The Supreme Court’s decision to count income taxes paid by Malampaya gas field contractors as part of the government’s 60 percent share in the project is expected to shore up investor confidence in the Philippines’ petroleum sector, Energy Secretary Sharon Garin said.
By reversing Commission on Audit (COA) orders that had sought to hold Shell Exploration BV, PNOC Exploration Corp. and Chevron Malampaya LLC liable for some P53.14 billion in back taxes from 2002–2009, the high court is seen effectively removing a major legal cloud hanging over private players.
“This resolution gives our investors the stability and security they need,” Garin said, adding that it “will encourage more exploration and development activity” in the country.
Under the Oil Exploration and Development Act, income taxes paid by — or on behalf of — contractors already count toward the government’s share of net proceeds.
The Supreme Court reaffirmed this provision, underscoring that while contractors remain technically liable for those taxes, the government covers them as part of its revenue from petroleum operations.
By overturning COA’s April 2015 decision and its January 2018 resolution, the court has effectively absolved the Malampaya consortium of any further tax obligations tied to that period.
With Malampaya supplying roughly 40 percent of the country’s natural gas needs, the ruling removes what has been considered a potent deterrent for both existing and prospective investors.
Department of Energy data show 15 active petroleum service contracts nationwide — 11 in exploration and four in production, including Malampaya.
Garin expects that with this legal certainty brought by the ruling, foreign and local firms will accelerate bids on exploration acreage and pursue new ventures in offshore and onshore fields.
