Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

EIGHTEENTH CONGRESS
2™ Regular Session

House Bill No. 8762

Introduced by Hon. Juan Miguel Macapagal Arroyo

EXPLANATORY NOTE

The Philippine National Oil Company (PNOC) was created through
Presidential Decree No. 334, as a response to the world oil situation of crisis
proportions in 1973 resulting from international political developments. It was
then deemed imperative for the Philippine Government to embark on measures
to ensure stable supply of petroleum products to support the economic growth
and social wee-being of the nation. Since then, P.D. 334 has undergone
amendments to continually respond to the needs of the times and to better serve
the interest of the nation.

Recent developments and current challenges faced by the energy sector
today made it imperative that we make PNOC more responsive and flexible in
terms of its energy exploration, exploitation and development.

Today, we speak not only of energy from petroleum, oil and gas but
efforts must also be directed towards tapping other energy resources of our
patrimony that are indigenous and alternative and new and renewable. We
cannot forever be fully dependent upon sources of energy, the bulk of which
cannot be found within our own shores, and at worst times, the prices of which
are manipulated by the few countries with control over worldwide supplies.
Moreover, amid the threat of decreasing global reserves, we should again
mobilize the same vehicle that addresses successfully the 1973 oil crisis.

While its ASEAN counterparts have become globally competitive and
among the top 1000 corporations in the world today like the Petroliam National
Berhad (PETRONAS of Malaysia), Pertamina of Indonesia and PTT of
Thailand, PNOC, sadly, shackled by stringent rules, remained dormant in its
present state without an outlook of spirited expansion. The passage of this bill
will equip PNOC with a certain degree of flexibility to meet energy challenges
not merely as a passive government-owned and controlled corporation but as a
business entity making profits for the government while at the same time, an


46
47
48
49
50
51
52
53
54
55
56
37
58

active, vigorous and strong organization fully committed to nation building. It
is envisioned that through this bill and the efforts and commitment of PNOC, our
vast national patrimony could be better utilized and meet the growing demands
for a stable and reliable energy resources.

Early approval of this bill is, therefore, earnestly solicited



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
EIGHTEENTH CONGRESS
2™ Regular Session

House Bill No. 8762

Introduced by Rep. Juan Miguel Macapagal Arroyo

AN ACT
FURTHER AMENDING PRESIDENTIAL DECREE NO. 334,
AS AMENDED, OTHERWISE KNOWN AS THE CHARTER OF
THE PHILIPPINE NATIONAL OIL COMPANY

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:

WHEREAS, it is imperative that the government intensify, strengthen and
accelerate the pace of, and give special attention to energy exploration,
exploitation, development, storage and transportation in the light of the

current trend in petroleum supply and prices and our continued industrial

progress;

WHEREAS, under Presidential Decree No. 334, The Philippine National
Oil Company is specifically tasked:

(a) To provide and maintain an adequate and stable supply of oil
and petroleum products for the domestic requirement and for

that purpose to engage in transportation, storage, importation,


95
96
97
98
99
100
101
102
103

105
106
107
108
109
110
1
112
113
114
1s
116
M7
118
119
120
121
122

exportation, refining, supply, sale and distribution of crude
oil, refined petroleum and petroleum-based products, whether
imported or produced by local refineries;

(b) To engage in the exploration, exploitation and development

of local oil, petroleum and other energy sources;

(c) To foster conditions relating to oil or petroleum operations
and other energy resources exploitation conducive to a

balanced and sustainable growth of the economy;

(d) Toundertake, by itself or otherwise, exploration, exploitation,
and development of all energy resources of the country

including survey activities related thereto;

(c) To undertake all other forms of petroleum or oil operations

and other energy resources exploitation.

‘WHEREAS, in its original charter, PNOC is granted authorities and
powers necessary to fulfill its mandate and as such it was successful in its
operations;

WHEREAS, due to the passage of several laws, these innate powers and
authorities of PNOC under its Charter were slowly eroded and it is now
shackled with so many rules and regulations which make it extremely
difficult to operate;

WHEREAS, in order that the Philippine National Oil Company could
effectively and efficiently attain these objectives as well as enable it to
capitalize on new opportunities in the energy exploitation, exploration,

development, storage and transportation including the exploration and


123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143

145
146
147
148
149
150
151

development of indigenous, renewable and alternative energy sources, it is
necessary that it be granted additional powers and incentives consistent
with its role in the overall thrust of the National Government for economic

growth and stability.

SEC.1. Section 5 paragraphs (a), (d), and (m) is amended to

read:

“SEC. 5. Powers and Functions of the PNOC.-
The PNOC shall have the following powers and
functions:

(A) TO ESTABLISH AND ADMINISTER A
COMPREHENSIVE AND INTEGRATED
PROGRAM FOR THE EXPLORATION,
EXPLOITATION, DEVELOPMENT AND
EXTRACTION OF FOSSIL FUEL AND
UNDER PRESIDENTIAL DECREE 87
(AMENDING FURTHER SECTION 17 OF PD
87 TO REFER TO PNOC AS THE
IMPLEMENTING AGENCY TAKING THE
PLACE OF THE DEPARTMENT OF
ENERGY, AND UNDER SECTION 3
PARAGRAPH 20 OF THE DEFINITION OF
TERMS);

(b) To undertake, by itself or otherwise,
exploration, exploitation, development,
STORAGE, TRANSPORTATION AND


152
153
154
155

176
177
178
179
180

SEC. 3.

DISTRIBUTION of all energy resources of the
country, including surveys and activities related
thereto AS WELL AS UNDERTAKE OIL, GAS
AND COAL OPERATIONS UNDER
SERVICE CONTRACTS. AS SUCH THE
PNOC IS GRANTED FRANCHISE FOR THE
DEVELOPMENT, CONSTRUCTION,
OWNERSHIP AND OPERATIONS OF
PIPELINES AND ALL OTHER MODES OF
TRANSPORTATION OF ENERGY
RESOURCES ALL OVER THE COUNTRY.

(d.) To undertake all forms of petroleum or oil
operations and other energy resources
exploitations BOTH LOCALLY AND
INTERNATIONALLY.

XXX
(m.) To determine its organizational structure,
and the number and salaries of its officers and
employees, EXISTING PROVISIONS OF LAW
TO THE CONTRARY NOTWITHSTANDING.

XXX

Section 6 shall be amended to read as follows:


181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209

SEC. 6. Governing Body ~ The PNOC shall be
governed by a Board of Directors, hereinafter referred
to as the “Board”; which shall be composed of nine (9)
members, to be appointed by the President of the
Philippines. The members of the Board, EXCEPT THE
CHAIRMAN AND THE PRESIDENT, shall serve for
a term of three (3) years or until their successors have
been appointed and qualified. In case of any vacancy
in the Board, the same shall be filled by the President
of the Philippines for the unexpired term.

THE BOARD SHALL HAVE THE SOLE
POWER AND AUTHORITY TO ESTABLISH AND
MAINTAIN OFFICES, BRANCHES, AGENCIES,
SUBSIDIARIES OR OTHER UNITS ANYWHERE
AS MAY BE NEEDED BY THE PNOC AND
REORGANIZE AND ABOLISH THE SAME AS
NEEDED; DETERMINE THE ORGANIZATIONAL
STRUCTURE OF THE PNOC AND THE NUMBER
AND SALARIES OF ITS OFFICERS AND
EMPLOYEES; AND TO ELECT THE DIRECTORS
OF ITS SUBSIDIARIES AND AFFILIATES
INCLUDING THE POWER TO REORGANIZE THE
SAME.

NO APPOINTMENTS TO THE
SUBSIDIARY/AFFILIATE BOARDS SHALL BE


210
2
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234

236
237
238

MADE UNLESS SO ELECTED BY THE PNOC
BOARD.

No person shall be appointed as member of the
Board unless he is a natural born citizen of the
Philippines, at least thirty-five (35) years of age and of
established integrity.

THE SECRETARY OF THE DEPARTMENT OF
ENERGY SHALL, IN CONCURRENT CAPACITY,
BE THE EX-OFFICIO CHAIRMAN OF THE PNOC
BOARD AND ITS SUBSIDIARIES, PROVIDED,
THAT IN NO CASE SHALL THE SECRETARY BE
THE CHIEF EXECUTIVE OFFICER OR CHIEF
OPERATING OFFICER OF THE PNOC OR ITS
SUBSIDIARIES, ANY LAW TO THE CONTRARY
NOTWITHSTANDING.

THE PRESIDENT OF THE PNOC SHALL BE
APPOINTED BY THE PRESIDENT OF THE
PHILIPPINES. IN ADDITION, HE SHALL ALSO
BE THE PRESIDENT OF ALL PNOC
SUBSIDIARIES. THE PRESIDENT OF THE PNOC,
ON THE DATE OF HIS APPOINTMENT, SHOULD
HAVE AT LEAST TEN (10) YEARS EXPERIENCE
IN OIL AND GAS AND ENERGY RELATED
INDUSTRIES. FURTHER, IN ORDER TO ENSURE
THE SUSTAINABILITY OF THE PNOC’S PLANS
AND PROGRAMS AND TO ENSURE ITS


239
240
241
242
243

245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264

266
267

CONTINUOUS GROWTH, THE PRESIDENT OF
THE PNOC SHALL SERVE FOR A TERM OF TEN
(10) YEARS.

THE OTHER OFFICERS OF THE PNOC, SUCH AS
THE CORPORATE SECRETARY AND THE VICE
PRESIDENTS SHALL BE APPOINTED BY THE
BOARD.

SEC. 4. Section 12 shall be amended to read:

“SEC. 12. Appointment, Control and Discipline
of Personnel — IN ORDER TO MAINTAIN

OPERATIONAL FLEXIBILITY AND TO ENSURE
COMPETITIVE EDGE IN THE MARKET SO THAT
THE TECHNICAL EXPERTISE OF QUALIFIED
PERSONNEL MAY BE AVAILED OF TO REALIZE
THE GOALS OF THIS ACT, any provision of law to
the contrary notwithstanding, the Board, upon
recommendation of the President of the PNOC, shall
ESTABLISH AND MAINTAIN A POSITION
CLASSIFICATION AND COMPENSATION
STRUCTURE BASED ON JOB EVALUATION
STUDIES AND WAGE SURVEYS, grant them leave
of absence under such regulations as it may
promulgate, discipline and/or remove them for cause;
and establish and maintain a recruitment and merit

system for the PNOC and its affiliates and subsidiaries.


268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296

THE PNOC SHALL WITHIN A PERIOD OF
SIXTY (60) DAYS FROM APPROVAL OF THIS
ACT SHALL COME UP WITH A POSITION
CLASSIFICATION AND COMPENSATION
STRUCTURE TO BE APPROVED BY THE
PRESIDENT OF THE PHILIPPINES.”

SEC.5. A paragraph shall be added between the first and

second paragraph of section 15, which shall read:

“SEC. 15. Privileges and Incentives. — The
PNOC shall be entitled to all the incentives and

privileges granted by law to private enterprises engaged
in petroleum or oil operations.

XXX
THE PROVISIONS OF REPUBLIC ACT 9184
NOTWITHSTANDING, THE COMPANY SHALL
HEREAFTER BE EXEMPTED FROM THE
REQUIREMENTS OF PUBLIC BIDDING IN
PROCURING GOODS AND SERVICES DIRECTLY
RELATED IN OPERATING ITS BUSINESS.

XXX

SEC.6. A paragraph shall be added to Section 17, which

shall read:


297
298

300
301
302
303
304
305
306
307
308
309
310
311
312
313
314
315
316
317
318
319
320
321
322
323
324

“SEC. 17. Reports. — The PNOC shall, within
three (3) months after the end of every fiscal year,
submit its annual report to the President. It shall
likewise submit such periodic or other reports as may

be required of it from time to time.

SECTION 13, CHAPTER III OF REPUBLIC
ACT NO. 7638 NOTWITHSTANDING, THE PNOC
SHALL BE EXEMPT FROM SUBMITTING ITS
ANNUAL BUDGET TO CONGRESS FOR
APPROVAL. HOWEVER, A JOINT SENATE AND
HOUSE PETROLEUM OVERSIGHT COMMITTEE
SHALL BE CREATED FOR THE PURPOSE OF
OVERSEEING THE OPERATIONS OF THE PNOC.

SEC. 7. Contracts, Benefits and Obligations of the Philippine
National Oil Company. All contracts entered into, benefits enjoyed
and obligations incurred by the Philippine National Oil Company
previous to the effectivity of this Act shall remain valid and in force
and effective unless otherwise provided and shall, from hereon, be
in the name of the PNOC.

SEC. 9. Separability Clause. - Should any section or
provision of this Act be held unconstitutional or invalid, no other
provision hereof shall be affected thereby and shall continue to be in
full force and effect.


325
326
327
328
329
330
331
332
333

334
335

SEC. 10. Repealing Clause. — All laws, decrees, executive
orders, administrative orders, rules or regulations inconsistent

herewith are hereby repealed, amended or modified accordingly.

SEC. 11. Effectivity. - This Act shall take effect fifteen (15)
days after publication in two (2) newspapers of general circulation.

APPROVED.