Four foreign groups keen on extracting oil from Malampaya

Four foreign groups expressed keen interest in extracting oil from the Malampaya natural gas fields in northwest Palawan which could significantly ease the country’s dependence on expensive imported oil.

"These four groups are willing to take over the development and extraction of oil in Malampaya if the existing consortium does not push through with its development," Energy Undersecretary Peter Anthony Abaya said over the weekend.

He said that these groups have the financial muscle and the technology to extract the estimated recoverable 40 million barrels of oil from Malampaya.

The groups include the Houston-based ARGO Group, Norskidrow, a Norwegian company and two other foreign companies.

"What is critical right now is for the project to push through especially as crude prices in the world market continue to rise and does not seem to be tapering off. The bottomline is for government to take the initiative to jumpstart the project if the consortium operating the Malampaya gas field won’t do it," said Abaya.

The Philippines, he said which imports 98 percent of its oil requirements, is spending precious billions of dollars to purchase oil and having part of it produced locally will provide some respite from surging prices of crude in the world market.

The country’s oil import bill for the first five months of the year has increased by 27.2 percent to $2.3 billion from $1.8 billion in the same period last year despite a notable 8.6 percent decline in the demand for oil for the period under review.

Abaya noted that the country’s oil import bill in 2004 was about 22 percent of the country’s gross domestic product or GDP. In contrast, the ratio of oil import bill to GDP in 1995 was just 7.7 percent.

Currently, the Department of Energy (DOE) is still giving the Malampaya deep water gas-to-power consortium time 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 proposals to push through with the plan to extract oil, also within the gas field it is currently operating, saying the volume is not commercially viable.

It added that oil extraction could adversely affect its gas production.

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. Estimated to generate at least $2 billion in revenues, it 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.

The ARGO Group LLC said it 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.

The ARGO Group 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.