REITERATING A TRANSPARENT AND COMPETITIVE SYSTEM OF A WARDING SERVICE/OPERATING CONTRACTS FOR COAL, GEOTHERMAL AND PETROLEUM PROSPECTIVE AREAS REPEALING FOR THIS PURPOSE DEPARTM…

WHEREAS, Section 1 of Presidential Decree No. 1442, otherwise known
as “An Act to Promote the Exploration and Development of Geothermal
Resources,” Section 4 of Presidential Decree No. 972, as amended,
otherwise known as “The Coal Development Act of 1976,” and Section 4 of
Presidential Decree No. 87, as amended, otherwise known as the “Oil
Exploration and Development Act of 1972,” allow the Philippine
Government to promote and undertake the exploration, development and
production of the country’s indigenous coal, geothermal and petroleum
resources through service/operating con- tracts with contractors;

WHEREAS, Republic Act No. 7638, as amended, otherwise known as “The
Department of Energy (DOE) Act of 1992,” mandates the DOE to prepare,
integrate, coordinate, supervise and control all plans, programs,
projects and activities of the Government relative to energy
exploration, development, utilization, distribution and conservation;

WHEREAS, on 22 December 2006, the D OE issued Department Circular
No. DC2006-12-0014 providing for a transparent and competitive system
for investment and public contracting rounds for awarding coal,
geothermal and petroleum service/operating contracts;

WHEREAS, the DOE desires to adopt the most effective strategy for
promoting and attracting local and foreign investment to further
increase the exploration, development and production of prospective
coal, geothermal and petroleum areas;

WHEREAS, the DOE reiterates and acknowledges the need to continue
adopting a transparent and competitive system for awarding
service/operating contracts for exploration, development and
production of the country’s coal, geothermal and petroleum resources;

WHEREAS, consistent with national interest, the DOE has, after
consultation with stakeholders, resolved to enhance government
participation, through the government corporate sector, in the
exploration, development and production of indigenous oil and gas
resources through the grant of option to PNOC to participate in
petroleum service contracts;

NOW, THEREFORE, in consideration of the aforementioned premises, the
following procedures shall govern the transparent and competitive system
of awarding service/operating contracts for coal, geothermal and
petroleum exploration, development and production.

1. Contracting Rounds

1.1 The Energy Resource Development Bureau (ERDB) shall determine
prospective coal, or geothermal, or petroleum areas found in the
Philippine territory; and its maritime zones including the continental
shelf for inclusion in the competitive public contracting rounds. The
DOE Secretary, based on reports submitted by ERDB, and if he deems fit,
shall declare such areas open for competitive public contracting round.
The DOE shall not accept any application or proposals for exploration,
development and production service/operating contract except during the
competitive public contracting rounds. No applications for small-scale
mining permit for coal operations shall likewise be entertained in the offered areas until after service/operating contracts have been awarded.

1.2 The ERDB shall prepare the contracting round documents with a
description of available data and the prospect of
geothermal/coal/petroleum resources in each area. The DOE Contract
Negotiating Panel (DOE-CNP per Department Order No. 2003-05-005) shall
then disseminate information of the contracting round which shall
include, among others, the foll owing:

a. Location Map and Technical Descriptions (TDs) of the area/s being offered during the contracting round;

b. Schedule of activities for the contracting round; and

c. Such other information as the DOE-CNP may deem appropriate.

1.3 Interested parties for the contracting rounds on petroleum
may access data available at DOE after payment of a Data Viewing Fee of
Five Hundred United States Dollars (US$500.00) for a two (2) day-day
maximum visit. If the interested party decides to purchase the DOE data,
the Data Viewing Fee will be credited to the total price of the
purchased data.

1.4 Interested parties for the contracting rounds on coal,
geothermal and petroleum areas shall submit complete set of documents
for evaluation by the DOE-CNP. The DOE-CNP may require submission of
additional information/documents, as may be necessary, during
evaluation of the proposals for clarification purposes only. A
non-refundable application fee of ONE HUNDRED THOUSAND PESOS
(P100,000.00) per area for petroleum and geothermal, and FIFTY THOUSAND
PESOS (P50,000.00) per area for coal shall be paid by the proponent upon
submission of the proposal which shall include the following documents:

a. Work Program

a.1 Proposed oil/gas service contract, geothermal service
contract or coal operating contract based on existing DOE Model
Contracts;

a.2 Proposed work program (discussion on the application of the
different exploration strategies and methodologies to be employed in
delineating energy resources at depth with subsequent manpower
complement should be in detailed narrative format and the Schedule of
Activities in Gantt Chart) and minimum expenditure on annual/sub-phase
basis for each proposed activity with respect to the area or areas
specified in the proposal; and

a.3 Narrative presentation of data and information (such as
geology, stratigraphy, geochemistry, geophysics, water or coal quality, resource estimate, resource indicators, etc.) suggesting presence of
energy resources at depth.

b. Financial Proposal and Documentation

b.1 Audited financial statement and annual reports for the last three (3) years;

b.2 Duly filled-out information sheet;

b.3 Resume/profile of the prospective contractor, its incorporators, stockholders or officers;

b.4 Particulars of the kind of financial resources available
to the prospective contractor including capital, credit facilities and
guarantees so available; and

b.5 Certified copy of latest income business tax returns filed
with the Bureau of Internal Revenue, and duly validated with the tax
payment made thereon, if applicable.

c. Legal Documentation

c.1 Certified copy of Articles of Incorporation;

c.2 Certified copy of the by-laws of the prospective contractor;

c.3 SEC Registration Certificate; and

c.4 Certified copy of latest general information sheet submitted to the Securities and Exchange Commission.

d. Technical Proposal and Documentation

d.1 Particulars of the technical and industrial qualifications,
eligibilities and work related experiences of the interested party and
its employees;

d.2 Particulars of the technical and industrial resources
available to the interested party for the exploration, development and
production of geothermal, coal and petroleum resources;

d.3 Particulars on the experiences, achievements and tract
records of the interested party and its employees related to technical
and industrial undertakings; and

d.4 Particulars on organizational and management structures
relative to Administration, Financial and Technical aspect of the
interested party.

For financial, legal and technical documentation, if the
interested party is a joint venture, all entities forming part of the
joint venture shall comply with the above requirements. In addition, the
interested party shall submit a copy of the joint venture agreement.
Furthermore, any interested party, acting singly or forming part of a
joint venture, that is organized in a foreign country shall submit
documents equivalent to the above, issued by the appropriate governing
body and duly authenticated by the Philippine consulate in the country
where it is registered or where it operates.

1.5 The DOE CNP shall open the submitted proposals relative to
the contracting round during the first working day after the announced
deadline for submission of proposals. No proposals or contracting
documents shall be accepted on the designated day of the opening of
proposals.

1.6 The DOE CNP shall then conduct evaluation of the submitted proposals based on the following criteria:

a. Work program               – 30%
b. Financial qualification      – 30%
c. Technical qualification     – 30%
d. Legal qualification          – 10%

1.7 The DOE CNP, for sufficient and valid cause, may at any given time reject any or all proposals submitted.

The DOE shall discuss with the highest-ranked proponent to
finalize the contract details. No material deviation from the DOE model
contract shall be allowed at any given time. The winning proponent shall
be charged a processing fee of Php1.20/hectare for geothermal, Php
0.48/hectare for petroleum and Php30,000.00 per block for coal based on
DOE’s Schedule of Fees and Charges in compliance with EO 197. The DOE
CNP shall then make a recommendation to the DOE Secretary for any award
of service/operating contracts based on the discussions. The DOE shall
formally inform all the proponents of the results of the evaluation.

2. Contract Areas – The definition and
delineation of prospective coal, geothermal and petroleum contract areas
shall be in accordance with the provisions of applicable government
laws, rules and existing procedures such as the National Integrated
Protected Areas System (NIPAS) Law and the Indigenous People’s Right
Act (IPRA), among others.

3. Frontier Areas – Privately identified coal,
geothermal and petroleum frontier areas with no available technical data
may be allowed to be offered through negotiated contracts.

4. Separability Clause – If for any reason, any
section or provisions of this Circular is declared unconstitutional or
invalid, such parts not affected shall remain in full force and effect.

5. Repealing Clause – The provisions of
Department Circular No. DC2006-12-0014 is hereby repealed. All other
department circulars, which are inconsistent with the provisions of
this Circular are hereby repealed, amended or modified accordingly.

6. Effectivity – This Circular shall take into effect fifteen (15) days following its publication in at least two (2)
newspapers of general circulation and shall remain in effect until
otherwise revoked.

Adopted: 2 April 2009

(SGD.) ANGELO T. REYES
Secretary