.
The year 2009 started off on a high note, following the passage of the Renewable Energy Law in December 2008, a landmark piece of legislation considered to be the first and most comprehensive of its kind in Southeast Asia.
“The legislation was the envy of most other countries and we were ahead in providing the proper legal and policy frameworks for the promotion of RE,” Reyes said.
In a span of only a year, the law spurred hefty investments in the country’s energy sector. As of end-2009, the Department of Energy had awarded over 90 renewable energy contracts to 24 companies that had committed to pour in as much as $3.2 billion in fresh investments.
“We have over 60 more in the pipeline, so we have seen ... pronounced interest among local and foreign investors,” Reyes said.
On the petroleum exploration front, the country’s investment potential was given a boost following the entry of two giants, namely ExxonMobil Exploration and Production Philippines BV and BHP Billiton Petroleum Pty. Ltd. in Service Contract 56 in the Sulu Sea.
ExxonMobil’s recent discovery of hydrocarbons toward the end of the year—and after drilling only one exploration well—had further drawn renewed interest from oil majors over the untapped, potential oil and gas resources of the country.
While some sectors soared in 2009, the downstream oil industry however took a beating from accusations of overpricing and cartelization, and most notably, the imposition of Executive Order No. 839, which froze fuel prices for over two weeks at their Oct. 15 levels.
These, despite having lower oil prices in 2009 compared to the previous year, when crude oil reached an all-time high of $147 per barrel. A number of times, several groups called for a review of the Oil Deregulation Law to see whether it still served its purpose.
In early 2009, militant and civil groups, along with the National Economic and Development Authority, accused Petron, Pilipinas Shell Petroleum Corp. and Chevron Philippines Inc. of overpricing their petroleum products.
Then Neda director general Ralph Recto said that petroleum products were overpriced by P8 a liter, while the Pambansang Lakas ng Kilusang Mamamalakaya ng Pilipinas (Pamalakaya) and Bagong Alyansang Makabayan (Bayan) alleged that the “Big 3” continued to rake in P167.03 million daily in extra profits due to overpricing.
These allegations were partly fueled by the weekly price adjustments implemented by the oil firms, which they said were meant to reflect more closely price movements in the world crude market.
After the noise died down, the oil firms’ profits were again threatened by EO 839, which forced them to sell their petroleum products at a loss.
Industry sources earlier expressed surprise and confusion over the government’s move to implement EO 839, which froze fuel prices due to the devastation wrought by two powerful storms in Luzon.
They reasoned that oil prices in October were only about half of the record high level reached in July 2008—during which the government did not make any move to put a cap on fuel prices.
Oil companies, which found a strong ally in the business community, pointed out that the order, aside from causing tightness in fuel supply, posed a “bigger problem over the long term” because, with the order in place, the country was now seen as a place that lacked policy stability, with no rule of law and no protection given by the government to investors.
While the order was in force, the country’s inventory of finished petroleum products dropped to eight days from the usual 21, as oil firms that do not refine crude halted importation of gasoline and diesel due to government-imposed price caps in Luzon.
Pilipinas Shell Petroleum also sued the government for the imposition of EO 839, stressing that it didn’t want this to “become a precedent” for such a directive to be issued whenever a national emergency emerged.
Despite the controversies, local oil firms remained bullish for 2010, allocating hefty capital expenditure budgets for the aggressive expansion of their retail networks and depots.
Fernando Martinez of the Independent Philippine Petroleum Companies and of Eastern Petroleum Corp. said he expects more stable crude and energy supplies worldwide for next year, which may prevent the resurgence of price shocks seen in 2008.
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