Malampaya prospectors given till Sept to submit proposals

Investors planning to develop the oil rim in the $4.5-billion Malampaya deep water gas-to-power project in Palawan should submit their respective proposals not later than the end of this month, a ranking Department of Energy (DOE) official said.

Energy Undersecretary Guillermo Balce said they have already informed the interested parties of the deadline. Foremost of those that were informed was the consortium led by Shell Philippines Exploration B.V. (SPEX), the major operator of the Malampaya project.

Balce said they told the SPEX group to submit its proposal on the Malampaya oil rim which it earlier deemed as "sub-commercial," which means it is not viable for commercial production.

The DOE official earlier sent a letter to the consortium members to come up with the proposal for the oil rim, which is estimated to contribute about $2 billion to the country’s economy.

Aside from Royal Dutch Shell group which holds 45 percent, the other members of the consortium are Chevron-Texaco with 45 percent and the Philippine National Oil Co.-Exploration Corp. (PNOC-EC) with 10 percent.

The SPEX consortium holds the sole right to explore in Service Contract 38 or the Malampaya project in northwest Palawan.

However, SPEX said it will, make its official statement tomorrow if it will participate in the oil rim development again after it decided to abandon it sometime ago.

Whatever the decision, the DOE had already proposed to issue a new service contract to a third party that will develop the Malampaya oil rim.

"The DOE has made certain moves to finally settle with the operator what it wants to do. I would expect maybe next week, there might be some critical development or in other words it could be given to a third party through a service contract, has the highest possibility," PNOC president Eduardo Mañalac said earlier.

SPEX also has the option of asking other companies to participate in the Malampaya oil development. It can also enter into joint ventures or farm-in agreements with several companies to extract the oil from Malampaya.

The government has been pushing the Malampaya consortium to develop the oil rim in the wake of the unprecedented surge in global oil prices.

"We will force the issue to the consortium. I think we gave a good legal basis (to compel them). We have a contract with them," Balce said in an earlier interview.

Earlier, SPEX said developing the oil rim may affect the production of the Malampaya natural gas.

But the DOE, along with other interested firms, said that the oil rim could be commercially viable and with the aid of new technologies, the potential oil rim developer could extract the oil without jeopardizing the natural gas deposits of Malampaya.

There are already some parties that have expressed interest to develop the oil rim. These include AustralAsian Energy Ltd., US-based Argo Group, PetroEnergy Resources Corp. (PERC), South China Resources Inc. and Norwegian firm Petroleum Geoservices.

Experts believe that the Malampaya oil rim should be developed by next year, before gas production will have brought pressures to a level that will lower recovery of the oil.

Balce said the government wants the commercial production of the oil rim to start by the middle of next year and the outcome of negotiations with SPEX would be crucial.