Oil exploration in RP active, shows promise

Posted at 10/07/2008 5:40 PM | Updated as of 10/07/2008 6:17 PM
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It may come as a surprise that the Philippines has substantial oil reserves. But the growing number of oil exploration activities in select parts of the country attests to promising finds.  

In 2005, the Department of Energy estimated that the Philippines had a total of 456 million barrels of fuel oil. The volume consists of 54 million barrels of condensate, 2,135 billion cubic feet of gas and 25 million barrels of oil.
 
 “These petroleum reserves calculations are based on the 16 sedimentary basins situated all over the country from the Cagayan Valley Basin in the north down to the Agusan-Davao Basin in the south as well as the prolific Northwest Palawan Basin and the Sulu Sea Basin along the western flank of the archipelago,” the DOE said.

Vietnam has 600 million barrels of oil reserves as of 2007, according to the Oil and Gas Journal. Thailand has 290 million barrels of proven oil reserves. Malaysia has 3.0 bilion barrels of proven oil reserves.

This promise of the potential petroleum reserves in the Philippines , together with the recent surges in oil prices, has attracted a number of oil exploration companies to the country. The government has awarded these companies service contracts to explore areas identified as having potential petroleum reserves.

Based on news reports and a list of petroleum service contracts obtained by abs-cbnNEWS.com/Newsbreak from the energy department, there are 33 active petroleum service contracts awarded to oil and gas exploration companies as of the end of September 2008. (Click here to see list)

 “Exploration activity in the Philippines has recovered to levels last seen in the mid-1970s,” the United States Energy Information Administration said in its latest country analysis of the Philippines.

It was in the 1970s when the Cadlao and Nido oil fields were discovered and when the country produced as much as 20% of its fuel requirement.

Almost half of the service contracts cover areas near or within the province of Palawan. The 15 service contracts within the Palawan cover an area measuring about 11.85 million hectares. Three service contracts, meanwhile, cover 2.9 million hectares of area in the Sulu Sea while four service contracts in the Cagayan Basin cover an area measuring 1.74 million hectares. (Click here to see map.)

Despite the presence of large areas for exploration, discovery rates in these areas remain low compared to other countries.  According to Eduardo Hernandez, president of the Petroleum Association of the Philippines, discovery rates in Northwestern Palawan and Sulu Sea reached 47% and 12%, respectively. Discovery rate in Cagayan Valley was 13% while in Southwestern Palawan it was 10%.  In contrast, Vietnam’s discovery rate has increased from 30% in 1989 to 80% in 2001.

Companies and contracts

Three exploration companies have been awarded four service contracts each: NorAsian Energy Ltd, Burgundy Global Exploration Corp (BGEC), and the state-owned Philippine National Oil Co.—Exploration Corp. (PNOC-EC)

Norasian Energy Ltd., a subsidiary of the Australian-based Otto Energy, was awarded four service contracts (SC): SC 50, which covers 128,000 hectares in Northwestern Palawan; SC 51, which covers 332,000 hectares in Eastern Visayas, SC 55 covering 900,000 hectares in West Palawan and SC 69 covering 704,000 hectares in the Visayan Basin . Norasian also has 18% indirect interest in the Galoc oil field in Northwestern Palawan .
Burgundy Global Exploration Corp., a member of the Burgundy Group of Companies that has also business interests in hotels, real estate and property development and techno-industrial estate, has also been awarded four service contracts: SC 61 covering 1.3 million hectares in northeastern Palawan; SC 62 covering 1.3 million hectares in southeastern Palawan; SC 67 covering 648 million hectares in eastern Palawan and SC 68 covering 983,000 hectares in eastern Palawan.

State-owned PNOC-EC has also been awarded four service contracts: SC 37, which covers 36,000 hectares in the Cagayan Basin ; SC 47 covering 1.466 million hectares in offshore Mindoro; SC 59, which covers 1.47 million hectares in West Balabac in southwestern Palawan; and SC 63 covering 1 million hectares in southwestern Palawan .

Apart from these service contracts, PNOC is also the only Filipino partner in Malampaya Deep Water Gas-to-Power Project—or SC 38 that covers Palawan—which was formally inaugurated in 2001. Other partners in the project are Shell Philippines Exploration B.V. and Chevron Texaco. PNOC-EC also owned 15% stake in the concession that was awarded SC 43, which covers portions of the Ragay Gulf in the Bicol Region.

Triggered by oil prices

Eduardo Hernandez, a director at PNOC-EC, said the current interest in exploration was triggered by the increase in the oil prices from US$40 to US$100.

Oil exploration in the country, however, has a long history and it dates back to 1896. Data from the energy department showed that the first exploration occurred when Smith, Bell and Co. drilled in Cebu .

Widespread exploration occurred only between 1950s to 1970s. In 1973, the contract system was introduced after the signing of the Oil Exploration and Development Act of 1972, or Presidential Decree No. 87. The decree granted exploration companies incentives like exemption from all taxes and duties for importation of materials and equipment to be used for petroleum explorations, and exemption from all taxes except income tax.

Despite the fact that oil exploration in the Philippines started even before the 1900s, neighboring countries have drilled more wells than the country.

 “Our country remains largely an unexplored or virgin country for oil explorers,” Hernandez said adding that, in the Philippines, only 557 wells have been drilled over a hundred years while Indonesia drilled 400 wells a year in the 1980s. “Our record of oil drilling in 100 years is close to Indonesia ’s record in one year.”

Risky venture

 
Oil production and exploration, says Hernandez, is capital intensive. Hernandez said most local exploration companies cannot undertake drilling on their own and foreign corporations have to shoulder about 85% of the cost. “Cost could be from US$25 million to US$50 million.”
 
Exploration is a risky investment since a company must drill first to know if there is oil. Indeed, not all exploration yielded positive results. Last May 13, Japan Petroleum Exploration Co. Ltd (JapEx) announced that its subsidiary Japex Philippines decided to abandon SC 46 block in Tañon Strait after it was not able to discover oil and gas in the 2,580 sq. km site even if it has already drilled one exploration well.
 
During the same month, Malaysian oil firm Petronas also pulled out after it failed to find significant petroleum reserves in offshore Mindoro . Reports said Petronas and other members of the consortium had spent US$23 million for drilling in its service contract area.
 
“We have been looking for oil with little success,” said Hernandez. “Not because the prospect of finding is not significant but because we have not drilled enough wells to prove that our country has major reserves.”
 
Exploration companies that want to drill oil have also faced opposition from environmentalists and from fisher folk. Japex and Norasian, for instance, met strong opposition from fishermen’s groups who claimed that their drilling activities might scare away the fish and would destroy marine life.

These, however, have not stopped companies from venturing into oil exploration and participating in the Philippine Energy Contracting Round (PECR), an annual activity initiated by the energy department where exploration blocks are offered to companies for bidding for exploration, drilling and production..with reports from Gemma Bagayaua-Mendoza

 


 

Service Contract No.

COMPANIES

LOCATION

AREAS

1

6

The PHILODRILL Corp/ Oriental

NW Palawan

164,837.72

2

14

The PHILODRILL Corp.

NW Palawan

70,887.56

3

37

Philippine National Oil Co.-EC

Cagayan Basin

36,000.00

4

38

Shell Philippines Exploration B.V.

Palawan

158,526.00

5

40

FORUM Energy Philippines Corp.

N. Cebu

458,000.00

6

41

TAP (Philippines) Pty. Ltd

Sulu Sea

832, 386.00

7

43

Pearl Oil Ltd.

Ragay Gulf

806,550.00

8

44

Gas2Grid Pte. Ltd.

Central Cebu

75,000.00

9

45

South Sea Petroluem Holdings Inc.

Agusan-Davao

560,000.00

10

47

Philippine National Oil Co.—EC

Offshore Mindoro

1,466,700.00

11

48

Aragorn Power and Energy Corp.

Cagayan

748,000.00

12

49

RANHILL BHD

Southern Cebu

265,000.00

13

50

NORASIAN Energy Ltd.

NW Palawan

128,000.00

14

51

NORASIAN Energy Ltd.

East Visayas

332,000.00

15

52

E.F Durkee & Associates , Inc.

Cagayan

96,000.00

16

53

Pitkin Petroleum  Ltd.

Onshore Mindanao

660,000.00

17

54

Nido Petroleum Philippines Pty. Ltd.

West Calamian, NW Palawan

537,616.15

18

55

NORASIAN Enegry Ltd.

West Palawan

900,000.00

19

56

MITRA Energy Ltd.

Sulu Area

862,000.00

20

57

CNOOC Int’l Ltd/

North Calamian, NW Palawan

720,000.00

21

58

Nido Petroleum Philippines Pty. Ltd.

West Calamian, NW Palawan

1,344,000.00

22

59

Philippine Nat’l Oil Co.--EC

West Balabac, SW Palawan

1,476,000.00

23

60

SHELL Philippines Exploration B.V.

NE. Palawan

1,008,000.00

24

61

Burgundy Global Exploration Corp.

NE Palawan

1,356,000.00

25

62

Burgundy  Global Exploration Corp.

SE Palawan

1,302,000.00

26

63

PNOC-EC-Nido Pet. Philippines

SW Palawan

1,056,000.00

27

64

RANHILL BHD

Sulu Sea

1,254.940.00

28

65

MIOCENE Mining and Energy Corp.

Cagayan

860,00.00

29

66

Helios Petroleum and Gas Corp.

Agusan-Davao

488,000.00

30

67

Burgundy Global Exploration Corp.

East Palawan

648,000.00

31

68

Burgundy Global Exploration Corp.

East Palawan

983,900.00

32

69

Norasian Energy Philippnes Inc.

Visayan Basin

704,000.00

33

70

Polyard Petroleum International Co. Ltd.

Central Luzon Basin

684,000.00