CAPITAL: Manila

MONETARY UNIT: Peso

REFINING CAPACITY: 401,000 b/cd

OIL PRODUCTION: 800 b/d

OIL RESERVES: 289 million bbl

GAS RESERVES: 2.8 tcf

The Philippine Supreme Court dismissed a lawsuit by a member of the House of Representatives questioning the legality of the oil sector deregulation law.

It said the petition of Rep. Enrique Garcia "lacks factual foundation specifically highlighting the need to declare the challenged provision unconstitutional."

Former Pres. Fidel Ramos signed the law in February 1998, allowing refiners to set their own prices after a 5-month transition period and opening the downstream oil business to other players.

Garcia claimed the law was anticompetitive because removal of government price controls on gasoline and other products would allow the market to be dominated by three refiners: Petron Corp., Pilipinas Shell Petroleum Corp., and Caltex (Philippines) Inc.

Separately, the government passed a law requiring the three refiners to sell cleaner products. They would have to invest $157 million to meet the higher standards.

Philippine gasoline had between 45 and 50% aromatics content, but the law limited it to no more than 45% aromatics and not more than 4% benzene within 6 months.

All gasoline must be lead-free by 2003 and contain no more than 35% aromatics and 2% benzene.

Malampaya project

Texaco Inc. acquired 45% of the Malampaya natural gas development project from Royal Dutch/Shell units Shell Philippines Exploration BV and Shell Philippines LLC.

As part of the deal, Texaco would help fund the $2 billion upstream project, which included the drilling and operation of deepwater gas wells, on and offshore production facilities, and a 500-km subsea pipeline. Shell was to continue as the project`s operator. Shell let contract for construction of an onshore gas processing plant for the Malampaya project. The twin-train plant, to be built in Tabangao on Luzon Island, was rated at 500 MMcfd.

Shell said Malampaya project costs would total $4.5 billion, of which $2.5 billion would be for three power plants in southern Luzon.

First gas was due in October 2001. Proven reserves were 2.5 tcf.

The government said the project would save the country $500 million/year in oil imports for power plants and provide $8 billion of revenue during the 20-year life of the field.

Meanwhile, Philippine National Oil Co. said a discovery in the northern island of Fuga had up to 1.36 billion bbl of oil.

The state-owned oil company was discussing development with real estate tycoon Tan Yu, who owned the island.

PNOC`s partners included Stirling Resources NL and Hardman Resources NL of Australia.

Processing activity

TotalFina SA acquired a 15% interest in Shell Gas Eastern Inc., which owned an LPG import and storage terminal at Tabangao.

The only refrigerated butane and propane storage facility in the Philippines, it had combined storage capacity of 50,000 tonnes.

TotalFina said its acquisition, through unit Total Philippines Corp., would enable it to enter the Philippines market and provide logistical support for its other LPG marketing operations in Southeast Asia. Total said it would spend $29 million to upgrade its storage facilities in the Philippines.

Total`s depot in Bataan province would be upgraded and expanded to 240,000 bbl of capacity from 100,000 bbl. Total also would open a 400,000 bbl depot in the Batangas Bay area south of Manila.

Meanwhile, Chinese Petroleum Corp. withdrew from a project to build a naphtha cracker and related downstream units.

CPC cited a combination of factors, including strained trade ties between Taiwan and the Philippines. CPC wanted to place top priority on investment within Taiwan.

The $600 million project`s other partners were Itochu Corp. and Philippine Petrochemical Development Corp.

Petron planned to build a 345-Mw, coke-fired power plant by 2003, one of several projects totaling $1 billion that it planned. Others included a continuous-regeneration catalytic reformer and a sulfur recovery unit at its 180,000-b/d refinery at Limay, Bataan.