Philippine Environmental Regulation and Control

for the Oil and Gas Industry

Alan Ishmael G. Castro

December 10, 2021

The oil and gas industry operates in every corner of the world, from all habitats and terrains

inland to the depths of the ocean offshore. BP (2021) reports oil continually holding the

largest share of the global primary energy mix at 31.2% while the natural gas share is 24.7%,

slightly behind the share of coal at 27.2%. Hydroelectricity, nuclear, and renewable energy

sources represent a total of 16.9%. These data cement the significance of the oil and gas

industry, which remains a critical part of the global energy supply chain as every nation and

community will continue to rely on oil and gas resources for their energy supply for the

foreseeable future.

The oil and gas industry has had its fair share of environmental controversies for both the

upstream and downstream sectors. Major oil spills, ruptured oil and gas lines, damage to land,

rig and refinery accidents, fire, incidents of air and water pollution have all happened in

various locations and time periods. Truly, the oil and gas industry has not been without some

form of environmental risk and side effects. The challenge for the oil and gas sector is to not

just explore and produce natural resources to meet the world’s energy demand, but also

simultaneously dealing and minimizing adverse impacts to the environment through

implementation of current good practices learned from previous incidents.

To appreciate the potential environmental impact of the oil and gas industry to the

environment, it is important to understand the activities involved throughout the oil and gas

supply chain, the upstream and downstream sector. This summative essay discusses the

environmental protection laws in the Philippines, how they affect the oil and gas industry,

environmental management, and practices to abide by local legislations.

Upstream Oil and Gas

identify potential hydrocarbon bearing rock formations in major sedimentary basins. Detailed

information about a prospective area is built up using data from geological assessments in the

field accompanied by data gathered from survey methods such as magnetic, gravimetric, and

seismic surveying methods.

Seismic surveys are the most common surveying methos and often is the first chosen method

to be undertaken. It relies on pulses of acoustic energy transmitted into the ground where the

different geological strata reflect signals back to the surface. Seismometers, used on land, and

hydrophones, used on water, pick up the reflected signals and transmit the data for further

interpretation. Magnetic surveying records its measurement through the changing strength of

the magnetic field that reflects the magnetic characteristics of the rock formations beneath the

ground. The gravimetric method relies on the measurement of the changes in the gravitational

field at the earth’s surface. Both the magnetic and gravimetric methods can be carried out on

land and at sea using survey ships or an aircraft.

The development of modern technology has pushed for these nondestructive surveying

methods to be used as environmental considerations are now a prevalent part of the

exploration processes. Such is the case with seismic surveying. In the past, dynamites were

used as the energy source to deliver acoustic pulses to the ground. Nowadays, seismic

vibrators and air guns are used to prevent damage to the surveyed area. There are no specific

laws and regulations in the Philippines preventing the use of any types of explosives for the

purpose of exploration, the Philippines’ fiscal regime does compel the service contractor to

abide by laws and decrees with respect to environmental protection such as minimizing the

damage and destruction to marine life and oceanic environments, and continuously conform

to good engineering practices and latest technologies prevalent in the oil and gas industry.
Exploration activities to be carried out by the service contractor shall be submitted in detail to

the Department of Energy (DOE) and be subject for approval.

Once a promising geological structure has been identified in the exploration area, there are no

other ways to confirm the presence of hydrocarbon resources but to conduct actual drilling

onsite.

Drilling pads are constructed to bring in the drilling equipment and support services and

access roads are made for land-based explorations. Access roads should be made with

minimized social and environmental impact in mind, for example, minimizing the number of

forest life needed to be cut down to pave roads and without displacing the local population

residing in the area. Offshore exploration drilling is typically carried out by a mobile offshore

drilling unit.

Drilling mud is critical to balance the underground hydrostatic pressure and for cooling down

the drill bit. During drilling, the risk of uncontrolled flow from the reservoir to the surface is

greatly reduced through blowout preventers which quickly closes around the drill casing to

seal off a well. Once hydrocarbon is reached, well tests are done to gather flowrates,

formation pressure, and establish whether commercial quantities of hydrocarbons may be

produced. If the well does not contain quantity of hydrocarbon to be considered commercially

viable, it is declared as a dry hole and must be decommissioned or plugged properly to

prevent environmental risks and restore the area close to its original conditions before drilling

activities commenced. When hydrocarbons are deemed available in commercial quantity,

more wells are drilled for appraisal of the quantity of hydrocarbon reserves in the field and

subsequently production well networks are put online together with establishing the

permanent oil and gas production facilities or platforms/rigs.

Generated oil, gas, and any water formation from the well testing and throughout the oil and

gas production period must be disposed in accordance with the implementing rules and
regulations of Republic Act No. 6969 or commonly known as the Toxic Substances and

Hazardous and Nuclear Wastes Control Act. This act bears full responsibility to the waste

generator i.e., the E&P company to properly manage and dispose hazardous wastes such as

oil, used chemicals, diluted solvents, etc. and requires a quarterly report to the Department of

Environment and Natural Resources (DENR) of the type and quantity of hazardous wastes

generated and sent for treatment to an accredited treatment provider. Failure to comply by the

E&P company and their respective pollution control officers shall be subject to fines and

imprisonment of involved individuals. And for multiple offenses, a seize and desist order

shall be imposed by the DENR.

E&P companies must also comply with Republic Act No. 9275 or the Philippine Clean Water

Act which, in essence, controls and restricts the discharge of pollutants, untreated industrial

wastewater, oil, and other substances into classified bodies of water including groundwater

resources. The DENR requires companies to include wastewater discharge volumes and

qualities as reported by an accredited third-party test to be reported quarterly through their

pollution control officer. Failure to comply with the quality limits entails penalties imposed

per day until rectification of the issue. This compels companies to setup and enforce spill

prevention, control, and countermeasure practices, especially for offshore installations, as

they must face legal liabilities set by the Oil Pollution Compensation Act. This act has

jurisdiction over vessels, onshore and offshore facilities, including exploration and

production sites which may affect land and water bodies inside Philippines’ territorial seas

and exclusive economic zone. Responsible parties i.e., company executives, operational

owners including contractors and subcontractors will be subject to oil pollution cleanup costs,

damages to natural resources, private and public properties, and possibly effects on health

that result from any oil spills on top of penalties imposed upon violations of the law. Not only

does the E&P company have to observe and comply with local legislations with regards to
marine environmental concerns, the overarching international legal framework of the United

Nations Convention on the Law of the Sea (UNCLOS) through the International Maritime

Organization and subsequently the individual conventions for the protection of marine

environment and coastal regions must be observed.

Republic Act No. 8749 or more commonly known as the Philippine Clean Air Act is enforced

to regulate the discharge of emissions of various air pollutants such as Particulate Matter,

Carbon Monoxide, Nitrogen Oxides (NOx), Sulfur Oxides (SOx), and other specific chemical

compounds through the use and adaptation of the best available technology. Facilities that

predate the act and are not compliant with the set emission limits are required to obtain

approval from the DENR for a preset grace period to conduct modifications and other

projects that are expected to reduce the existing emission levels and meet the required

standards. Companies are required to submit to the DENR a quarterly third-party emissions

test results, from an accredited tester, taken at the point of discharge i.e., the smokestacks and

ambient noise and emissions level taken at three points at a certain distance from the point of

discharge. Failure to comply with the emission standards entails penalties imposed to the

company until rectification of the issue.

The upstream sector must conduct, in due diligence, studies of the existing area’s properties,

potential environmental impacts to the land, sea, and air in tandem with implementing a form

of loss control management system to identify and evaluate likelihood of possible areas and

activities which can cause an oil spill, pipeline ruptures, and similar HSE incidents. Safety

and environmental plans and programs must be strictly implemented throughout any

operations being conducted which means the industry must maintain their active and

experienced engineers and technical personnel to oversee HSE and legislation compliance

through frequent inspection and verification of the oil and gas facilities, making sure

maintenance activities are done on time to prevent major issues, repair and correction of any
leaks detected as soon as possible. Maximizing the use of available technologies to aid in

improving operations, maintenance, and environmental compliance is highly encouraged.

Upstream - End of Well Lifecycle

Decommissioning of oil and gas production facilities after 20 to 40 years of production is

also a key safety and environmental concern for both the government and the IOCs. Planning

for the removal of structures and equipment installations, rehabilitation and restoration of the

production site, site closure and monitoring should already be a part of the initial design and

development phase of the project either onshore or offshore.

The Philippine Petroleum Act and the petroleum service contracts do not have published or

accompanying decommissioning guidelines, instead, the Philippines and its relevant agencies

such as the DENR and DOE, as part of the ASEAN region, will rely on the service company

to competently conduct decommissioning activities in accordance to international law and

generally accepted international standards and practices set by the ASEAN Council on

Petroleum Decommissioning Guidelines for Oil and Gas which was published in 2015.

Wastes and other materials recovered from the decommissioning of onshore programs must

be disposed or recycled in accordance with Republic Act No. 9003 or the Ecological Solid

Waste Management Act which acts to prevent decommissioned sites to become open dumps

of solid waste that can eventually affect land environment and its surrounding areas.

One of the most notable offshore decommissioning programs in recent years is the Brent field

decommissioning program being undertaken by Royal Dutch Shell and Esso. The

decommissioning program has been met by many technical and environmental challenges

such as the removal or recycling of the platform topsides, removal of the oil left inside the

subsea storage cells, and removal or leaving in place the subsea pipelines to name a few.

Shell and Esso have undertaken inhouse and external independent studies fielded by experts

on petroleum and environmental engineering to come up with a solution that is technically

viable.

Future decommissioning programs would want to take note of the experiences being learned

in the Brent field as the decommissioning program is currently undertaken.

Downstream Oil and Gas

Potential environmental risks in the downstream sector are significantly less severe than the

upstream sector where rig incidents, spills, and wrecks have occurred does not mean the risks

and consequent health, safety, and environmental impacts are any less severe. Downstream

activities in the refineries, tank farms, oil and gas terminals, transport, and distribution

network all must play a significant role in protecting the land, sea, and air in which they

operate in.

Environmental monitoring in refinery operations is critical as downstream operators are

covered by the same legislations as their upstream production counterparts. Smokestack

emissions from combustion processes and industrial wastewater are inevitable byproducts of

the industry. Modernized refineries will have implemented systems such as a continuous

emissions monitoring system (CEMS) which incorporate a series of sensors and probes fitted

along the smokestack, which then feed data to a gas analyzer system which can continuously

log emissions data to ensure that the limits set by RA 8749 are compliant, especially for

Particulate Matter, Carbon Monoxide, Nitrogen Oxides (NO x), and Sulfur Oxides (SOx). As

required by the act, downstream companies must still undergo accredited third party testing

every quarter for stack emissions and ambient air and noise quality with fines and penalties

imposed for unmet limits. Refineries must also dispose of their waste oil and other

byproducts in accordance with both RA 9003 and RA 6969.

especially for pH, oil and grease, surfactants, and phenolic compounds. A typical wastewater

treatment setup for oil refineries involves skimming tanks or API separators which take most

of the oil and grease in the influent water, aeration, and activated sludge treatments with

nitrification basins are put in place. Prior to effluent discharge to the designated body of

water such as a lakes and rivers, final chlorination and filtration are done. Companies

together with their designated pollution control officers are held liable by the Philippine

Government through the DENR for any violations or noncompliance of the provisions of the

act.

Environmental Management Approaches

Policies and commitments made by management alone will not assure the oil and gas

industry’s performance and environmental impacts will meet local and international

legislation requirements. Technical personnel and supporting infrastructure must be put in

place for policies, plans, and programs to be effective. This requires IOCs to invest a

considerable amount of capital into HSE programs that will be necessary administrative and

operational costs to comply with the encompassing local and international legal framework.

Effective implementation of an environmental program, or any other management program,

will require comprehensive analysis of current and existing practices in the industry, clear

communication of the policy’s objectives, relevant trainings, allocation of necessary

resources, delegation of responsibilities, and overall accountability with the program. This

approach shall acknowledge that like supply chain operations, environmental management

involves a chain of command and lines of responsibilities.

It is also necessary for existing companies opening new projects to conduct a systematic

review of their policies and programs which must be open to revisions and updates to their
practices – the systematic review must be initiated by the topmost echelon of the company to

involve major stakeholders and senior management for a comprehensive approach and

ensures utmost commitment by all. Moreover, the Six Sigma principle of DMAIC (Define,

Measure, Analyze, Improve, and Control) is a very powerful tool in continuously improving

environmental compliance and truly controlling the process risks involved.

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