Recto Bank project faces delay from Manila-China standoff

Posted at 05/01/12 6:45 AM

MANILA, Philippines - Forum Energy Plc., operator of Service Contract 72, would have to wait for the outcome of a long-standing standoff between the Philippines and China over Recto Bank in the South China Sea, Manuel V. Pangilinan, Philex Mining Corp. chairman, told reporters on Monday.

Philex Mining, through its interests in FEC Resources Inc. and Philex Petroleum, controls 64.45 percent of the share capital of Forum Energy. “There’s always the possibility of a delay in work program, given the political concerns between the Philippines and China, which have to be sorted out,” Pangilinan said.

He added that he hoped the Department of Energy (DOE) would not take it against them if the work program was delayed by a prolonged impasse between Manila and Beijing.

“If Chinese gunboats appear in the horizon, then there could be delays as those rigs and survey ships that are owned by other countries would not want to get involved in any kind of regional conflicts,” Pangilinan said. Though a delay was possible, he added that they would still stick with their committed work program and schedules.

Pangilinan said developing gas fields usually takes six to 10 years and any delay would push that timeframe further. Energy Undersecretary Jose Layug Jr. said they have not received reports raising concerns about security.

“We have always informed bidders and potential investors that the government will definitely consider them as partners and will help them in all aspects of their oil-and- gas exploration,” he added.

Layug said the DOE has been coordinating with the Department of National Defense as well as with other agencies of the government. In terms of gross prospective resources, Weatherford Petroleum Consultants earlier reported that the Recto Bank is estimated to have a low of 4.666 trillion cubic feet (TCF), a high of 16.612 TCF and a best estimate of 8.799 TCF of gas. The report said the disputed territory could also have a low of 117 million barrels, a high of 416 million barrels and a best estimate of 220 million barrels of oil and what it called liquids in place.

Prospective resources refer to quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations, which are technically and economically viable to recover. While in terms of contingent resources, Weatherford said Recto Bank has a low of 1.474 TCF, a high of 2.603 TCF and a best estimate of 4.598 TCF of gas. It added that the area could have a low of 37 million barrels, a high of 115 million barrels and a best estimate of 65 million barrels of oil and what it also called liquids in place.

Robin Nicholson, Forum chairman, said the Weatherford report showed an improvement in the resources previously known and supports the case to proceed with a drilling program. “We will continue discussions with our major shareholders, our joint venture partner and our advisors to determine how the SC 72 drilling program, which we anticipate will cost a total of $75 million, will be funded,” he added.

Service Contract 72 covers 880,000 hectares and is located in the Recto Bank Basin, which is within the 200-nautical-mile exclusive economic zone, based on Republic Act 9522, or the Philippine Archipelagic Baselines Law, signed on March 10, 2009.