₱5 Billion Armament Budget to Secure West Philippines Oil and Gas Field Approved by Pres. Aquino

President Benigno Aquino III has approved the release of ₱4.9 Billion from the Malampaya fund to strengthen the defenses of natural gas exploration in northern Palawan, National Treasurer Roberto Tan said Wednesday (September 14, 2011).

The fund to be released this month, will be disbursed to the Armed Forces of the Philippines (AFP) for the purchased of New smaller patrol vessel, 4 radar Station, Tanks, and modern assault rifles and ammunitions. The AFP was tasked to acquire and deploy a support fleet of ships smaller than the Hamilton class BRP Gregorio del Pilar.

As early as last March, the Philippine military sent an aircraft to the disputed Recto Bank ( Reed Bank) near Palawan following reports that Chinese patrol boats were trying to harass a Filipino oil exploration team there.

Lt. Gen. Juancho Sabban, chief of the AFP Western Mindanao Command, said the Chinese were claiming the exploration team from the Department of Energy was in Chinese territory where in fact the Recto Bank is just in the backyard of the Philippines, within 200 Nautical Miles Exclusive Economic Zone, while china is within thousands of Kilometers.

BRP Gregorio del Pilar, the Philippine Navy's largest and newly acquired ship, is a symbol of the Philippines' "seriousness" in fortifying the protectors of the country's maritime resources.

The Gregorio del Pilar, however, is less than half the size of China's first aircraft carrier that is expected to go on sea trials by the end of September. The Philippines' largest ship is 367 feet long, compared to China's Shi Lang that measures 1,000 feet.

₱100 Billion Malampaya "Commingled" Fund Missing?

The National Treasurer also disclosed Wednesday at the joint congressional oversight committee hearing on the comprehensive tax reform package that the Malampaya fund, with a remaining balance of ₱99.45 Billion, exists as a "commingled" special account in the government's general fund.

He said the Malampaya collections from 2002 to August 2011 totaled ₱121.97 Billion, of which ₱21.645 Billion was disbursed partly to pay for the Hamilton class ship which the Philippines bought from the United States of America.

During the hearing, Senator Ralph Recto made an issue out of the "commingled" status of the Malampaya fund and said that the fund was missing. Recto argued that the fund cannot be used for any purpose other than those for which it was created.

In a July 5 statement, Budget Secretary Florencio Abad explained the Malampaya fund was "…not actual cash but an accounting of revenue inflows and expenditure items charged against the Fund since revenues were remitted to the government from the Malampaya Natural Gas Project since it started in 2002."

The Malampaya special account is known at the Department of Budget and Management as Fund 151 and is managed by the Bureau of Treasury and the Energy Department.

Abad also said back in July that the Aquino administration had charged ₱2.87 Billion to the Malampaya account for "necessary energy-related" expenditures:

·        ₱2 Billion for fuel requirements of the National Power Corporation-Small Power Utilities Group (NPC-SPUG), to avert a power shortage in off-grid areas

·        ₱450 million for the Pantawid Pasada program as direct support to jeepney and tricycle drivers affected by the recent spate of oil price hikes and

·        ₱423 million for the purchase of the USS Hamilton cutter marine vessel to strengthen the security perimeter of the Malampaya Natural Gas Project.

Abad claimed that during the Arroyo administration only ₱250 million out of the ₱19.64 billion drawn from the fund was spent on an energy-related project that provided electricity to 211 villages in 2006

"The rest of the 98.73 percent or ₱19.39 billion was released for non-energy related projects," Abad noted and broke it down as follows:

·        In 2006, ₱1 billion for the Armed Forces Modernization Fund (What AFP modernization happened in 2006?)

·        In 2008, ₱4 billion for the Department of Agriculture

·        In 2009, a total of ₱14.39 billion to various agencies, including ₱7.07 billion for the Department of Public Works and Highways, ₱2.14 billion for the Philippine National Police, ₱1.82 billion for the Agriculture Department, ₱1.4 billion for the National Housing Authority, and ₱900 million for the Department of Agrarian Reform.

National Treasurer Tan said the ₱4.9 billion for the security build-up in northern Palawan will likely be raised through borrowings and then credited to Fund 151.

Budget Secretary Abad in a statement September 7 described how government will disburse the money for Malampaya defenses.

"The amount is divided between the capability requirements of the Philippine Navy and Philippine Air Force. Of this amount, ₱2.65 billion will fund base support and logistic system, coast watch requirements; and the acquisition of a high-endurance cutter sea vessel and three helicopters of the Philippine Navy."

"Meanwhile, the Air Force will be using ₱2.30 billion to purchase three helicopters and develop a base-hangar," Abad said.

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Philippines PLDT boosts 250-Gbps domestic fiber optic network

250-Gbps Gigabytes per second Capacity PLDT upgrade

Philippines’ telecommunications leader Philippine Long Distance Telephone Company (PLDT) is implementing multiple redundancy enhancement plans for its 10,000-kilometer domestic fiber optic network (DFON) to meet increasing demand for improved resiliency and capacity of the offshoring and outsourcing (O&O) industry in several key regions in Luzon and Mindanao.

PLDT’s DFON consists of 10 major fiber optic loops across the country which currently offers 1.6 terabit per second capacity. It has also acquired a fully-supported ROADM (reconfigurable optical add-drop multiplexer) that has been deployed and upgraded since 2009.

ROADM has enabled PLDT to dynamically provision end-to-end, ultra-high-speed connections across its extensive multiple fiber loop network. This could fully support the growing O&O industry whose revenues are expected to expand to as much as $25 billion by 2016.

“PLDT has already provisioned the necessary ICT connectivity in the various O&O industry’s chosen locations of opportunity. We have been working with the industry in order to ensure that O&O firms will have the capacity and resiliency they require to compete in the global market,” PLDT senior vice president and customer sales and marketing group head Eric Alberto said.

PLDT is targeting the completion of parallel underground fiber in nine segments of DFON along North and Central Luzon to Manila by November 2011, while six segments linking Manila to South Luzon where major industrial parks are located are also in progress and are expected to be finished by January 2012.

PLDT has also earlier announced the completion of a new undersea and inland cable that provides third resilient route between Visayas and Luzon.

The new fiber optic cable from Cagayan de Oro to Davao via Bukidnon is set to enhance resiliency of the existing self-healing Mindanao fiber optic loop with a third leg by the first quarter of 2012. This ensures enhancement in Mindanao’s major O&O center’s growing traffic with third-route resiliency.

“PLDT has accelerated expansion into ‘next wave’ cities based on the forecasts of the O&O sector and we have taken the brave pioneering steps based on those projections. We have continued to enhance network quality, capacity, diversity, redundancy and other specifications that will allow the industry to exploit its growth momentum,” Alberto added.

Before the year ends, PLDT’s Internet gateway, which is connected to multiple international cable routes will also see improvement, bringing a total of 250 Gbps in total capacity - twice as much as any other provider in the country.

“PLDT has built according to the future specs of the O&O industry, allowing triple-level redundancies in our major fiber optic loops. All this is to ensure that connectivity so vital to those industries will not fail, and that the Philippines retain its status as the most-preferred outsourcing destination for the world,” Alberto pointed out.

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Philex Petroleum PXP shares bubbles - unveiling for Recto bank Oil and Gas exploration

Shares of Philex Petroleum Corporation on Monday bubbled as the company unveiled an upbeat exploration plan for its concession area in Recto Bank (formerly Reed Bank), located about 148 kilometers west of Palawan province and believed to contain 3.4 trillion cubic feet of natural gas.

Philex Petroleum shares, which were listed on the Philippine Stock Exchange (PSE) by way of introduction or without any initial public offering, soared 617 % to close at ₱ 8.60 from an initial listing price of ₱1.20 per share. The shares surged to as much as ₱13.00

Philex Petroleum is chaired by Manuel V. Pangilinan, who also heads the country's largest telecommunications company and its biggest power distributor, as well as major infrastructure and media firms.

The oil and gas exploration unit of local mining blue chip Philex Corp. started trading on the PSE's second board under the ticker "PXP."

"PXP's activity was a mix of speculation and bona fide investing. The listing of ₱1.20 was likewise based on very conservative assumptions," said Manuel Lisbona, deputy chief of PNB Securities.

After the listing ceremonies, top officials led by Pangilinan said the group would invest about $80 million in Service Contract No. 72 (SC72) covering part of the Recto Bank.

The amount will cover survey, appraisal and other exploratory works on the 8,800-square-kilometer concession area within the next two years.

Philex Petroleum's UK-incorporated oil and gas unit Forum Energy plc (FEP) has a 70-percent interest in SC72, which the Philex group is hoping to be the Philippines' "next Malampaya" gas field.

The remaining 30-percent interest is held by Monte Oro Resources and Energy Inc. led by businessman Enrique Razon.

The Recto Bank service contract, apart from its international exposure in oil and gas exploration, set Philex Petroleum apart from other listed peers, said Carlo Pablo, company president and chief operating officer.

"This is one of the few assets (in the Philippines) with a (gas) discovery and it's a sizeable discovery compared with other assets that have been opened up for bid. So this is more advanced than other opportunities and we have a 70-percent interest in it," Pablo said, when asked to explain the company's plan to prioritize SC 72.

"We know that Malampaya is a very successful project. The question is can it be the next Malampaya?" he said.

Disputes at Seas

Many foreign investors believe that in this kind of Oil and Gas exploration, if you will not gamble rish then you could not gain success. They understand the issue of the sea disputes but they also rely the Philippines government to protect their investment in the area.

The Recto bank is within Philippines 200 Nautical Miles Exclusive Economic Zone as defiend by the international laws so nothing to worry of as the area is within the Philippines territory .

The SC72 concession area, however, is subject to international boundary issues pertaining to certain areas of the West Philippine Sea (South China Sea).

Recto Bank is well within the country's economic exclusion zone that extends to 370 km (200 nautical miles). Foreign Secretary Albert del Rosario said in July that Recto Bank was not part of the contested Spratly group of islands in the West Philippine Sea.

The Spratlys, believed to have huge oil and gas deposits and also considered a rich fishing ground, are claimed entirely by China, Taiwan and Vietnam and in part by Malaysia, Brunei and the Philippines.

China harrased the Survey ship in the WPS

Manila has complained repeatedly this year that the Chinese military has become much more aggressive in asserting China's claims to the area.

It said one of the first aggressive acts occurred in February when a Chinese naval vessel harassed a ship belonging to a Philex Petroleum subsidiary that was carrying out seismic explorations in the Recto Bank.

In its prospectus issued on Aug. 31, Philex Petroleum acknowledged the territorial concerns but assured potential investors that the Philippine government would support it.

Asked about the territorial dispute, Pangilinan said:  "As a Filipino, how can I say that it belongs to the Chinese? Recto Bank belongs to us."

In February last year, the Department of Energy awarded SC72 to Philex Petroleum. SC72 has a seven-year exploration period extendible by three years and a 25-year production period that can be extended by 15 years.

The service area contains the Sampaguita gas field discovered in 1976 and a number of leads identified from earlier seismic evaluation.

In September 2006, results of the interpretation of a 3D seismic program at the Sampaguita gas discovery performed by independent consultants Count Geophysics Ltd. indicated 3.4 trillion cubic feet of gas-in-place.

Pangilinan said the development of alternative natural gas resources was important given the processing facilities in Batangas province that rely on gas, especially if Malampaya's resources run out.

Without an indigenous source of fuel, power rates in the country will continue to be high, he said.

Partnering with Foreign Investors

If and when Philex Petroleum finds this concession area to be similar to or even bigger than Malampaya, Pangilinan said the company would bring in strategic foreign partners even if this would mean the dilution of its interest.

In the case of Malampaya, he noted that development cost was about $5 billion, which was why Shell and Chevron had to come in.

"When somebody puts in $5 or $10 billion, our stake will be modest, although if it's a big gas (field) even if our stake is modest, we'll earn a lot of income," Pangilinan said.

Unless local capital markets deepened significantly, Philex Petroleum will not be able to finance development by itself, he said.

Before listing 1.7 billion common shares, Philex Petroleum distributed 36 percent of its outstanding shares as property dividends to shareholders of parent Philex Mining Corporation.

Because its shares are now widely held, Philex Petroleum was not required to undertake an initial public offering (IPO).

Philex Mining shares likewise traded up on the stock exchange on Monday, joining Philex Petroleum in bucking the general downturn.

Philex Petroleum also has interests in exploration assets in Peru and Vietnam via Pitkin Petroleum Plc.

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