The government has embarked on an earnest program to search for oil reserves last experienced during the term of former President Ferdinand Marcos Sr., the father of the incumbent, amid skyrocketing prices of fuel.

President Ferdinand "Bongbong" Marcos Jr. said the Department of Energy has initiated the oil hunt through the revival of the drilling operations around the Cadlao oil field in Palawan of Nido Petroleum Philippines.

The firm, operated by Australian firm Sacgasco, holds Service Contract 6B to conduct surveys "by the last quarter of this year."

"While it is the first step, it signals the government's intent to maximize indigenous resources and has attracted strong interest from foreign investors in the Philippine upstream oil and gas sector," Marcos said.

The term of Bongbong's father experienced a spurt in oil exploration after the issuance of Presidential Decree 87 which converted the old concession system into the service contract system.

Under the service contract scheme, private capital, both foreign and domestic, was encouraged under a sharing arrangement in which 60 percent of production goes to the government and 40 percent to the service contractors.

Among the first beneficiary of the measure was the NIDO complex which initially produced a total of 10,000 barrels a day from two wells.

Its peak field production was 40,000 barrels a day, which then was equivalent to 15 percent of the country's requirements.

Incentives draw investors

"The government's commitment to preserve and maintain the investment incentives for service contractors under Presidential Decree 87 has been met with renewed confidence and strong interest by local and foreign investors in the oil and gas sector," Marcos said.

The President said NIDO is the technology provider and operator of Service Contract 6B, noting that the activities will pave the way for the drilling of two wells, one exploration and one appraisal, by the first half of 2023.

"For SC 6B, the appraisal well for the Cadlao oil field could lead to early oil production towards the second half of 2023 while the recoverable volumes expected from the oil field are five to six million barrels of oil," he explained.

PD 87 or the Oil Exploration and Development Act of 1972 allows the service contractor to have corporate tax payments as part of the government's 60-percent net share from the sale of petroleum.

The Chief Executive is optimistic that the move would allow the country to maximize its oil and gas resources.

He noted that Cadlao is an old field that was producing oil in the early 1990s with over 11 million barrels of output.

"The operatorship of this oil field was taken over by Nido Petroleum from Forum Energy Philippines Corporation in February 2022 to fund the 100 percent development costs, which include drilling, extended well tests, and subsequent development of the said oil field," he added.

In a Palace briefing, Office of the Press Secretary office-in-charge and undersecretary Cheloy Garafil said the government allowing the revival of the drilling operation in the Cadlao oil field demonstrates the President's intention to find local sources of oil.

"It shows the commitment of the President to search for locally-sourced oil products or oil exploration projects to address the rising costs of fuel," she said.

Salceda bets on rollback

Motorists, meanwhile, should not worry too much about another oil price increase after the mega increase on Tuesday, as it will be followed by a rollback in the coming weeks or even days, according to a legislator.

Economist-lawmaker Joey Salceda expects the P5.80 per liter hike in diesel prices next week will remain in place or even decrease in the following days as world oil prices start to decline once more due to a strong dollar and trader profit-taking.

The Organization of the Petroleum Exporting Countries' announcement of a supply reduction hinted that prices would rise, but the strong dollar, worries about a worldwide recession, and profit-taking by oil dealers, according to the solon, would cause prices to fall anew.

"I expect crude prices to go below $90 this week before stabilizing a little above that, but lower than last week's prices," Salceda, chairperson of the House Ways and Means Committee, said Tuesday.

"It is very probable that the P5.80 price increase in diesel will be followed by a rollback in the weeks or even days after. Give world prices a lag time of around 7 to 14 days to reflect in pump prices here," he said, noting that coal is falling in price, so there is no compelling reason for price increases in the power sector."

The Albay solon said he would ask the Department of Energy and the Energy Regulatory Commission to be more cautious about authorizing power sector price rises in the coming weeks.

He said that he expects oil prices to remain between $80 to $95 for the remainder of the year, therefore pump costs should remain stable from now until December.

Edjen Oliquino