The Supreme Court’s decision upholding the government’s full 60 percent share in the Malampaya gas project — including income taxes paid by private contractors — sends a strong signal of stability and fairness in the country’s petroleum sector.
Energy Secretary Sharon Garin said in a chance interview that the ruling could encourage more investors to tap opportunities in local oil and gas exploration.
“We’re happy that the issue has been resolved because it gives stability and security to the exploration of our investors. So it will encourage more investors,” Garin said.
“I’m happy that they already know because before, they didn’t know what it was. Now, they know. And I think that will bring more investors to the Philippines for exploration,” she added.
To recall, the Supreme Court reversed a Commission on Audit (CoA) ruling that demanded P53.14 billion in unpaid income taxes from the Malampaya gas project contractors Shell, PNOC Exploration, and Chevron from 2002 to 2009.
The Court ruled that CoA committed grave abuse of discretion, saying the taxes were properly paid by the government as part of its 60 percent share under the Malampaya Service Contract.
Under Presidential Decree 87, the government assumes the income tax obligations of contractors to attract private investment in oil and gas exploration — a policy reinforced by other presidential decrees.
The ruling, written by Associate Justice Japar Dimaampao, clarified that while contractors remain liable for income tax, the government pays it on their behalf. The decision overturned CoA’s 2015 and 2018 rulings and upheld an earlier arbitration ruling that validated the tax arrangement.
Signed in 1990, the Malampaya Service Contract provides for a 60-40 profit-sharing split between the government and the contractors, who contested CoA’s claim that P53.14 billion was wrongly deducted from the state’s share.