PETROLEUM ACT OF 1949

RA NO. 387

Purpose: “to promote exploration, exploitation, and utilization of the petroleum resources of the
country, and employs the concession system for the exploitation of the nation’s petroleum resources.”

Legal Source: Regalian Doctrine

5 kinds of Concession:

1. Non-exclusive exploration Permit

a. Limited to geological or geophysical exploration on specified areas, preparatory to
making application for exclusive exploration concession.
b. The permit shall be for a term of not exceeding 2 years, renewable for another 2 years
at the discretion of the DENR Secretary.
2. Exploration Concession
a. All works for the discovery of petroleum, including but not limited to, surveying,
mapping, aerial, geophysical investigation … structural drilling and other useful work in
connection with the operation.
b. Does not include the actual production of oil. Exception oils found during exploration
may be freely use for operation purposes, not commercial.
c. Limit: 500,000 hectares in one petroleum region; 1,000,000 hectares in the whole
country.
d. The term shall be not more than 4 years and can be extended up to not exceeding 25
years.
e. Service Contracts for petroleum exploration may be allowed only through a law passed
by Congress.
3. Exploitation Concession
a. Refers to the production oof petroleum within such area, such as: drilling and operating
wells, pumping and storage facility, and facilities useful for making petroleum for sale,
manufacture or refining within or for shipment from such area.
b. Does not include operations which is part of manufacturing or refining or any work
outside such area which are a part of a pipeline or other special transportation system.
 c. The term shall not exceed 25 years, renewable for another 25 years before its
expiration.
4. Refining Concession
a. Refers to the processing or treating of petroleum by chemical or physical means for the
purpose of making or separating marketable products.
b. Does not include operations, separate from the gas compression, removal of noxious
gases, crude oil stabilization or treatment for emulsion.
c. Term shall not exceed 25 years, renewable for another 25 years, prior to expiration.
5. Pipeline Concession
a. A non-exclusive right to transport petroleum, by mean of, and through a pipeline or
system of pipelines, between the source of production and/or refining and places
defined in the pipeline concession.
b. Shall have the preferential right to utilize his own installations for the transportation of
petroleum, bit is obliged to utilize any remaining transportation pro rata for the
transport of such petroleum as may be offered by others for transport, and to charge
without discrimination such rates as may have been approved by the DENR Secretary.
c. Pipeline concession are common carries and are thus except from common carriers’ tax
under the LGC.

Cancellation:

1. Exploration may be cancelled:

a. Failure to perform work obligation under Article 47 of the act for 2 consecutive
years.
b. Failure to pay for 2 consecutive years the exploration tax due.
2. Exploitation concession:
a. Failure to perform exploitation work for 2 consecutive years;
b. Suspending production operation for more than 6 months without prior
approval from DENR Sec;
c. Failure to pay for 2 consecutive years the annual exploitation tax due; and
d. Failure to deliver or pay to the government its royalty within 1 year from the
date such royalty becomes due.
3. Refining and pipeline Concessions:
a. Failure to begin construction of a refinery or pipeline within 1 year from the
date of the issuance of such concessions.

All application for concessions shall be filed before Director of Mines and Geosciences Bureau; while
disputes, except conflict of application, shall be filed before the DENR Sec.
For first 5 years of the of the grant of any concession, any imported equipment, machinery etc are
exempt from customs duties to encourage exploration, exploitation, and development of the petroleum
products.