MANILA, Philippines - Shell Philippines Exploration BV (Spex) and Chevron Malampaya LLC, operators of the $4.5 billion Malampaya deep water gas to power project, are eyeing a farm-in venture for the Gindara block oil prospect in northwest Palawan, potentially the next biggest oil find in the country.

Spex and Chevron hold 45% each in the Malampaya project near the Gindara block. The Malampaya project has an estimated recoverable reserve of about 600 million barrels of oil.

A report by Southern Cross Equities, commissioned by Kairiki Energy Ltd. to study its ongoing proejcts, showed that the Gindara block or SC 54B consortium composed of Kairiki which has a 40% stake, and Nido Petroleum Ltd. with 60% interest, are in talks for a possible partnership with Spex and Chevron.

"We understand that negotiations have been ongoing for some time with neither side agreeing to terms," Southern Cross said.

Southern Cross did not reveal the parties the consortium is negotiating with, but industry officials have confirmed Spex and Chevron are among those keen on signing a farm-in agreement with the Gindara block developers.

The development of the Gindara prospects requires a hefty capital of $30 million.

Southern Cross said the Gindara consortium should spread out risks by tapping partners for the oil prospect.

"Nido and Kairiki have the option to drill the Gindara prospect on their own which would mean higher risk approach but also provide much higher reward," said Southern Cross.

Previously, Nido head of exploration Jon Pattillo said the Gindara block may be the highest ranked drilling candidate in Nido’s Northwest Palawan exploration portfolio "in terms of its excellent risk profile and potential significance to the company."

"The prospect is comparable in scale to Shell’s Malampaya field, 30 kilometers to the north, but located in only 320 meters of water and close to the joint ventures recent discoveries at Tindalo and Yakal in adjacent SC 54 Block A," he said.

The consortium plans to begin its exploration drilling program in 2011.