The document discusses recent global trends in mining and petroleum, China's activities in the South China Sea, and the implications of Trump's presidency. It then summarizes updates in the Philippine resources industry under Duterte, including developments in petroleum, coal, geothermal, and legal issues. Finally, it identifies opportunities for geologists, such as infrastructure projects, solutions to disputes over the West Philippine Sea, and work related to climate change and water management.

1. Reasserting the Relevance of the
Geology Profession Under the
Duterte Administration
Atty. Fernando S. Peñarroyo
GEOCON 2016
13 December 2016
Puno & Peñarroyo Law Offices

2. Contents
• Recent Global Trends
- Global mining and petroleum update
- China and the South China Sea strategy
- Trump presidency
• Resources Industry Philippine Update
- petroleum, coal, geothermal; West Philippine Sea
Arbitral Ruling; Duterte administration; legal and
regulatory issues; climate change
• Bright Spots

3. Contents
•Recent Global Trends
- Global mining and petroleum update
- China and the South China Sea strategy
- Trump presidency
• Resources Industry Philippine Update
- petroleum, coal, geothermal; West Philippine Sea
Arbitral Ruling; Duterte administration; legal and
regulatory issues; climate change
• Bright Spots

4. PwC’s Mining
Industry 2015
Perspective
• Top 40 mining companies
experienced first time
collective lost, lowest
return on capital, 32%
capex write-off – signaling
an almost stagnant
investment environment
• Lower demand for bulk
commodities combined
with a bleak global
outlook and production
hangover resulted in 25%
fall in commodity prices
• Leverage is an all time
high of 46%

6. Present Oil Market
• Saudi Arabia maintaining
high output levels since
mid-2014 despite a global
supply glut to defend
market share
• OPEC and non-OPEC
producers agreed to curb
oil output and ease a
global glut – first joint
action since 2001
• Companies have cut
spending on exploration in
anticipation of uncertain
period of lower prices

7. China’s Nine-Dash Lines

9. • Area 7 (1)
Recto Bank
• Exploration Phase (10)
SCs 50, 54, 55, 57, 58
59, 63,72, 74 & 75
• Production Phase (3)
SCs 6, 6A, 6B, 14 &
38 (Malampaya gas field which
supplies 40% of the energy
requirement of Luzon)
ACTIVE PETROLEUM SERVICE
CONTRACTS (SCs) within
the Nine-dash lines
AREAS OFFERED IN THE
5th PHILIPPINE ENERGY CONTRACTING
ROUND (PECR5)

10. Trump Presidency
and the Resources
Industry
• Oil and gas industry
buoyed by Trump
election
• Mining companies
also seen as winners
• US will continue to
intervene in South
China Sea dispute
even under Trump

11. Contents
• Recent Global Trends
- Global mining and petroleum update
- China and the South China Sea strategy
- Trump presidency
•Resources Industry Philippine Update
- petroleum, coal, geothermal; West Philippine Sea
Arbitral Ruling; Duterte administration; legal and
regulatory issues; climate change
• Bright Spots

13. CurrentProducingPetroleumServiceContracts
(DOE,December2015)

16. Geothermal
Power
Plants
1,896 MW
Total Installed
Capacity
(as of December 2014)

18. Developmentincrementsandplantdecommissioning
since2005(DOE)

19. West Philippine Sea Dispute Arbitral
Ruling

20. Chinese Interference in Philippine
Petroleum Exploration Activities
China Claimed Reed Bank - SC 72
in February 2010
In August 2010, a Chinese
Embassy Official in Manila
informed Nido Petroleum that
SC 58 was claimed by China

21. Chinese Interference in Philippine
Petroleum Exploration Activities
In 2011, Chinese government
protested the inclusion of Areas
3 and 4 in the PECR 5
In March 2011, Chinese coast
guard vessels prevented a
seismic vessel from conducting a
survey for in Reed Bank

22. Permanent Court of Arbitration
Ruling
• China’s Claim to historic rights under the Nine-
Dash Lines is contrary to UNCLOS and cannot be
the basis of nay maritime entitlements
(territorial sea, exclusive economic zone,
extended continental shelf)
• All historic rights in the EEZ were extinguished
upon the effectivity of UNCLOS
• China violated the exclusive right of the
Philippines to its EEZ by interfering with the
petroleum activities of Filipino vessels within the
EEZ

23. Duterte Presidency
– What to Expect
• Laying the grounds for
Federalism
• Peace and Order –
peace agreements
with NPA and Muslim
secessionist
• Warming relations
with China
• Renewable Energy
vs. Coal-fired Power
Plants – Review of
Energy Mix

24. Existing, Committed and Indicative Coal-fired Power
Plants as at September, 2016 (DOE)

25. List of Existing Coal-fired Power Plants (DOE)

27. Mining Industry
Under Duterte
• Appointment of Gina
Lopez, DENR
Secretary
• Audit of Existing Mines
started 08 July 2016
• Halted operations for
environmental lapses
of 10 mines ( 8 nickel
producers); 12 more
mines recommended
for suspension
• Next on the block: audit
of non-metallic mines
and review of ECCs
granted to coal mines

28. Alternative Mining
Bill
• As a general rule, all
areas closed to mining
• MGB to conduct mineral
exploration
• Mining and mineral
processing reserved to
Filipinos
• 500 hectares maximum
mining area
• Mining rights are non-
transferable
• Maximum term of
MPSAs shall be mine life
+ 5 years but not to
exceed 15 years
• FPIC for every stage of
mining operations
• No open pit mining
• Government share –
10% of gross; IP royalty
– additional 10% of
gross

29. Upstream
Petroleum Issues
• Service Contract No. 46
Constitutional Challenge
(Resident Marine
Mammals vs. Sec. Reyes)
• Commission on Audit’s
(COA’s) Notice of Charge
for income tax deducted
from the National Wealth
share of the Government
• Award of the three (3)
Service Contracts in
recently conducted PECR 5
is still pending and
dependent on the resolution
of the cases above.
• DENR Water Quality
Guidelines and General
Effluent Standards – no
technologies available

30. Permitting Issues
Local government
• The legal issue of local autonomy in relation to the
exploration, development and utilization of natural
resources vis a vis the power of control by the
executive over LGUs will only be settled by judicial
interpretation.
Indigenous Peoples
• Given the complexity in applying the concept of free
and prior informed consent, development agencies
and the private industry are more inclined to adopt the
standard of 'free, prior, and informed consultation
resulting in broad community support’ where 'broad
community support' is interpreted as requiring 'good
faith negotiation with and informed participation of
indigenous peoples'.

31. Geothermal Exploration Projects with Permitting
Issues (DOE)

32. Petroleum Service Contracts Under Force Majeure
(DOE)

33. Vulnerability to
Climate Change
• The Philippines is highly
vulnerable to the impacts
of climate change.
• Risks include increased
frequency of extreme
weather events, sea-level
rise, rising temperatures
and extreme rainfall.
• Key Findings of “Climate
Change in the Philippines”
report:
- increase in annual mean
temperature by 0.57°C;&
- in terms of maximum
and minimum temperatures,
the increases have been
0.35°C and 0.94°C

34. Global Climate Risk Index 2015:
10 Most Affected Countries

35. Contents
• Recent Global Trends
- Global mining and petroleum update
- China and the South China Sea strategy
- Trump presidency
• Resources Industry Philippine Update
- petroleum, coal, geothermal; West Philippine Sea
Arbitral Ruling; Duterte administration; legal and
regulatory issues; climate change
•Bright Spots

36. Bright Spots for the Geology Profession
• Energy projects as projects of national
significance to address permitting issues
• “Golden Age of Infrastructure”
• Possible workable solution to the West
Philippine Sea petroleum exploration impasse
• Benham Rise
• Water resources management
• Climate change adaptation and disaster
reduction and risk management

37. Can there be joint development in
the Philippine EEZ?

38. Benham Rise – The
New Frontier
• DOE is open to the idea
that exploratory projects in
the Benham Rise may be
included in the Philippine
Energy Contracting
Round for petroleum.
• But MGB admitted that
there are no
administrative rules that
will regulate deep seabed
exploration and
development of mineral
resources, similar to the
"Mining Code", which
refers to the
comprehensive set of
rules, regulations and
procedures issued by the
International Seabed
Authority (“ISA”).

39. Philippines Water Governance
• Governance is very complex due to the number of institutions
involved, all with different hierarchical coverage, varied
mandates and representing the interests of diverse
constituencies.
• The government must embark on a “national water security
assessment” to determine the extent of its water resources to
provide the framework for an integrated, coherent and
sustainable water resources management program. Following
this integrated approach to water resources development and
management, the government can proceed with the
streamlining of regulatory procedures to attract investments
into the water sector.

40. Conclusion
• Slowdown in greenfield exploration for both
minerals and petroleum in the short term
• Resources industry is in for a rough ride but is
expected to weather the storm
• BUT: Other areas include environmental
planning, hydrogeology, pollution control, civil
engineering and construction, climate change
and disaster risk reduction/management
strategies
• Vigilance is always needed to protect the
profession!

41. Acknowledgments
• Department of Energy for the maps, figures and
data
• Supreme Court Senior Associate Justice Antonio
T. Carpio for his learned insights on the West
Philippine Sea Arbitral Ruling

42. About the Speaker
• Master of Laws (Univ. of Melbourne), Bachelor of Laws BS
Geo, (UP)
• Managing Partner, Puno and Penarroyo Law
(www.punopenalaw.com)
• VP and Treasurer, Clean Rock Renewable Energy Corp.
• Trustee and Secretary, Philippine Mineral Exploration
Association
• Director, Geological Society of the Philippines
• Legal Counsel, National Geothermal Association of the
Philippines
• Former Director, International Geothermal Association
• Lecturer, Asian Institute of Technology (Bangkok), UP
National Institute of Geological Sciences
• http://www.philippine-resources.com/

43. Reasserting the Relevance of the
Geology Profession Under the
Duterte Administration
Atty. Fernando S. Peñarroyo
GEOCON 2016
13 December 2016
Puno & Peñarroyo Law Offices