Houston-based oil giant presses bid to develop Malampaya oil rim

The Houston-based petroleum and natural gas company Argo Group LLC reiterated its interest in developing the Malampaya oil rim in northwest Palawan which the government is pushing to reduce the country’s dependence on imported oil.

Argo Group officials said the company could extract from four to 40 million barrels of oil from the Malampaya oil field as early as May 2006.

"The Argo Group is confident that a safe, cost effective, and practical oil recovery solution is available. We believe we clearly defined the benefits of our proposed solution and trust the plan may be considered as part of a realistic solution. The proposed solution not only exploits the proven oil reserves cost effectively, but also allows for protection of the existing gas reservoir," said Bobby Quintos, president and senior partner of Argo Group in a letter to Energy Undersecretary Guillermo Balce.

In recent months, the Argo Group and its technical consortium which include Clarksons Shipping Services, Expro Group, Teekay Tankers and APL met with officials of the Department of Energy (DOE) to present their development plan for the Malampaya oil rim.

The DOE is still in talks with the Malampaya deep water gas- to-power consortium to pursue the development of the oil rim. The consortium led by Shell Exploration Phils. B.V., Chevron-Texaco and the state-owned Philippine National Oil Co.-Exploration Corp. (PNOC-EC) earlier junked plans to push through with the plan to extract oil, also within the gas field it is currently operating, saying the volume is not commercial viable. It added that oil extraction could adversely affect its gas production

The Argo Group however, said its plan guarantees safe extraction of resources which will be a multi-stage approach that will entail minimal intrusion of the existing gas reservoir operations.

Argo said it could extract oil from Malampaya by May 2006 and beyond that would be difficult.

"We have assumed that there may be no more than a three-year window available to extract the oil which includes the order of long-lead items. After this period, reservoir pressure will have been depleted from the existing gas production to an extent that is likely to prevent further commercial production of the oil," said Quintos.

He added that Argo’s flexible multi-stage approach is technically and commercially sound for recovering reserves from four to 40 million barrels.

"The Argo concept allows continuous production from the existing MA-10 well while a drilling rig simultaneously develops further production wells as dictated by progress and reservoir performance," said Quintos.

The Argo Group’s technical consortium has relevant experience, both working in the Philippines in general, as well as specific and direct operational experience from producing oil from the Malampaya oil rim reservoir. It was part of the extended well test production that undertook exploratory MA-10 well in late 2001.

The company however, just like other interested parties, will have to wait for the outcome of DOE’s ongoing negotiations with the Malampaya consortium.

The government wants the consortium to begin commercial oil production by mid-2006 because it will be hard to extract oil when pressure of the natural gas drops.

The Malampaya oil rim is a 56-meter thick oil zone below the 600-meter thick gas cap.

The oil rim, which is seen to generate at least $2 billion in revenues, was initially discovered with the drilling of well Malampaya-1 in 1991 but was considered at the onset as a separate development from the much larger natural gas reserves comprising the bulk of the Malampaya petroleum resources.