CONSUMERS' DEMAND!
Herman Tiu Laurel
Herman Tiu Laurel
4/30-5/6/2012
Another historic scam is in the making in the Camago-Malampaya Natural Gas Pipeline Project, a.k.a. Service Contract 38, set to expire in 2024. This project of the PNOC-EC (Philippine National Oil Co.-Exploration Corp.), a government corporation, is a venture with Royal Dutch Shell and Chevron-Texaco which anomalously gave the Philippines only a minority 10% share of a most valuable national patrimony of the Filipino people--its fossil fuel reserves. That original sin will be exacerbated by a new plot involving top Department of Energy (DoE) officials and the giant oil companies, swindling the country of $800 million, as well as delaying the full ownership by the Philippine government of the Camago-Malampaya project and all its benefits. The plotters intend to do this by a 15-year extension of Service Contract 38, 13 years before the present contract ends and a $1-billion capital expenditure for an expansion of gas wells that is totally unnecessary.
Don't Extend? Cut Malampaya contract
It's easier to explain why a 15-year extension of a very profitable 25-year contract that still has 13 years to go is suspiciously premature, especially when at the end of the present term of the contract, the facilities and profits to be transferred to government would be worth hundreds of billions of dollars. It is even easier to explain why this 15-year extension should not be allowed and what a great loss it would be to a nation that is already suffering from extremely high fuel and power prices today and more so in the foreseeable future. If Camago-Malampaya is already in government hands, the people can expect changes in the pricing of the gas-to-power deal, such as the elimination of the indexation of the price of gas to the price of oil, resulting in a lowering of the price of power from gas-fired power plants Sta. Rita, San Lorenzo, and Ilijan that were sold to Meralco. This would at least mitigate the power price gouging abuses made possible by the EPIRA (Electric Power Industry Reform Act), the ERC (Energy Regulatory Commission), and power companies like Meralco. Actually, we should cut the Service Contract (SC) short of the 25 years.
Meanwhile, explaining to the layman the $1-billion capital expenditure proposed by the Camago-Malampaya consortium for expansion of wells, a proposal emanating from the majority owners, Shell and Chevron-Texaco, and subject to conformity of the DoE (hence the need for DoE officials as conspirators), is much more complicated. Nonetheless, the exposé document from DoE and PNOC employees provides the clear explanation: "It will be recalled that SC 38 consortium drilled some 11 wells and in the service contract area, of which only 1 well was found dry. Of the 10 wells, only 5 wells are commissioned to supply the natural gas requirement of the three natural gas power plants… The rest of the wells have not yet been commissioned. But should there be a drop in the supply… the rest of the wells can easily be commissioned by the SC 38 consortium without spending $1 billion as previously announced… The Camago and Malampaya gas reserve is estimated at approximately 4.2 trillion cubic feet of gas. As of… September 2011 only 1 trillion cubic feet has been spent."
As no new wells need to be drilled, the commissioning of the untapped five wells would be the correct course, since opening one well would cost only a maximum of $100 million, a figure that Shell Philippines country chairman Edgar Chua himself confirms. We echo then the DoE and PNOC concerned employees' question, "Why did the DoE and the PNOC allow this $1 billion unnecessary, premature project when the gas reserve would still be good to sustain the project for the next 10 to 15 years?"
The inescapable conclusion is that the SC 38 consortium is inflating the expenditures to $1 billion in order to avail of the cost recovery privileges (contained in Terms and Conditions, Annex III). At the same time, the alleged need to raise said amount is being used as a justification for the 15-year extension to obtain funds from other investors--all while that $1 billion will actually be reimbursed by government, deducted from 60% share of government's profit. Neat, huh? Except that there are alert DoE and PNOC employees who spotted the scam.
Shell DPAs?
How did the plotters ever think they could get away with the scam? As the saying goes, "Some are smarter than others." At least, that's what they thought. Now we have to bring up the usual suspects: the DoE officials at the helm of such activities.
The paper sent to us reports that Energy Secretary Jose Almendras and Undersecretary Jose Layug are both formerly involved with Shell, either as legal counsel-retainers and/or employees. In the case of Layug, an established case of conflict-of-interest has been shown in public statements he made when he was responsible for the Malampaya gas contract during his stint with Chevron. The big problem today is, after these exposés and alerts being issued by various quarters, we have discovered that there has been a "ceremonial signing" of the $1-billion "investment contract," followed by the DoE chief's dispatching his undersecretary, reportedly using his personal passport, to Singapore to meet with "suppliers."
Thus, the concerned DoE and PNOC employees conclude: "The biggest plunder and scam is now being committed, perpetrated, sanctioned, supported and whitewashed by no less than the DoE Secretary Jose Rene Almendras, Undersecretary Jose M. Layug, Jr., and PNOC President Antonio M. Cailao together with Shell as co-conspirator to defraud the government of the Republic of the Philippines of $800 million or P34 billion."
Bigger than that, however, are the hundreds of billions of dollars in oil and gas production facilities and profits that the conspiracy will deprive future generations of Filipinos. These conspirators must not only be exposed and investigated, they must be prosecuted.
Ultimately, the buck of gas and oil stops at the Office of the President. And unless BS Aquino III takes aggressive and immediate action to stop these DoE scams, the nation should make him pay for it come 2013.
A bad lie again
In the meantime, the scams in the power sector continue too. Last week's newspapers reported that "Gov't releases funds to cut power rates," quoting Budget Secretary Butch Abad's claim that, through his office, the Aquino administration released P767.2 million to be "used to help cut energy costs and bring down the high electricity rates in several regions," making it appear that the BS Aquino III government has a heart for the suffering power consumers. But taking a detailed look of the fund Abad cites, we'll find the sham that power industry analyst and consumer advocate Butch Junia discovered and texted us: "Budget Secretary Butch Abad misleads the public. This is not subsidy. This is the host community tax where the LGU share is set and allocated by law. And what is the real story here? Only host communities (where there are generating plants) will benefit--but rightly so. That tax will be tacked on to generation cost which all will pay, making us (the paying consumers) the subsidizers, like in the lifeline rate and the senior citizens' discount. The same modus all over always."
More "lintik" on power consumers
Our OpinYon readers have come to expect a weekly update on the power issue from this column, and we will not fail you. Two Saturdays ago, we had Mindanao anti-EPIRA power crusader Luis "Louie" Corral as guest, with anti-oil cartel crusader Dr. Amanda Cruz, on our GNN show. Louie warned of "electric storms" and power hikes to come. Here's the gist which we wrote in our Tribune column last week:
"Additional rate increases from PSALM (Power Sector Assets and Liabilities Management Corp.)'s P1 trillion stranded costs… an additional P0.39 per kilowatt-hour (kWh) on the 'Universal Charge'; (the National Power Corp. or Napocor's Small Power Utility Group's) budget shortfall of P7 billion just for 2011… an additional P0.07/kWh… (also for) the 'Universal Charge;' an additional SPUG budget shortfall of P3.1 billion (going to) the ERC's Incremental Currency Exchange Rate Adjustment (ICERA) and Generation Rate Adjustment Mechanism (GRAM)… will increase power rates for off-grid areas; the Napocor-Meralco P14-billion Court of Appeals settlement (may be passed on) to consumers;
"Pending ERC petitions of Meralco, Davao Light and Power, Visayas Electric, and other distribution utilities (including 119 electric coops), renewal of transition supply contracts of distributors… and privatized Gencos (which under EPIRA are not utilities) that allow over 12% ROI (will zoom prices anew); new IPP-Administrator contracts will bring up Genco generation charges; Renewable Energy program feed-in tariff would tie the country to immature, expensive power, entailing an additional P0.1256/kWh.; SC Case on illegal dismissal of Napocor workers (will entail) backwages of P48 billion; EVERY ONE (1) CENTAVO PER kWh INCREASE REPRESENTS P657,000,000 PER ANNUM…"
Given all these, EPIRA must go!
(Tune in to 1098AM, DWAD, Sulo ng Pilipino/Radyo OpinYon, Monday to Friday, 5 to 6 p.m.; watch Destiny Cable GNN's HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m., on "Anti-Large Scale Mining Update: Tampakan;" visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)
Don't Extend? Cut Malampaya contract
It's easier to explain why a 15-year extension of a very profitable 25-year contract that still has 13 years to go is suspiciously premature, especially when at the end of the present term of the contract, the facilities and profits to be transferred to government would be worth hundreds of billions of dollars. It is even easier to explain why this 15-year extension should not be allowed and what a great loss it would be to a nation that is already suffering from extremely high fuel and power prices today and more so in the foreseeable future. If Camago-Malampaya is already in government hands, the people can expect changes in the pricing of the gas-to-power deal, such as the elimination of the indexation of the price of gas to the price of oil, resulting in a lowering of the price of power from gas-fired power plants Sta. Rita, San Lorenzo, and Ilijan that were sold to Meralco. This would at least mitigate the power price gouging abuses made possible by the EPIRA (Electric Power Industry Reform Act), the ERC (Energy Regulatory Commission), and power companies like Meralco. Actually, we should cut the Service Contract (SC) short of the 25 years.
Meanwhile, explaining to the layman the $1-billion capital expenditure proposed by the Camago-Malampaya consortium for expansion of wells, a proposal emanating from the majority owners, Shell and Chevron-Texaco, and subject to conformity of the DoE (hence the need for DoE officials as conspirators), is much more complicated. Nonetheless, the exposé document from DoE and PNOC employees provides the clear explanation: "It will be recalled that SC 38 consortium drilled some 11 wells and in the service contract area, of which only 1 well was found dry. Of the 10 wells, only 5 wells are commissioned to supply the natural gas requirement of the three natural gas power plants… The rest of the wells have not yet been commissioned. But should there be a drop in the supply… the rest of the wells can easily be commissioned by the SC 38 consortium without spending $1 billion as previously announced… The Camago and Malampaya gas reserve is estimated at approximately 4.2 trillion cubic feet of gas. As of… September 2011 only 1 trillion cubic feet has been spent."
As no new wells need to be drilled, the commissioning of the untapped five wells would be the correct course, since opening one well would cost only a maximum of $100 million, a figure that Shell Philippines country chairman Edgar Chua himself confirms. We echo then the DoE and PNOC concerned employees' question, "Why did the DoE and the PNOC allow this $1 billion unnecessary, premature project when the gas reserve would still be good to sustain the project for the next 10 to 15 years?"
The inescapable conclusion is that the SC 38 consortium is inflating the expenditures to $1 billion in order to avail of the cost recovery privileges (contained in Terms and Conditions, Annex III). At the same time, the alleged need to raise said amount is being used as a justification for the 15-year extension to obtain funds from other investors--all while that $1 billion will actually be reimbursed by government, deducted from 60% share of government's profit. Neat, huh? Except that there are alert DoE and PNOC employees who spotted the scam.
Shell DPAs?
How did the plotters ever think they could get away with the scam? As the saying goes, "Some are smarter than others." At least, that's what they thought. Now we have to bring up the usual suspects: the DoE officials at the helm of such activities.
The paper sent to us reports that Energy Secretary Jose Almendras and Undersecretary Jose Layug are both formerly involved with Shell, either as legal counsel-retainers and/or employees. In the case of Layug, an established case of conflict-of-interest has been shown in public statements he made when he was responsible for the Malampaya gas contract during his stint with Chevron. The big problem today is, after these exposés and alerts being issued by various quarters, we have discovered that there has been a "ceremonial signing" of the $1-billion "investment contract," followed by the DoE chief's dispatching his undersecretary, reportedly using his personal passport, to Singapore to meet with "suppliers."
Thus, the concerned DoE and PNOC employees conclude: "The biggest plunder and scam is now being committed, perpetrated, sanctioned, supported and whitewashed by no less than the DoE Secretary Jose Rene Almendras, Undersecretary Jose M. Layug, Jr., and PNOC President Antonio M. Cailao together with Shell as co-conspirator to defraud the government of the Republic of the Philippines of $800 million or P34 billion."
Bigger than that, however, are the hundreds of billions of dollars in oil and gas production facilities and profits that the conspiracy will deprive future generations of Filipinos. These conspirators must not only be exposed and investigated, they must be prosecuted.
Ultimately, the buck of gas and oil stops at the Office of the President. And unless BS Aquino III takes aggressive and immediate action to stop these DoE scams, the nation should make him pay for it come 2013.
A bad lie again
In the meantime, the scams in the power sector continue too. Last week's newspapers reported that "Gov't releases funds to cut power rates," quoting Budget Secretary Butch Abad's claim that, through his office, the Aquino administration released P767.2 million to be "used to help cut energy costs and bring down the high electricity rates in several regions," making it appear that the BS Aquino III government has a heart for the suffering power consumers. But taking a detailed look of the fund Abad cites, we'll find the sham that power industry analyst and consumer advocate Butch Junia discovered and texted us: "Budget Secretary Butch Abad misleads the public. This is not subsidy. This is the host community tax where the LGU share is set and allocated by law. And what is the real story here? Only host communities (where there are generating plants) will benefit--but rightly so. That tax will be tacked on to generation cost which all will pay, making us (the paying consumers) the subsidizers, like in the lifeline rate and the senior citizens' discount. The same modus all over always."
More "lintik" on power consumers
Our OpinYon readers have come to expect a weekly update on the power issue from this column, and we will not fail you. Two Saturdays ago, we had Mindanao anti-EPIRA power crusader Luis "Louie" Corral as guest, with anti-oil cartel crusader Dr. Amanda Cruz, on our GNN show. Louie warned of "electric storms" and power hikes to come. Here's the gist which we wrote in our Tribune column last week:
"Additional rate increases from PSALM (Power Sector Assets and Liabilities Management Corp.)'s P1 trillion stranded costs… an additional P0.39 per kilowatt-hour (kWh) on the 'Universal Charge'; (the National Power Corp. or Napocor's Small Power Utility Group's) budget shortfall of P7 billion just for 2011… an additional P0.07/kWh… (also for) the 'Universal Charge;' an additional SPUG budget shortfall of P3.1 billion (going to) the ERC's Incremental Currency Exchange Rate Adjustment (ICERA) and Generation Rate Adjustment Mechanism (GRAM)… will increase power rates for off-grid areas; the Napocor-Meralco P14-billion Court of Appeals settlement (may be passed on) to consumers;
"Pending ERC petitions of Meralco, Davao Light and Power, Visayas Electric, and other distribution utilities (including 119 electric coops), renewal of transition supply contracts of distributors… and privatized Gencos (which under EPIRA are not utilities) that allow over 12% ROI (will zoom prices anew); new IPP-Administrator contracts will bring up Genco generation charges; Renewable Energy program feed-in tariff would tie the country to immature, expensive power, entailing an additional P0.1256/kWh.; SC Case on illegal dismissal of Napocor workers (will entail) backwages of P48 billion; EVERY ONE (1) CENTAVO PER kWh INCREASE REPRESENTS P657,000,000 PER ANNUM…"
Given all these, EPIRA must go!
(Tune in to 1098AM, DWAD, Sulo ng Pilipino/Radyo OpinYon, Monday to Friday, 5 to 6 p.m.; watch Destiny Cable GNN's HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m., on "Anti-Large Scale Mining Update: Tampakan;" visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)
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