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March - April 2019 ISSN 2243-8173-19-02

SURVEY OF MINING AND PETROLEUM


What’s inside?
ISSUES IN THE BANGSAMORO-ARMM
1. Philippine Mining Law This paper was prepared by Atty. Ishak V. Mastura, LL. M. Petroleum Law and Policy (Centre
for Energy, Petroleum and Mineral Law and Policy, University of Dundee, Scotland, U.K., 2007).
2. Mineral Rights Atty. Mastura is the Chief Operations Officer of IAG Development Consulting Inc. (IDCI), the
business and development consulting firm of IAG. Visit www.idci.com.ph to learn more.
2.1. Types of Mineral
Rights
INTRODUCTION
3. Mineral Rights Under
the Philippine Mining Law
Mining has a long history in the Philippines going back to antiquity
4. Mining in the when its inhabitants mined for gold and other valuable minerals. This
Autonomous Region Southeast Asian country comprises an archipelago of 7,100 islands
in Muslim Mindanao divided into three geographic regions, Luzon, Visayas and Mindanao.
(ARMM) The country has rich mineral resources forming part of the “Pacific Rim
of Fire”, which is so called because of the intense volcanic activity at the
5. Overview of the margins of the tectonic plates and is well-known for epithermal gold,
Philippine Service
porphyry copper-gold, and volcanic-hosted massive sulfide deposits.”
Contract

6. Oil a Catalyst for Peace Principal minerals found in the Philippines include gold, copper, nickel,
or Seeds of Intensified chromite and manganese. The Philippines has reserves of about 7
Conflict billion metric tons of metallic minerals and 52 billion metric tons of
non-metallic minerals making it among the countries with the richest
6.1. A Nigerian Oil endowment in gold, copper and nickel. Despite its abundant mineral
Scenario?
resources, the Philippines never realized its full potential. The mining

This Policy Brief is published bimonthly.

Editor: Benedicto R. Bacani Associate Editor: Ramie P. Toledo Lay-out Artist: Jazz L. Cuaresma
regime of the Philippines follows the Regalian Doctrine in which all mineral resources nature of mineral rights granted by governments. Agreements and structures vary so
of the country are owned by the State. Similar to other countries that were colonized, that it is difficult to determine whether a specific contractual or regulatory arrangement
its past colonial experience under Spain and then America has given the Philippines a is a concession, a license, or a permit. Sometimes these terms are used interchangeably.
decidedly nationalistic view of the exploitation and development of its mineral resources Having contractual form does not in itself indicate the material substance of the
so that the general rule in the mining regime of the country is that the exploitation of mineral rights because hybrid forms now predominate. Whether mineral rights are
mineral wealth is reserved for Filipinos. Hence, the 1987 Philippine Constitution limits called licenses, permits, leases, concessions or contract rights, what is essential is
the full participation of foreigners to financial or technical assistance in large-scale mining that the nature and status of those rights are determined in a legal act that is binding
projects. on the state and other parties.

In 1995, in an effort to revitalize the mining industry, the Philippine government enacted 2.1. TYPES OF MINERAL RIGHTS
a new mining law. The Philippine Mining Act of 1995 provides for mineral tenure and
mining rights under an Exploration Permit, Mineral Agreement (i.e. Mineral Production Because of the prevalence of the hybrid approach to the grant of mineral rights
Sharing, Co-Production and Joint Venture) allowing maximum 40% foreign equity, and by governments, myriad labels have increasingly been utilized to describe these
Financial or Technical Assistance Agreement (FTAA) for 100% foreign equity in mining. arrangements. The difficulty with labeling mineral rights is that host governments
may negotiate varying terms for agreements over time. Having said that, among the most
1. PHILIPPINE MINING LAW common mineral contracts or agreements granting mineral rights are concessions,
production-sharing contracts, joint venture contracts, contracts of work, service contracts
The 1987 Philippine Constitution states: “All lands of the public domain, waters, and technical assistance contracts.
minerals, coal, petroleum, and other minerals oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are In the traditional concession, the State’s role was limited to granting the
owned by the State.” Unlike some other constitutional mining provisions that simply declare concessionaire access to large areas with exclusive mining rights including complete
only general mining principles to be implemented in mining statutes, the Philippine control over the disposition of mineral resources, in exchange for a production royalty.
Constitution itself specifies that the State may directly undertake mining activities or enter In the Philippine context, a concession is described as follows: “[T]he concessionaire
into co-production, joint venture or production sharing agreements. For large-scale mining, makes a direct equity investment for the purpose of exploiting a particular natural
the government has the option under the Constitution to enter into financial or technical resource within a given area. Thus, the concession amounts to complete control by
assistance agreements with 100% foreign-owned entities. In case a mining agreement the concessionaire over the country’s natural resource, for it is given exclusive and
or FTAA is obtained right from the start of mining activity, the exploration right is already plenary rights to exploit a particular resource at the point of extraction. In consideration
integrated into the mining agreement similar to the unified concession of Peru where a for the right to exploit a natural resource, the concessionaire either pays rent or
single license provides for both exploration and mining rights. royalty, which is a fixed percentage of the gross proceeds.”

2. MINERAL RIGHTS The modern concession is similar to what is described above but a more complicated
fiscal regime consisting of taxes and royalty. The joint venture is a participation agreement
Minerals are owned by the State in most countries. There are three main ways used by between the State and the miner, which may be an equity joint venture or contractual
governments in granting mineral exploration authorisation and mineral exploitation rights joint venture. In equity joint ventures, the State participates as an equity partner
(the combination of which is the essence of mineral rights). The first is based on a grant of in the mining venture while in contractual joint ventures, the miner is limited to a
title to the minerals a licensing system defined by a Mining Law and national regulation. contractual right for financial compensation. In production-sharing contracts, the State
Second, host governments might use only a mining agreement which becomes the and the miner share in the production of the mining venture with the miner shouldering
mining law that governs that project. Third, and by far the most widespread method, the management, the expense and risk of exploration and the development and utilization
is the hybrid system in which the mining title (and national regulations) and mining of the mineral resources, while being entitled to cost recovery and a profit from production.
agreement are used simultaneously or in turn. The difficulty is in determining exactly the
Service contracts are akin to production sharing contracts in the sense that the

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contractor funds all the capital expenditures and operating costs, but differ with the Because of its nomenclature, the FTAA has caused confusion in the past and continues
production sharing contract in that the contractor does not share in the production, but is to do so. One recent magazine article described the FTAA as: “Basically a concession
paid a fee for service or from a portion of the value of production. Service contracts agreement, the FTAA is a contract involving financial or technical assistance for
may be interchanged with contracts of work, but one author argues that the distinction large-scale exploration, development and utilization of mineral resources. The FTAA
between the two is that: “In a contract of work, the contractor works independently provision of the Mining Act allows foreign companies to have full control of mining
of the contracting State or its national enterprise, while the contractor in a service projects.” The Mining Journal remarked about the Mining Act when it was first passed
contract undertakes to work under the supervision or control of the other contracting that: “Most importantly, the new act abolishes the leasehold system for acquiring
party.” mining rights and, through the FTAA, allows 100% foreign ownership in large-scale
mining projects. In a much later article referring to FTAA, the Mining Journal clarified
In the Philippines context: “A service contract is a contractual arrangement for engaging that: “Under the revised mining law, the old leasehold system has been replaced
in the exploitation and development of petroleum, mineral, energy, land and other with a service contract scheme whereby the government gives a qualified contractor
natural resources by which a government or its agency, or a private person granted the exclusive rights to conduct exploration and develop and operate a mine in the
a right or privilege by the government authorizes the other party (service contractor) contract area for 25 years, renewable for the same period.”
to engage or participate in the exercise of such right or the enjoyment of the
privilege, in that the latter provides financial or technical resources, undertakes In the case of the FTAA, there is some truth to the claim that it is just a new name
the exploitation or production of a given resource, or directly manages the productive given for the original service contracts, which was the means of granting mineral rights
enterprise, operations of the exploration and exploitation of the resources or the to foreign corporations under the 1973 Constitution. As previously stated, the Philippine
disposition of marketing or resources.” service contract was basically a version of the concession with production-sharing element.
An FTAA has a very large potential contract area of 81,000 hectares. It has a long duration
In technical assistance agreements, the contractor provides technical services for the of up to fifty years. The FTAA provides limited real property right over mineral resources.
execution of a project for a specified fee, “without any ownership in any form in As written in the Mining Act, there is even no clear production sharing with the
the production of the enterprise.” The structure of a technical assistance agreement has State. These are some characteristics which it shares with the concession. But the
been referred as the most radical departure from the traditional concession since it State ownership of minerals, the heavy involvement of the government in mining
completely relegates the miner from the status of owner to that of contractor. operations, the reporting requirements and the requirement of area relinquishment are
characteristics of service contracts. Hence, the FTAA is actually a hybrid system just
3. MINERAL RIGHTS UNDER THE PHILIPPINE MINING LAW like the Indonesian Contract of Work. Just like in Indonesia, it can be said that the FTAA
allows the government to continue claiming control and supervision over the country’s
The mineral rights in the Philippines, which has a civil law system, are based on a mineral resources, while opening the door to foreign investments in its development.
mining agreement with the basic principles, terms and conditions of the agreement
provided by the mining law. RA 7942 states that for purposes of mining operations, a
mineral agreement may take the following forms – mineral production sharing agreement, 4. MINING IN THE AUTONOMOUS REGION IN MUSLIM MINDANAO (ARMM)
co-production agreement or joint-venture agreement.
While the ARMM has a lot of mineral potential according to the national geological maps,
FTAAs are excluded from the enumeration of authorized forms of mineral agreements. this has not been exploited because of its long history as a conflict -affected area. The
However, the FTAA is defined under the Mining Act as a contract involving financial discussion above on the Philippine Mining Law and legal regime is relevant to the ARMM
or technical assistance for large-scale exploration, development, and utilization of because for the most part mining in the Philippines is governed by the Constitution and
mineral resources In essence, it is a mining contract allowing 100% foreign equity in the ARMM cannot deviate much (if at all) from the national laws implementing those
mining investments in the country. But if we look at its ordinary meaning, the term Constitutional provisions on mining in the country, which have become entrenched as well
is deceptive and diverges from the accepted usage of the term “financial or technical in legal jurisprudence arising from cases filed in the Supreme Court.
assistance” in the natural resources industry.
According to the data from the ARMM Regional Board of Investments, mining and quarrying

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accounts for 18% of registered investments in the ARMM with agriculture consisting the pay in other mining areas in the country. Whether this makes the region less attractive to
bulk of registered investments at 40% followed by downstream and renewable energy mining investors really depends on a variety of factors depending on the particular mineral
investments at 24%. resources found in the region and the quality of mineral reserves.

The biggest bone of contention in the ARMM legal framework for mining is what constitutes So far, the biggest and most active mining area in the ARMM is in the far flung Province
“strategic minerals” which issue arose of the 1996 GRP-MNLF Peace Agreement. The of Tawi-Tawi, where the MPSA of “SR Languyan” in Languyan Municipality has spawned
ARMM for the most part has asserted that “strategic minerals” only refers to sources of contractors for the mining of nickel ore, which are exported raw for processing in China.
“potential energy” and fossil fuels in accordance with a vague enumeration found in the
expanded ARMM Organic Act (RA 9054). National government has asserted at one time Recently, this year, 2018 the ARMM regional government initiated the enactment of the
or another that it is the national government that ought to define what consists of “strategic ARMM mining code entitled “An Act Providing for Responsible Mining of the Autonomous
minerals” to include metals and metallic minerals. However, national government has Region in Muslim Mindanao, and for Other Purposes” principally authored by Assemblyman
not gone to the extent of cancelling Mineral Production Sharing Agreements (MPSA) that Hannibal Tulawie of Sulu. The legislation is expected to be passed and signed into law
have been issued by the ARMM Department of Environment and Natural Resources. The before the end of this year, 2018. As anticipated there is no significant deviation from the
ARMM has not issued any new MPSAs from the first few that it issued particularly for Philippine Mining Law except that the Regional Wealth Tax is now imposed in addition to the
nickel mining in Tawi-Tawi province. share of the ARMM regional government from the national taxes on mining. The Regional
Wealth Tax according to some quarters did not have legal basis and some have argued
The issue on “strategic minerals” has affected even the issuance of Environmental that the ARMM Revenue Code was not sufficient basis for its imposition on mining so this
Compliance Certificate for mining in Tawi-Tawi because the national Department of legislation is supposed to cure that perceived legal defect even though no one has actually
Environment and Natural Resources came out with Department Order No. 2012-7, questioned the tax in court.
classifying nickel as one of the strategic minerals within the national government’s purview.
However, unlike in the national mining laws and legal regime, under the proposed ARMM
This issue of “strategic minerals” has been done away with in the recently passed mining law the grant of mining license in the ARMM must have the concurrence of the
Bangsamoro Organic Law (BOL) by removing any distinctions regarding minerals but the legislative branch of government, i.e. the Regional Legislative Assembly, and no longer
BOL is now very explicit that mining and mineral resources in the Bangsamoro-ARMM are the sole prerogative of the executive branch, i.e. the ARMM Regional Governor. This
subject to the Constitution and national laws. Hence, the Bangsamoro cannot pass any concurrence by the legislative for mineral licenses will probably be carried over in the BOL
legislation in its parliament that would contravene the Philippine mining laws and legal because the structure of government under the BOL is parliamentary, wherein the executive
regime. and legislative branches are fused or joined. This extra layer of consent from the legislative
branch for mining to take place may both be a boon and a bane depending on whether
The current ARMM government has also imposed the 5% regional wealth tax on gross mining becomes a significant economic activity and source of revenues for the regional
sales provided by the ARMM Revenue Code on mining activities, which makes mining government.
relatively more expensive in the ARMM than in other areas of the country. Mining has
significantly contributed to the regional government’s own sources of revenues so that 5. OVERVIEW OF THE PHILIPPINE SERVICE CONTRACT
taxes, fees and charges grew from P52.9 million or 8.1% of the total internally generated
revenues in 2013 to P267.8 million in 2014 due to the higher collection of the regional Presidential Decree (PD) 87 or “The Oil Exploration and Development Act of 1972” established
wealth tax, which was raised from ½ of 1% to 5% of gross sales, so that taxes, fees and the Service Contract regime for petroleum exploration and production in the country. It
charges jumped four-fold in 2014, constituting 31.2% of the sources of revenues of the was later amended in 1983 by PD 1857 providing for better incentives to contractors for
regional government. deep water exploration and development. In the Philippine Service Contract, service and
technology are furnished by the contractor for which it shall be entitled to the stipulated fee
With the increase in national excise taxes for mining from 2% to 4% in the recent tax while financing is provided by the government to which all petroleum produced shall belong,
reform law of the national government and the 5% regional wealth tax, government take but where the government is unable to finance petroleum exploration operations and if the
for mining in the ARMM is now 9% of gross sales, which is double that of what miners

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contractor shall furnish services, technology as well as financing, the proceeds of the sale Sulu Sea and as one Mitra Energy Ltd. geologist said about SC 56 “the integration of well
of the petroleum produced under the contract shall be the source of funds for payment of and seismic models in a robust analysis of the prospectivity of the SC 56 has led to the
the service fee and operating expenses due the contractor.1 upgrading of the Sandakan Basin for deepwater exploration. The “elephants” are waiting to
be tested.”8 On the other hand, natural gas reserves or oil equivalent are said to be found
Aside from the basic provisions of the law on limitation of cost recovery up to 70% of in the geophysical terrain of the Cotabato Basin, the heart of which is the Liguasan Marsh
gross proceeds and profit sharing of profit oil of 60% for the government and 40% for and the Pulangi River Delta, and by virtue of anecdotal evidence and actual discovery of 29
the contractor, all the other terms and conditions of the contract are negotiable. Current BCF of gas, it is suggested that it is more gas prone rather than suitable for oil discovery.9
Service Contracts cover a seven-year exploration with the first two years of the work
program devoted in conducting geological and geophysical studies and drilling of one The ability of Moro insurgents to disrupt any oil-related activities has been proven when
exploration well. In practice, the Philippine Service in June 1997 there was a reported kidnapping of 43 PNOC personnel conducting seismic
survey in the Cotabato Basin, and although the MILF denied that the alleged kidnappers
6. OIL A CATALYST FOR PEACE OR SEEDS OF INTENSIFIED CONFLICT were their fighters they were said to have run to the MILF’s Camp Raja Muda provoking
a military offensive on the camp.10 Earlier in February of that year, two employees of the
The ARMM has some of the biggest untapped petroleum resources in the Philippines. PNOC were also kidnapped and released. The activities of the PNOC in the Cotabato
Two of the most highly prospective Petroleum Sedimentary Basins in the country lie within Basin were stopped altogether when President Estrada launched his “all-out war” against
the territorial jurisdiction of the ARMM, i.e. the Sulu Sea Basin and the major portion of the the MILF in 2000. Even offshore oil sites are not immune to seaborne attacks. The MILF
Cotabato Basin. According to the Philippine Department of Energy, the offshore Sulu Sea has seaborne resources and it demonstrated its maritime capability in February 2000, when
Basin has a potential 203 MMBOE, while the land-based Cotabato Basin has a potential they attacked the vessel Our Lady Mediatrix, killing forty persons and wounding fifty.11
159 MMBOE with 29 BCF of gas already discovered.2
Hence, the Philippine Human Development Report 2005 realizes the key importance of the
The hydrocarbon prospectivity of the ARMM is borne out by the fact that in previous years peace process with the MILF in resolving development and security issues in the country
three Service Contracts (SC) still at the exploration stage have been awarded by the by concluding that:
Philippine government in the offshore Sulu Sea Basin in the waters surrounding the Sulu
Archipelago. SC 41 with an area of 4,820 square kilometers is operated by Australian “Addressing the root causes of rebellion in Mindanao would also address the root
company, Tap Oil.3 SC 64 with an area of 12,600 square kilometers is operated by causes of terrorism there. The armed conflict on the Moro front had better evolve in
Malaysian company, Ranhill Berhad.4 Perhaps the most intriguing is SC 56 operated by this direction, for the sake of human security and human development in Mindanao
Malaysian-based Mitra Energy Ltd., wherein ExxonMobil signed a 50% farm-in agreement and the rest of the Philippines. Of the three tracks constituting the current form
in the past.5 of evolution of this conflict, the MILF track seems to be a linchpin of the broader
Mindanao peace process and the legitimate fight in defense against terrorism. This
This vote of confidence by ExxonMobil has significant value considering that oil analyst is because this track is still evolving. In the MNLF track, the final peace agreement
Daniel Yergin calls it “no question, the gold standard, the company all others measure has encountered problems in implementation, some of which may be due to the
themselves against.”6 ExxonMobil is known for its penchant for long-range thinking and inadequacy of the agreement itself. The third track, the nature of the terrorist
having a 10-year strategy and planning horizon, which bodes well for the Sulu Sea problem with the Abu Sayyaf, does not partake of peace negotiations. The MILF
acreage.7 The Sulu Sea Basin overlaps the Sandakan Basin on the Malaysian side of the
8 De Silva, S., Sandakan Basin: From Wildebeest to Zebra - Where are the Elephants?, 2006 AAPG International Conference, Perth,
1 Dimagiba, V., “Service Contract Concepts in Energy”, The Philippine Law Journal, Vol. LVII, September 1982, pp. 321-322. Australia, November 5-8, 2006 at http://aapg.confex.com/aapg/2006int/techprogram/A106444.htm. The richest oil and gas fields are
2 Cotabato Basin at http://www.doe.gov.ph/petroleum/cotabato_basin.htm and Aberga, E., The Sulu Sea /East Palawan Basins Resource categorized as “elephants” as opposed to “economic”, “large”, “big” or “giant” fields.
Assessment at http://www.ccop.or.th/ppm/document/PHWS1/Sulu%20Sea%20Resource%20Assessment.pdf 9 Arnado, J. and Arnado, M., Casualties of Globalization, Economic Interest, War and Displacement along Ligawasan Marsh Philippine,
3 Philippines to Hold Public Contracting Round on Oil Exploration, December 15, 2006 at http://www.rigzone.com/news/article.asp?a_id=39192 Social Science Research Council’s Program on Global Security and Cooperation, Manila, November 2004, pp. 36-38. The study states
4 Ranhill and Phil-Mal Awarded SC 64 in the Sulu Sea, December 05, 2006 at http://www.petroengineers.com/news/article.asp?a_id=38730 that: “While the marsh residents do not have technical know-how on recognizing natural gas, their actual contacts with this fuel confirms the
5 ExxonMobil Inks Deepwater Deal Off the Philippine Islands, December 05, 2006 at http://www.petroengineers.com/news/article.asp?a_ presence of natural gas. Focus group discussions with residents reveal stories of people being able to produce fire by lighting up matches
near the natural gas ‘pockets’. In fact, some residents have rigged improvised pipes to the source and in this way have tapped the natural gas
id=38822 for their daily cooking.” Moreover, the same study says that PNOC Exploration Corporation gives an unverified estimate of potential reserves
6 Contreras, J., “Multiple Personality”, Newsweek Special Edition Issues 2007, December 2006-February 2007, p. 36. of up to 1.7 trillion cubic feet of natural gas in the Cotabato Basin.
7 Ibid, p. 36. 10 Gutierrez, E. and Guialal, A., “The Unfinished Jihad: The Moro Islamic Liberation Front and Peace in Mindanao”, in Kristina Gaerlan and
Mara Stankovitch (eds.), Rebels, Warlords and Ulama, A Reader on Muslim Separatism and the War in the Southern Philippines, Institute for
Popular Democracy, Quezon City, 2000, pp. 268-270.
11 Banlaoi, R., “Maritime Terrorism in Southeast Asia, The Abu Sayyaf Threat”, Naval War College Review, Autumn 2005, Vol. 58, No. 4.
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track is the key link that merits priority.”12 the push for peace in the north-south deal’, says the source, an African diplomat
long involved in the peace negotiations.”17
For the international community, which has become increasingly concerned about the
terrorist “black hole” in Mindanao, an International Crisis Group report likewise concluded Another observer noted that “In the south, I think the existence of oil was a powerful force
that a peace agreement with the MILF providing for a genuine and fully implemented behind the settlement, because the government realized it couldn’t fully exploit the oil while
autonomy for the Moros is a sine qua non for winning the long-term war on terror in the fighting was going on.”18 Most of the producing oilfields of Sudan are in the South so that
Mindanao.13 they had been subject to steady SPLA attacks. As the oil production and oil prices rose, it
became an economic bonanza such that according to a Sudanese representative to the UN
It follows that the key to the potential hydrocarbon bonanza in Mindanao is the completion “Oil was a factor and a negotiating tool. We knew there would be a great deal more to share
of the Mindanao peace process as this will remove a lot of risks and uncertainty in their in the future.”19 It is also mentioned that the Southern Sudan peace process was successful
development. largely because of U.S. pressure. “It’s because America and other countries need the oil,”
according to the media source.20
Can oil be that catalyst?
Also in Darfur, Sudan, oil is seen to lubricate peace. Observers are optimistic that the
Oil can be a catalyst for peace since the Philippines also needs to develop the petroleum promise of large profits from oil could provide a reason for the Khartoum government, rebels
resources of the Bangsamoro to facilitate its economic growth which has not been high and foreign governments to work towards peace.21 However, one observer warned that
enough to cope with a growing population and high poverty levels plus natural and man- “There’s several rebel groups, dividing like cells….They don’t seem to have a very coherent
made disasters. Out of its estimated oil consumption of 335,000 barrels of oil per day, and sophisticated view of what their demands are. Oil could help them focus their demands
the Philippines imports 312,000 barrels of oil per day.14 Unless alleviated, this high import or it could further fragment them.”22 Which sentiment I think is fair warning to the Moro rebel
dependence and high energy intensity of GDP and continuing high oil prices would be groups in Mindanao. One recent opinion in the papers gave an unverified report that there
bound to undermine economic growth, increase inflation and weaken the balance of is now an ongoing “turf war” in Mindanao among the Moros in the MILF, MNLF and ARMM
payments.15 If worse comes to worst in the coming years and oil prices stay or go higher, government for access and control of mineral resources, not only in the Liguasan Marsh,
the Philippines would be prone to instability as opposition to rising fuel prices mounts.16 but also in the Sulu Sea and other parts of Mindanao.23
The Philippines is also highly indebted with debt at nearly two-thirds of GDP. An infusion
of export revenues from oil and gas and self-sufficiency in energy would surely assuage a Sadly, the general experience regarding the correlation between petroleum and conflict is
lot of the country’s problems. negative. Petroleum and the rents it generates are a central mechanism for prolonging
violent conflict and only rarely as in Sudan a catalyst for resolution.24 One study provides
The experience of the Sudan peace process is salutary. One Newsweek article about the that point-source resources or those which are concentrated in a small area far from the
role of oil in the peace settlement in Sudan said: capital produce secession movements, while diffuse resources or those which are scattered
over a larger area far from the capital produce “warlordism.” 25
“According to a source familiar with Sudan’s long conflict, it is no accident that
the government and its longtime enemy, the Southern People’s Liberation Army In the case of the Bangsamoro areas, the probable petroleum resources are both point-
(SPLA), began serious peace talks about three years ago, when the oil bounty was
becoming apparent. Nor is it a surprise that negotiators for the two sides made an 17 Polier, A., “Sudan: A Catalyst for Peace, Oil has played a major role in ending Sudan’s civil war”, Newsweek, February 21, 2005.
18 Gidley, R., “Oil discovery adds new twist to Darfur tragedy”, Reuters AlertNet, June 15, 2005 at http://www.alertnet.org/thefacts/
unexpected push to finish the deal late last year – when oil prices hovered near reliefresources/111885496661.htm
record highs of close to $50 a barrel. ‘Oil has been the most important factor in 19 Supra note 131.
20 Supra note 132.
21 Supra note 132.
12 Supra note 14, p. 80 22 Supra note 132.
13 Southern Philippines Backgrounder: Terrorism and the Peace Process, ICG Asia Report No. 80, Singapore/Brussels, July 13, 2004, p. 23 Supra note 112.
26. 24 Gary, I. and Karl, T., Bottom of the Barrel, Africa’s Oil Boom and the Poor, Catholic Relief Services, June 2003, p. 24.
14 CIA World Factbook Philippines at https://www.cia.gov/cia/publications/factbook/print/rp.html 25 Ross, M., “Oil, Drugs, and Diamonds: The Varying Roles of Natural Resources in Civil War”, in Karen Ballentine and Jake Sherman (eds.),
15 Donnelly, R., “Coping with dear oil”, Asia Today International, 2006, p. 20 at http://www.efic.gov.au/attachments/db/efi/110.pdf The Political Economy of Armed Conflict, Beyond Greed and Grievance, International Peace Academy, Lynne Rienner, London, 2003, pp.
16 Ibid. 53-54.

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source as in the Liguasan Marsh and diffuse as in the Sulu Sea but both far from the conflicts within the past decade, d) economic destitution is pervasive in the region,
capital and hence we foresee the persistence of the phenomena of secession movements and e) weak government and ineffective institutions are incapable of managing
and “warlordism” (exemplified by small armed groups like the Abu Sayyaf and the political revenues. 31 The Bangsamoro areas fit all the categories in the list except the first
clans) co-existing. so there is more likelihood of continuing violent conflict in those areas in case oil is
found. But it also reinforces the strategic imperative of a genuine implementation
The bad news according to studies is that petroleum being an unlootable resource – that of the CAB/FAB peace agreement with the MILF as the starting point of peace and
which cannot be easily appropriated by individuals or small groups such as diamonds – is development.
more likely to ignite separatist conflicts, and exacerbate grievances over the distribution
of resource wealth.26 Moreover, in cases where the resource is obstructuble such as 6.1. A NIGERIAN OIL SCENARIO?
petroleum traveling through a pipeline (except when oil is offshore), it provides rebel
groups with unceasing flow of extortion opportunities.27 Anticipating that its resources If the petroleum in the Bangsamoro areas is exploited without a deliberate and
being obstructuble are subject to holdups, governments tend to act preemptively by using well-prepared effort of addressing security issues not only in the sense of physical
terror and repression against local people.28 security but also relating to governance and human security as provided for, among
others, in the implementation of peace agreements with the MNLF and the MILF, a
Hence in our case, where the MILF control the onshore Cotabato Basin, the development likely scenario is that – with warring political clans, rebel groups and militias, corrupt
of petroleum resources therein without substantial work on the implementation of the twin security forces, the presence of foreign terrorists, the proliferation of small arms,
2013-2014 Comprehensive Agreement on the Bangsamoro/Framework Agreement on the the prevailing culture of impunity and the possibilities of competition for illegal oil
Bangsamoro (CAB/FAB) peace agreement will likely exacerbate and prolong the conflict wealth through “bunkering” (i.e. theft of oil), as well as, opportunities for corruption
by providing means of extortion or financing for disgruntled insurgents but increased of revenues it brings – oil will foster in the same “resource curse”, 32 poverty, misery
government repression can also be expected if there is petroleum development without and chaotic conditions found in the Niger Delta. 33
an acceptable implementation of the peace agreements by various constituencies in
Mindanao. One caveat of what may happen in the Bangsamoro areas goes this way, “It is important
to note that illegal oil bunkering is probably the most significant accelerator of conflict
In the Sulu Sea Basin, even though the petroleum resources are offshore, they straddle in the Niger Delta [and] one day’s worth of illegal oil bunkering in the Niger Delta
the border between the Philippines and Malaysia wherein small groups of saboteurs will buy quality weapons for and sustain a group of 1,500 youths for two months.” 34
can crisscross the border to evade pursuit and hide in the numerous islands and islets A worse scenario that may also be replicated is an earlier communal uprising of the
in the area. The Sulu Sea is notorious for the kidnap-for-ransom activities and piracy of Ijaw tribe in Delta State in 2003 to demand self-determination and recompense for
the Abu Sayyaf wherein they were successful for a number of years in boarding vessels past grievances regarding oil, which killed scores of people and temporarily shut-off
and kidnapping crew members.29 The sea has never deterred Moro insurgent activities, 40% of the country’s output.
the Moros being a “maritime people” and renowned seafarers for centuries. For much
of the 1970s, 80s and 90s both the MNLF and MILF were linked to several attacks on Under the BOL, petroleum resources are supposed to be jointly awarded by the
maritime vessels. 30 Bangsamoro government and the national government. But national laws and
procedures of the national Department of Energy must be followed. Under those
Another ominous research conducted on oil and violent conflict found that violent national laws the national Department of Energy is the lead agency and the ultimate
conflict was most likely to occur when: a) oil revenues accounted for a substantial responsibility for signing of petroleum licenses rests with the President of the
percentage of government income, b) oil fields are located in a region with a distinct Philippines.
ethnic or religious identity, c) the country had experienced ongoing unresolved
26 Ibid, pp. 64-65.
27 Ibid, p. 62. 31 Shankleman, J. “The Role of Business in Peace Making: A Case Study of the Oil Industry”, USIP Fellow Project Report, July 8, 2004 at
28 Ibid. http://www.usip.org/fellows/reports/2004/0708_shankleman.html
29 Raymond, C., “Piracy in Southeast Asia: New Trends, Issues and Responses”, Harvard Asia Quarterly, Vol. IX, No. 4, Fall 2005. 32 Supra note 138, p. 21. “Negative development outcomes associated with petroleum and other minerals are known as ‘resource curse.’
30 Shie, R., Ports in a Storm? The Nexus Between Counterterrorism, Counterproliferation, and Maritime Security in Southeast Asia, Essentially, this refers to the inverse association between growth and natural resource abundance, especially minerals and oils.”
Issues & Insights Vol. 4 No. 4, Pacific Forum CSIS, Honolulu, July 2004, p. 11. 33 See Rivers and Blood: Guns, Oil and Power in Nigeria’s Rivers State, A Human Rights Watch Briefing Paper, February 2005.
34 Mahtani, D., “Oil giant shell admits it fuels Nigeria violence”, The Sydney Morning Herald, June 14, 2004.

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