Malampaya group not keen on development of oil rim

The consortium developing the Malampaya deep water gas-to-power project in Palawan has reiterated its position to drop the development of the Malampaya oil rim.

A government source said top-level officials of the Malampaya consortium led by Shell Phils. Exploration B.V. (Spex) restated its stance in a recent meeting with Department of Energy (DOE) representatives. During the meeting, the same source opposed the government’s decision to provide indemnity payment of P1 billion to Spex and the other consortium members — Chevron-Texaco and the Philippine National Oil Co.- Exploration Corp.

The consortium holds Service Contract 38 allowing them to explore oil and gas deposits in the area north of Palawan. The existing contract requires companies interested in joining the development of the Malampaya oil rim to pay the consortium P1 billion in indemnity.

The source explained that this provision is discouraging to other parties that have the capability to undertake the Malampaya oil rim, projected by the government to generate $2 billion to the local economy.

Previously, Energy Undersecretary Peter Abaya said the DOE will head the development of the Malampaya oil rim if the consortium drops out of the project.

"It is our position to get that oil out. We will get it out and we will use it for the benefit of Filipinos," said Abaya. He noted the need to pursue the development of the oil rim immediately because it will be harder to extract oil when the pressure of the natural gas drops. Oil and gas experts earlier recommended the development of the oil rim by 2006 before gas production bring pressures to levels that will reduce the recovery of the oil.

The Malampaya oil rim is a 56-meter thick oil zone below the 600-meter thick gas cap currently being produced by the consortium.

The oil rim was discovered with the drilling of the Malampaya-1 well in 1991 but was considered at the onset as a separate development from the much larger natural gas reserves comprising the bulk of theMalampaya petroleum resources.

To determine the potential for producing the Malampaya oil, an extended well test was conducted on the Malampaya-10 well (MA-10) from December 2001 to April 2002.

A maximum oil production rate of 25,100 barrels per day was achieved and a total of 1.88 million barrels were produced and sold.