Shell to tap Norwegian oil firm for Malampaya proj

Norwegian oil firm Norsk Hydro is likely to be tapped by Shell Philippines Exploration B.V. (SPEX) as its technical operator in the oil rim development in Service Contract No. 38 or the $4.5-billion Malampaya deep water gas to power project.

Energy Undersecretary Guillermo Balce said Norsk Hydro is expected to make its formal presentation to the SPEX today (March 28).

Balce said this goes to show that SPEX may reconsider its earlier decision to abandon the oil rim development in the Northwest Palawan project.

Aside from SPEX which serves as a major operator, the other consortium members of the multi-billion dollar Malampaya project, are: Chevron Texaco and Philippine National Oil Co.-Exploration Corp. (PNOC-EC).

"Norsk Hydro will make a presentation to convince the consortium that an oil rim development in Malampaya site is profitable. Entertaining the entry of one group who has the technical capability signals that the SPEX group is not abandoning the oil rim development in Malampaya," Balce said. 

Norsk Hydro is Norway’s largest publicly traded industrial company. It has aluminum, energy, and chemical interests. Light metals (aluminum) is its largest business segment, accounting for close to half of sales. Its oil and energy operations boast 2 billion barrels of reserves and are focused on its home turf. The Norwegian government owns close to 45 percent of the company. 

SPEX-led consortium has a 25-year contract with the government to supply natural gas to three gas-fired power plants in Batangas namely: Sta. Rita, San Lorenzo and KEPCO-Ilijan.

Apart from natural gas exploration, SPEX also started a series of oil well tests in the Malampaya field but late last year it announced that it had found no viable reason to continue to oil rim development in the area.

When SPEX announced its plan to abandon the oil rim development, the Department of Energy (DOE) has asked the PNOC-EC to look for other interested investors. 

PNOC president Eduardo Mañalac, however, pointed out that should SPEX decides to abandon the oil rim development project, it would still continue be part of the consortium that operates project and would be willing to "cooperate" with the new developers of oil rim.

Mañalac said the government is actively looking for an alternative oil developer should SPEX abandon the oil development in SC 38.

He said there are at least three Asian oil and gas exploration firms that have expressed interest to develop the Malampaya oil rim development field in Northwest Palawan.

Mañalac said one of the three oil firms is a non-OPEC (Organization of Petroleum Exporting Countries) member.

The government is optimistic that it could attract more investors for the development of an oil rim in the Malampaya oilfield amid the prevailing rise in crude prices in the global market.

According to DOE, it may adjust recovery cost measures of up to 100 percent. "It will depend on the law and how we could accommodate recovery costs demand. The bottomline is that the government wants its oil reserves developed at all costs," it said. At present, the government is providing about 70-percent cost recovery for oil exploration.

At present, the Philippines is a minor oil producer and its gas sector has not been developed extensively.

But there are significant offshore gas reserves which enable the government to make expanding gas use a priority particularly for power generation, which will reduce the oil import bill.