PNOC to get new service contract for development of Malampaya oilfield

The Department of Energy (DOE) will issue a new service contract (SC) for the Philippine National Oil Co. (PNOC) to develop an oilfield beneath the $4.5-billion Malampaya deepwater-to-gas power project in Northwest Palawan, an industry official said.

The official, however, noted that the DOE can only issue the new contract for the development of the oil rim if it accepts the conditions set by the Malampaya consortium.

The DOE has yet to agree on the conditions set by the consortium composed of Shell Phils. Exploration B.V. (SPEX), Chevron-Texaco, and PNOC-Exploration Corp. The consortium relinquished its right to the oil rim development after proving that the oil under the Malampaya natural gas field is not commercially viable.

The Malampaya oil rim, estimated to contain up to 40 million barrels of oil, is covered by SC 38. "DOE will issue the SC to PNOC then other players can get on board," the source said.

The DOE has directed PNOC to take the lead in developing the Malampaya oil rim following the decision of the consortium to relinquish its rights to the project.

According to the official, PNOC will have an option to bid the development of the oil rim to other industry players or enter into joint venture agreements with interested parties.

"It will be up to PNOC on how it will handle the oil rim development," the source said.

The SC 38 consortium, in deciding to relinquish its rights to the oil rim, said it is willing to work together with the DOE and the third party "subject to conditions that will safeguard the integrity of the natural gas reservoir and the existing development and offer reasonable indemnity to protect the gas project from the impacts that arise from the oil rim development."

PNOC president Eduardo Mañalac earlier said the agency is willing to accept the decision of the DOE should it be tasked to spearhead the development of the oil rim.

"From the PNOC side, we’re prepared. We’re ready to accept if the development of the oil rim will be assigned to us by the DOE. We have to take it since we’re the government," Mañalac said.

After SPEX’s announcement relinquishing its rights to the oil rim, DOE opened the project to international and local oil companies.

"While we note that the SC 38 consortium considers the oil rim non-commercial based on their economic parameters and standards of operation, we look forward to tapping other oil companies that consider the oil deposits viable to produce," Energy Secretary Raphael Lotilla said.

Lotilla is optimistic that they could start a partnership with a third party "soonest to optimize the opportunities in the development of the oil rim for the benefit of the Filipino people and with reasonable returns for participating third parties."

There are several foreign firms such as AustralAsian Energy Ltd., US-based Argo Group, PetroEnergy Resources Corp. (PERC), South China Resources Inc. and Norwegian firm Petroleum Geoservices Inc. that have expressed keen interest in developing the oil rim.